Happiness is (about to be) overrated

11 01 2011

I have to be careful here. A few years ago I spoke at a discussion on happiness and passed the flippant comment that I had not been happy since 1963 (a reference to Philip Larkin as I am sure you all know). After the discussion I was approached by a man who,  identifying himself as a therapist,  offered to help me with my ‘problem’ of unhappiness.

So to be clear, this piece is not about my own state of mind, which those who know me well will confirm is that of a sunny optimist who can only see the bright side of life. It is rather about the intention of the UK government and others to find a new and better way of measuring the wealth of nations, not through the present measure of growth, GDP, but by adding in some as yet undefined way of assessing the happiness or state of well-being of the nation.

Tim Harford, in his excellent summary of the current discussion, makes the point that all of the information that the government purports to want to find out in its new ‘happiness’ initiative is already available from numerous other official surveys. So, if the information already exists, why has the government decided to make a public issue of surveying ‘happiness’ at this moment in time?

The ‘happiness’ debate is a product of the coming together of two different but connected social phenomena. One is the pervasive sense of ‘limits’ which imbues much of contemporary society, the idea that we are reaching the end of the road of exploitation of the earth’s natural resources, that we need to learn to be more sustainable and less dependent on material growth.

The second is the recession and  the very real impact on our lives, here in the west, of the cutbacks in living standards which we are beginning to experience. When we face a future of stagnant  growth and financial pain how tempting it must be for those in government to try to convince us that growth is not what we need, or indeed that it may even be a hindrance to our happiness and well-being.

I am not suggesting that this is simply a cynical ploy by Cameron and others. They undoubtedly have been influenced, as have many people in our society, by the idea that the value of material wealth is overstated and that we should all be looking to other aspects of our life for solace. (Although, I  doubt that this will lead Cameron and his wealthy chums to forswear their own vast riches along the path to a supposed happier existence.)

It would also be wrong to dogmatically assert that all that matters in life is money. Of course, there are many aspects of our daily life which give us pleasure and a degree of contentment that do not depend on money. Most of us get a sense of well-being from achievement and a feeling of control over our lives. But I am opposed to a happiness index precisely because  those kind of things are not measurable in any meaningful way, they are mainly subjective and often temporary and individualised.

The importance of economic growth and its measurement, in GDP, is that it is measurable. It gives an approximation of how dynamic a society is, how much wealth is being created, how productive its people are being.  Wealth creates possibilities which do not exist otherwise. If you look at the world today the nations which have the most human longevity and the best health are the most developed ones. Generally speaking those countries also have the most stable and democratic institutions and the most flourishing cultural activities. This is because wealth creates spare time and spare cash, time and money which can be used to pursue other things than the mere struggle for subsistence that occupies much of the world’s population even now. Economic development  transforms the nature of work from being dangerous, long and tedious to safer, better remunerated and less time-consuming.

The development of a bandwagon around the ‘happiness’ debate at this time is a tacit recognition by the ruling elites in the west that they have lost faith both in their belief in economic development and in their ability to maintain economically dynamic societies. They would like us all to stop pushing for more, to accept austerity and to learn to love it. It is an acquiescence to stagnation at every level in western society. They would like to encourage us not only to accept this stagnation but to call it happiness.

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Are we all co-operative now?

5 10 2010

The co-operative movement has been around in one form or another for centuries, both in the UK and elsewhere. Its heyday was in the late 19th and early twentieth century and it now plays only a peripheral role in modern life. The most generous estimate of ‘employee owned businesses’ is stable at around 2% of GDP. Why then has there recently been a sudden resurgence of interest in common ownership?

In the past, small producers and working class people joined together in producer and consumer co-operatives to defend their interests in the face of a chaotic capitalist system dominated by big business. In addition, common ownership was seen by some as part of a peaceful and gradual move from the market to a more socialised economy. Even today the Co-operative Party, as an ally of the Labour Party, returned 28 MPs to the current parliament under the joint title of Labour and Co-operative candidates, including Ed Balls, one of the defeated leadership candidates.

