Saturday, July 11, 2015

In Support of the Tube Strikers

On general principle, I tend to show support for, and solidarity with, strikers. Reading the right-wing media in the days leading up to this week’s tube strike made this a bit more difficult: the rhetoric was that tube drivers are well-paid, and are greedily holding out for more money, even rejecting a very good (read: lucrative) offer in order to skive off for a day.

After I shared a Huffington Post article supporting the strikers yesterday, a friend of mine responded with this piece of right-wing propaganda that’s been doing the rounds:

I have several problems with this table.

It claims that tube drivers are paid up to £60k per year, whereas those at the top of the scale are paid just under £50k per year.  Meanwhile, NHS nurses can earn over £65k, and the top doctors are paid over £100k.

Tube drivers are towards the top of the London Underground pay scale – the people you see every day in stations are on about £30k. These are the staff who have to deal with the worst of the public. Take Tony, for example (quote taken from BBC live text, 19:00 and 19:11 entries):
"We are the first face that customers see and we regularly get lots of grief. I was assaulted recently by a customer because we were enforcing a one-way barrier system. He grabbed me and started threatening me. I am not paid to put up with that abuse but it's a reality of the job.

"Luckily for me there were other staff in the vicinity. Under the new night Tube plans I could be on my own. Not a week goes by that we don't have three calls to the British Transport Police but it can take them up to half an hour to get there so you are basically dealing with it by yourself."

"We've been told there will be more police officers around, but we have had no assurances about how visible they will be. It's no good if they are up in the control room or sitting with the driver if something is going on at the back of the train or in another part of the station.

"We don't want to cause disruption but it's the only option we have left to get management to address the issues we have."

Many people seem to think that because tube drivers are paid relatively well and were at some point offered a raise, they have no right to go on strike. However, it’s not about the money:
“It’s about the life/work balance for Tube drivers in London and making sure that change is negotiated, not imposed.”

However, thanks to the underhand tactics of London Underground management, that’s exactly what would have happened without a strike.
“Our members on London Underground voted overwhelmingly for strike action because the company tried to force through, without negotiation, new rosters which would mean Tube drivers would have to work an unlimited number of weekend and night shifts for no extra pay.

The responsibility for this strike rests entirely with the management of London Underground who have not negotiated seriously throughout this dispute. They wouldn’t talk to us for months and then, when they did sit down with us on Monday, gave us just a couple of hours to consider their proposals, which they knew was not long enough, and withdrew them at 6.30pm.”

It should be noted that those who work in the NHS knew of the long, unsocial and irregular hours they’d have to work before they even started training; it’s not as if these conditions are suddenly thrust upon them.

Yes, the conditions for doctors and nurses can suck, but the answer to that is not to bring everyone down to the same level; it is to hire more doctors and nurses and improve their working conditions.

Finally, NHS workers are allowed to strike, and even did so last year. Maybe if UNISON, Britain’s biggest health union, went on strike again, conditions would stand a better chance of improving. If they do strike, everyone should stand on the picket lines with them.

Sunday, June 28, 2015

Responding to Hostile Questioning on Austerity, Jobs and the Deficit

When Diane Abbott appeared on Sunday Politics on 21 June – the day after the massive End Austerity Now demonstration took place in London – there was room for improvement in how she responded to Andrew Neil's tough line of questioning... 


What could she have said that would have made her responses more convincing?

DISCLAIMER: Though the facts are factual, the opinions contained in these responses are my own, and do not necessarily reflect the policy positions of Diane Abbott, Jeremy Corbyn or the Labour Party.


Diane Abbott, let’s look at alternatives to deficit reduction and to cuts in public spending, which is what the (#EndAusterityNow) demonstration wanted yesterday. Does the deficit matter?

It matters a lot less than people are being led to believe by politicians and the media. Unfortunately some leading Labour politicians are also buying into the rhetoric that our biggest economic priority right now is to drive the deficit down and that we need to be looking at spending cuts in order to do that.

It’s a very narrow view of the economic situation. The UK dipped into deflation last month (May), interest rates remain at record lows. What really matters is that we achieve growth, and do so in a way that is sustainable.


Growth may be coming right now, because average real wages are rising by almost 3%...

That is true (Guardian), but it’s important to consider this growth rate - like that of the economy - in historical and economic context. 