But the current enthusiasm for common ownership does not come from those sectors of society who have traditionally seen common ownership as some kind of limited defence against capitalism, but rather it comes from within society’s elite. Indeed, even David Cameron is said to be keen on promoting common ownership as part of his ‘Big Society’. In other words, it is not a grassroots movement as it used to be, but more a top down strategy developed within the elite and proposed as part of government policy through state ‘empowerment’.

There are some critics who see some of the discussion of common ownership as an attempt to offload the responsibility for social provision from the state on to other sections of society. The proposals for more common ownership in the area of social services, for example, are in this view a cynical attempt to justify cutting state provision of social services as part of deficit reduction. While it is true that there is a congruence between arguing for a smaller state and the reduction of public spending it would be wrong to think that fiscal issues alone are at the heart of the common ownership revival.

The broader problem which common ownership proponents are trying to address is the overall loss of dynamism of British society and the consequent loss of authority of those who are running it. This  crisis of authority is most evident in politics but operates throughout society. It has prompted a search for new ways of engagement between leaders and led. The recession gave extra impetus to this but was not the initial cause.

The elites who run Britain are faced with a tremendously important paradox, that capitalism is both unpopular and unchallenged. Its unpopularity means that large sections of society oppose those elements of capitalist society which are the most positive, economic growth and human control over the environment. The fact that it is unchallenged, in terms of any alternative, leaves the mass of society powerless, passive and apathetic. The elite search for resolutions to these problems has created  pressure to find new ways to engage with and incorporate larger sections of a disaffected and cynical populace.

Workers control or shared sacrifice?

Does any of this matter when considering the pros and cons of more common ownership in our society? After all, arguing against the idea that people should have more ownership and control over their lives would appear perverse. What democrat could be against more democratic control?

 William Davies in his Demos pamphlet ‘Reinventing the Firm’, which focuses on the private sector, and Philip Blond, whose ’The Ownership State’ is about the public sector are the two weightiest contributors to the current debate. Davies argues that there are 4 interlinked reasons why common ownership has become important today:

1. The banking crisis

2. The longer term crisis of the UK economy

3. The crisis in public spending

4. The moral crisis of consumer capitalism

According to Davies these 4 crises all point towards a new model of social ownership.

Common ownership  can take many forms, with differing levels of ownership and control. The best known, John Lewis, has a structure which rewards staff out of profits, but offers only limited control over major decisions. There is some evidence that employees in firms with an element of common ownership identify more with the business and exhibit greater job satisfaction.

However, a major problem with private sector co-operatives from the employee point of view is that they offer no extra guarantee of stability or job security. Co-operative businesses enter the market in the same way as any business and are subject to the same market pressures and to the laws of profit. If they do not comply with these laws then the businesses will fail alongside their non co-operative competitors. This kind of failure was the fate of many of the workers co-operatives set up in the 1970s, such as the Meriden motor cycle cooperative formed out of the collapse of Triumph.

 Normal shareholders have the option of selling their shares if they sense the business is failing. Employees do not have that option. Employees may be better off without the extra worry that the equity they have in the business, along with their jobs, can disappear if the business fails. This is especially true if the ownership is separated from effective control of the company. The danger here is that shared ownership becomes shared sacrifice.

Should we be more co-operative in the public sector?

Philip Blond points to the advantages of common ownership in the provision of social provision as being better productivity and better services. He locates his argument within the context of a decay of civil society. In that sense his argument is attuned to Cameron’s view that the solution to the crisis in the public sector is the ‘Big Society’, the rebuilding of civil society as a buffer between the impact of the recession and the needs of ordinary people.

 Leaving aside for the moment the economic imperative for cuts in spending is there anything positive about the ‘Big Society’ in this regard?  There is something positive about community initiatives which bring together people to pursue local objectives, such as school improvements or community run nurseries for children. Calling this the ‘Big Society’ does not seem to me to make much difference. The people who do this will do it anyway and everybody else will continue their normal lives. The main way that this would change is if the provision of social services outside the state becomes a necessity, in other words if existing provision is taken away.

Any argument for changes in the way that social provision is made which begins from the premise that there will be less rather than more resources available would tend to  have an inherent austerity dynamic to it. Of course, just because something is cheaper does not necessarily make it worse. There is an inbuilt tendency for production goods, tvs etc, to get cheaper but without any loss of quality. Perhaps both businesses and services can become better and more efficient through the adoption of co-operative principles.

Measuring productivity in the public sector is a highly contentious issue. Philip Blond makes a lot of the Office of National Statistics’  estimate that productivity in the Public sector fell by 3.4% in the past 10 years compared with a rise of 27% in the private sector over the same period. Just quite how you measure or compare the productivity of a factory worker with that of a teacher escapes me. The commodities that a factory worker produces get cheaper because it takes less labour to produce them. Are we saying that a teacher should be judged by how much they can cut the time they put into their pupils, or a doctor into the general care of their patients for that matter?

This is of course where the plans to cut public spending come in. The danger is that if we buy into the co-operative model for social provision, how long before we are told that the old and infirm need to be looked after outside of state provision, or that community soup kitchens should feed the unemployed rather than them receiving unemployment benefit? Philip Blond offers some justification for this view when he argues that common ownership can compensate for low pay in the public sector. He also highlights the fact that voluntary carers save the treasury £87 billion per annum

The state provision of social services was the compromise outcome of a struggle between the aspirations of the working class for more security in their lives and the recognition by the ruling class that some measure of social welfare, usually provided at the cheapest possible level, was desirable for social stability and the maintenance of the workforce. The events of the past two years have shown yet again how easily capitalism can descend into chaos and how powerless individuals are to defend themselves when that happens. Common ownership is an attempt to paper over the huge problems that our society faces. It is a paternalistic policy which at best can only affect the fringes of our society whilst having no impact on the central problem, the stagnation of our economy and of our society.

*I will be debating the issue of co-operatives with Will Davies and others at this event





Ditch the austerity rhetoric, Britain needs growth

19 08 2010

If, as opinion polls suggest, there is a majority in this country who accept that the Coalition Government’s austerity drive is necessary, then this would be one of the worst developments in the UK for some time. Why? Because it would imply that collectively we have turned our back on seeing growth as the way out of our problems.

An austerity mentality is the last thing we need at the moment. Penny pinching will not solve the problem of where the UK’s next economic impetus is going to come from. Businesses in the UK are sitting on piles of cash. The trend in results from Britain’s blue chip companies in recent months has been hugely increased profits, not just in the financial sector, but even in areas which apparently have been struggling such as aviation. These businesses need to feel that investing that cash in productive activities is the way to go, not storing it up like some 18th century miser, or perhaps worse, waiting for the next speculative bubble to erupt so they can pile in for more short term profiteering.

There are of course clear limits as to what this government, any government, can do to grow the economy, short of taking control of industry and investment directly. But political leaders are there to lead, to act as the collective voice for the aspirations of the country. By that measure the main aspiration of this country appears to be to stop a tiny minority of disabled people from ‘scrounging’. How lofty and inspiring!

The Coalition’s main claim to policy success in its first hundred days has been yet more reorganisation of education and the NHS, following on from years of New Labour tinkering. In those areas of the economy which desperately require leadership from the top to make things happen, such as investment in nuclear power and other large scale energy projects, it has vacillated.

Undoubtedly the Coalition’s biggest success so far has been to present public sector cost cutting as essential. But while everybody agrees that ‘scroungers’ and ‘bureaucrats’ should be cut, the logic of the 25% of cuts demanded from government departments is that 1 in 4 teachers will have to go, , one in four trains, one in 4 doctors if the ring fencing around the NHS is removed, and so on. Cameron and Clegg are fooling themselves if they think that most people are prepared to accept deterioration of public services and personal sacrifice without objection.