The UK’s recovery from the recession caused by the financial crisis of 2007-08 was slowed considerably by the imposition of austerity policies following the election of the Tory/Lib Dem coalition in 2010 (Simon Wren-Lewis). Only a year ago, 2014, average real wages were down at 2004 levels (Guardian). From such a weak base, the growth seen this year is far less impressive than it might initially sound. 

At this point, it would make sense to mention that Osborne changed tack in 2012 and increased spending but. because of the questions asked later on, that will come later...

Also, it’s important to bear in mind what the data actually mean: “average real wages” are average wages adjusted for inflation. As I mentioned earlier, UK consumer price inflation actually went negative in May 2015. In July 2014, it was +1.9% (data). Therefore, the low inflation rate is actually masking weak wage growth.


So should we be borrowing billions more and running a bigger deficit? 

There seems to have become engrained in the public psyche a perception that somehow running a deficit is something that only profligate governments do. But actually when you look back at the records, the IMF’s figures, the Tories ran a structural deficit every year between 1979 and 1997 (Huffington Post) - that’s 18 straight years.

[The government] shouldn’t be taking money out of the economy by imposing austerity policies, but instead listening to what pretty much every eminent economist is saying (Paul Krugman; Ha-Joon Chang et al [Guardian]) and stimulating the real economy. Promoting economic growth and increasing tax revenues, thereby boosting GDP, are often the best ways to get the debt-to-GDP ratio down, and indeed that is the case in the UK (Touchstone Blog; EconomicsHelp) Austerity has been tried and the results are in: it doesn’t work (Krugman (link above; for still more detailed analysis, Mark Blyth’s “Austerity: The History of a Dangerous Idea”).

At this point, Neil would probably have asked his question about Greece, but as the interview actually went he left it til the end - so feel free to jump ahead to that point then come back here!


[Savings from eliminating Trident] don’t save you anything in the next couple of years, and you don’t get much from raising taxes on the rich. Let me be clear, you wouldn’t borrow more?

Trident

Firstly, I support scrapping Trident because it’s the right thing to do, a step in the right direction towards a nuclear-free world (Jeremy Corbyn). Also, I think what a lot of people don’t appreciate about Trident is that it’s not an independent deterrent but is actually largely American-owned (Another Angry Voice). 

We acknowledge the economic impact on Argyll and Bute (where the Faslane base is a major employer) that will result from the discontinuation of Trident (Ian Jack, Guardian) and some of the savings should be re-invested in the region. 

Taxes 

We first of all need to tackle this defeatist attitude that it’s not possible to increase our tax income from the wealthiest individuals and corporations. Unless we get a grip of this, the inequality that has got out of control, and accelerated massively since the financial crisis (Guardian) will just keep on getting worse and worse. Already, the five richest families in the UK own more than the poorest 20% of the population (Guardian). 

There are policies that we could bring in that would go towards addressing this inequality; we need to look at the mechanisms that are being exploited by wealthy individuals and companies to avoid tax and how we can close loopholes. We need to change our relationships with firms that facilitate tax avoidance (SpinWatch). We need to make sure that multinationals that profit from sales to British consumers pay their fair share (Pearson). Where international co-operation is needed to address these issues, we should take a leading role in driving that co-operation.


I’m trying to explore the alternatives; how you would get out of this [deficit]. Given that raising taxes on the rich doesn’t get you that much, in fact it may even be negative, would you raise taxes on Middle England as Jeremy Corbyn suggested in his Newsnight interview? Going into the 40% bracket, should they be paying more than 40%? 

Yes. What I think people sometimes forget is that the higher rates of tax - be they 40%, 50% or whatever - apply only to income above the higher rate threshold. Everyone, even your CEOs and your Premiership footballers, pays basic rate tax on the first tier of their income; no-one actually pays 40% tax on all their income. The 40% really isn’t a high rate by UK historical standards - in the 1950s and 60s it was 90% (Wikipedia)! 


Where does the money [to invest in housing, education etc to create growth] come from? It doesn’t grow on trees, so are you going to borrow more or tax more to get this extra money? 

In the short-term we will borrow more. Despite what the Tories have been telling everyone for the past five years, that’s really not a problem. Our borrowing costs are lower than they’ve ever been (FT), interest rates are near-zero and so is inflation. There’s absolutely no reason aside from right-wing ideology why we shouldn’t borrow more and grow our way out of this slowdown. In the medium-to-long term, as we begin to achieve sustainable growth at the same time as tackling the tax avoidance I talked about earlier, the debt-to-GDP ratio will come down.


How much are tax cuts for the wealthy cost us? How much does the cut in the top rate of tax from 50% to 45% cost the Treasury? 