The Coalition is now worried enough about the success of its own austerity rhetoric that it is trying to row back a little. Nick Clegg said in a speech this week that the Coalition is ‘not just about cuts’. If the Coalition wants to avoid years of political misery all round it needs to ditch the austerity rhetoric and set some positive economic objectives, with as much government back up as possible. Economic growth will lift us all out of the mess we are in.





What cowboy put this fiscal deficit in?

9 06 2010

That Cameron and Osborne should blame the previous administration for the mess they have inherited is hardly a surprise. It should also not be a shock that Cameron is painting the future as black. He then has the dual advantage that if things turn out badly he can say he told us so and if they do not he can claim the credit for turning the economy round.

What is more interesting is that beneath the rhetoric there does seem to be a genuine belief that the state in Britain should be smaller and have less role to play in all aspects of life. In this respect Cameron has been aided by the addition to his ranks of a section of the Liberal Democrats who believe in the free market. Clegg, Cable, Huhne and the (now departed) Laws were the four LibDems appointed as ministers in the cabinet. All of them contributed to the ‘Orange Book’ in 2004 which espoused the free market as a solution to the problems of the economy and which provoked controversy within the LibDems.

Having come late to the free market philosophy, and at a time when most other politicians and economists were moving away from it, they have some of the fervour of  the convert. Cable in particular, whose formative experiences were in the 1970s when the UK government failed abysmally to prop up failing businesses such as British Leyland, is possessed of a fierce belief that the state has only a limited role to play in the economy. He has promised to overturn Mandelson’s nascent attempts at reviving an industrial policy for the UK.

So now the government has both pragmatic and quasi-ideological reasons for cutting public spending and reducing the size of the state. Pragmatic in order to avoid a collapse of the confidence in those lending money to the UK and quasi-ideological through the concept of the ‘big society’ rather than the ‘big state’.

The problem with this approach is that it flies in the face of the history of capitalism over the past 100 years. The role of the state, in every developed and developing country in the world, has come to play a bigger and bigger role as time has gone by. Outside of the aftermath of wartime no state of any consequence has succeed in cutting public spending absolutely. Certainly no state has managed to do so after a recession. Even under Thatcher, in the supposed brutal period of the 80s, public spending overall continued to rise.

Why is this? Essentially because the free market has proved incapable of fulfilling many different and essential functions of society. No modern state for example has ever had an education system which is run as a private business. No modern state has had an entirely private health system. Even in the US, which is most committed to the free market, state funding of Medicaid is an essential part of health provision. In addition, individual national insurance schemes have never been able to pay entirely for payments to the unemployed.

Private businesses depend  on the state to provide cheap education, health care and unemployment benefits. To some extent the role of the class struggle in earlier periods was important in establishing the levels of provision of benefits from the state, but the elite as a whole understood that the state needed to subsidise welfare in order for the economy to function effectively. It was not the post war Labour government, for example, which architected the welfare state in the UK but the National Government under the Conservative Churchill which did so through the production of the Beveridge report in 1942.

The state has also had a key role in the building and maintenance of transport and other key infrastructural projects, which are too big for any individual private company to develop but which all businesses benefit from. Roads are one good example of this, but virtually all communication systems and infrastructure projects require massive state involvement and investment in their production or maintenance.

It is also the case that the state is now so large and so intertwined with private business that many companies depend on government contracts. The IT business in the UK, for example, has benefited over the past twenty years from many large projects in the NHS and in other government departments.

There are those who argue that it is the increasing role of the state which has stifled private enterprise, but the reality is that without ever-increasing state involvement modern economies could not survive. Capitalism is too feeble and unproductive in most modern economies to operate on its own two feet without massive state assistance.

 So what does this mean for the present UK government’s plans to cut spending? Firstly they will struggle to make any impact on the overall scale of public spending without doing huge damage to the way our society works. Secondly, whatever their pretensions to the opposite, the axe will fall hardest on those least able to defend themselves.

A version of this article appeared on Spiked





And the election winner is…austerity politics!!

13 05 2010

So we now have a government that I am guessing virtually nobody in the UK who went into the polling booths actually voted for, a Con-Lib pact. To me it feels like a kind of coup d’etat, in a very polite English kind of way of course without the martial music.  This uncomfortable feeling is compounded by the announcement that a fixed term parliament of five years has been agreed. Not only did we not vote for this government but we are apparently stuck with it for five years.

Of course, there was so little between the parties in terms of policy that in practice any outcome, whether one party or a combination of the parties, would have made little difference to what is about to happen to us as a nation. As is becoming clear, all of the parties, and certainly this new government, are committed to a future of economic austerity.  Already there is talk of big tax rises, both direct through capital gains tax, and indirect, through VAT. While we are still waiting for detail on public spending , events elsewhere, such as in Ireland and Spain where wage cuts in the public sector are being implemented, are surely a harbinger of what is to come.

The almost unchallenged assumption throughout mainstream politics  is that austerity economics is the only way forward.  Much of the already pitifully small investment planned by Labour for upgrading the infrastructure of the UK has been scrapped or threatened with delays. The third runway at Heathrow will definitely not go ahead, the Crossrail project could be canned and the high-speed rail link  from London to Birmingham and beyond is in doubt.

What plans does this new government have to stimulate economic growth, which is the only alternative to austerity? There has been nothing in any of the pronouncements so far which has addressed this in any concrete sense. The focus is entirely on cutting the public spending deficit, mainly  to appease the financial markets, the same markets which were invoked as a reason why this coalition had to be put in place as quickly as it was.

Indeed the mood music is that the Liberal influence will make this government even more prone to sustainability and a green agenda than the last, another way of describing low growth expectations. Both Tories and Liberals are against state involvement in the fostering and development of new industries, something Labour’s Peter Mandelson was a late convert too.

The impression of a coup d’etat by a small, elite group of mainly upper middle class men will be reinforced once the cutting starts. One consolation is that this small group, cut off from any real social base or proper legitimacy,  may not even have the capacity to carry through a major attack on living standards.  But by the same token neither will it have the vision or decisiveness to take the steps necessary to modernise the UK economy. We are likely to be left with the worst of all worlds, an inward looking, pessimistic and unambitious elite which tries to micromanage the UK economy at time when boldness above all is required.

NB One of the main challenges for anybody who looks at the prospects ahead and recoils, is to develop an alternative approach to the economy. This means more than anything looking at why and how economic growth must be put at the centre of economic policy. Daniel Ben-Ami has put together a very helpful list of people who are trying to work in this direction. If you wish to become part of this, do get in touch with anybody on that list.





Austerity or growth-Cameron flips and flops

23 11 2009

David Cameron appears to have realised, as I predicted, that his party’s call for austerity is not terribly appealing. He is now talking af the need to promote economic growth. At this stage there is no substance behind the talk and it seems to be as rhetorical as his earlier call for austerity.

There are really only two main ways in which government can influence what happens in a market economy. The first is at the level of political leadership. This means that government sets an agenda for the nation, and creates a legislative framework to enable the agenda to operate. In that sense focussing on the need for growth is a step in the right direction. However, even at this level it is important to identify what the barriers to growth are that need to be overcome.

In the UK, some of these are historical and structural and to do with the shape of the UK economy, particularly its over-reliance on financial services. Some are to do with social and cultural factors, particularly the culture of risk aversion which has enveloped our society in the recent past. One of the main dangers as we creep out of the recession is that the lessons we learn may make us even more risk averse at a time when boldness is at a premium.

A new report from the Confederation of British Industry (CBI) for example predicts that businesses will adopt ‘a more balanced, less risky pathway to growth’. This may seem sensible in the aftermath of a recession, except that it contains the wrong assumption that it was risky behaviour which created the recession in the first place. This has now become the default position of those who have tried to explain the recession, that it was the product of risky behaviour in the financial sector.

It is vital that we do not allow this interpretation to remain unchallenged. The bubbles in the financial and housing sector which preceded the recession were the product of a stagnant economy, not caused by risky behaviour. Real productive investment in the UK and other western economies was seen as too long term and risky and has declined in favour of speculation. The bankers were responding to a demand for risk free investment with high returns hence the boosting of both the housing sector, seen as a one way bet, and the slicing and dicing of investments to spread the risk.

The second area in which governments can affect what happens in the economy is in the areas they have direct control over such as education, civil administration, health and infrastructural projects. The main danger here is that without an overall plan of how to revive the economy, decisions will be short term  and based on trying to placate public opinion. Here we can see the dangers of the weakness of the political class at its most exposed. Without the confidence to make long term decisions, which may be unpopular, the decline of the UK threatens to become a self fulfilling event.

What all these factors mean when put together is that collectively there is little belief that we can become a dynamic economic nation once again. One can sense that behind the flip-flopping of Cameron on the economy lies a genuine lack of belief that major change can be effected. In the absence of  clarity on this issue it is very unlikely that real political leadership in the form of agenda setting will emerge.





The cuts ‘debate’, dumb, dumber and dumberer

22 09 2009

A4PFSW8CAUKKZTSCA6U26I5CAOIW9TQCA7JXEVACAUDPMGWCAZGBJLQCAF8443HCA2LH38PCASMAT7FCA6NTCQ9CAC0J7EACAFICEB6CA8BB0GACAZNP1EJCA25DXN8CA6PNK19CA06HHYVCA4H06MZCA09WITTOn October 31st I shall be debating with Lord Skidelsky and others on the subject of economic growth at this Conference. It will be a great relief to be having a discussion about the key question of the times with Keynes’s main biographer rather than listening to the so called ‘debate’ on cuts in public spending which is now dominating politics.

After a long period in which all parties were in a state of denial about the public spending deficit, each is now desperate to show they are more fiscally virtuous than the last. The ridiculous Nick Clegg has now called for ‘savage’ cuts and I am sure that the Tories are browsing the lexicon of violence to find a suitably bloodthirsty description for their own cutting plans. This bravura posturing on cuts is just as useless as the period of denial which preceded it. Neither addresses the real issues at the heart of the crisis of the UK economy.

As I and others have pointed out on this blog before, there are no doubt areas of the state we can do without-the latest being the Independent Safeguarding Authority which would vet all contact between adults and children not their own. In other words there are sometimes good political reasons why some public spending programmes should be cut.

On the other hand there are areas of the state which we need and which should be doing their job much better with the funding they have. Education and health are the two most obvious areas. These require more effective leadership and execution, not less spending, in order to make them more satisfactory.

The recession has created a massive public spending deficit, which is likely to get worse. Tax revenues are falling as unemployment rises and the unemployed become a burden on the state. This is an indictment of the market economy which renders many millions of people surplus to requirements at regular intervals. This is the real problem we face, how to create an economy which fully utilises the productive energies of its people.

There are many things that politicians could be doing to encourage future economic growth. But these would require a hard look at the nation we are and what we want to become. It would mean planning where we want to be in 25 or so years time and then making the necessary investments needed to get there. It would mean, amongst other things, challenging current anti-growth and anti-science sentiments to push through nuclear power station building programmes and road and rail building.

When ‘Dave’ Cameron talks about a broken Britain he believes he is talking about other people, the underclass in particular. But the part of Britain which is most broken is the political class and its ability to lead. For the past ten years it has been allowed to coast because of the financial bubble, all the hard choices could be put off. Now it is faced with a problem which will not go away, it owes money to people who will want it back. Nothing in the experience of modern day politicians has prepared them for this. One can even be sceptical about whether the rhetoric on cutting public spending could ever be turned into reality because of this weakness and lack of conviction.

All the bluster about ‘savage’ cuts does not remove the fact that the British elite has no real plan for the UK economy which goes beyond hoping the financial sector will revive. The debate which should be taking place is about how we can grow our economy out of recession. This is the one we will be having on October 31st.