That all depends on how much the wealthiest individuals (who will have earned the most income over and above the top-rate threshold) managed to avoid! I believe we’re looking at a cost to the Treasury of £3–4 billion per year (Guardian).

More broadly, there is an idea that has been popularised – particularly in America – that tax cuts for the rich can boost revenue rather than costing the Treasury. When economists have actually looked at the data following tax cuts by Republicans in the U.S., they’ve found that it’s untrue (US News). One has to wonder whose interests the people spreading this myth are serving... 


What would happen if we hit the next recession and we still had a massive budget deficit? 

First off, we really don’t have a “massive” budget deficit. We have a modest deficit by historical standards (Data). 

We do need to be prepared for the next recession, and we do that by building our economy on strong foundations for growth, rather than being excessively dependent on the financial industry and on rising house prices (particularly in London; Guardian). Tory policies are leading us down the wrong road, and putting us at risk of a worse downturn in the future.


[If you cannot come out of a recession by making cuts alone], why have we now come out of recession? Why have we now got the fastest-growing economy in the G7?

I think what you’re doing here is taking statistics out of context to make a point that's actually misleading. Yes, we had 2.8% growth in 2014-15, but it’s been 7 years since the crash and onset of the recession and we’re only now just about getting back to where we were beforehand. 

We’ve wasted nearly five years (Simon Wren-Lewis), and that’s been because of the austerity policies of the coalition government. Up to the end of 2012, our recovery was the weakest of all of the G7 countries apart from Italy (Full Fact). Especially considering we’re not tied to the Eurozone with all of its currency’s structural problems, that’s really weak.

What has actually happened - and the Tories have been really sneaky about this - is that it obviously became apparent that austerity wasn’t working. And so, while the government didn’t change their rhetoric, they actually changed their spending policies to reduce the rate at which they were making spending cuts in 2012. The growth that was achieved in 2013 and 2014 follows on from that (Simon Wren-Lewis).

Unfortunately, it looks as though the Tories, now they’re in with a majority, are going to revert to the austerity policies of the coalition’s first two years in office, and we will likely see a downturn as a result. 


If these jobs are so low-wage and so insecure, why are we now in the middle of the longest spell of sustained retail spending since records began? 

I’m not too sure where you’ve got your figures from… The ONS reported that May 2015 represented the 26th consecutive month of growth (ONS). That’s consistent with the GDP data showing that we began to grow in 2013 after the government eased off on their spending cuts (see above) and after three years of weak to non-existent growth since the crash.

Of course, average sales volume data doesn’t tell you all you need to know about retail, and people have seen for themselves the impact of the recession and our slow recovery on their high streets, especially in more deprived regions where the renewed house price boom has had less effect on our towns (Guardian). 
We need to invest in the regions, do what we can to support small businesses and independent retailers and pubs and cafes and restaurants, and make sure that a rising tide lifts all boats and not just the biggest ships. When we put money into the pockets of people with the lowest incomes, and reduce inequality, we’ll start to see real social as well as economic recovery (IMF, via Guardian).


Unsecured credit is now lower than it was as the start of the recession [implying that the increase in retail spending isn't explained by people making more purchases on credit]...

This is misleading, because we’re not comparing the same timeframes. Yes, it’s lower than at the height of the boom (Trading Economics), but it’s growing fast once again. UK consumer credit grew by 6.6% in the year to February 2015 (Bank of England, PDF), so it is likely that a significant proportion of the increase in retail sales volume that we’ve started to see in the past couple of years.


There are 700,000 unfilled vacancies – there are jobs around, and three quarters of the jobs that are being created are full-time jobs...

When we look at the statistics on job vacancies, we see between 2001-08 there were somewhere between 550,000 and 700,000 vacancies in every three-month period until the crash. These numbers therefore represent a typical rate of turnover in the labour market (data from ONS, PDF).

That then dropped to 430,000 in early 2009. Not until the second half of 2013 did the number rise back above 500,000 (data source as above) – once again we’re looking at the impact of the misguided austerity policies imposed in the first couple of years of the coalition government. 


Where are the statistics from the ONS to show that these are all or nearly all low-paid jobs?

They’re not all low-paid jobs but many of them are. The median wage (that of the middle employee if they were all lined up from lowest-paid to highest) makes sense to look at when we're talking about low pay, because it’s less distorted by the extremes at the top end of the scale than the mean wage data are. In 2014 the full-time employee earning the median wage was actually earning less in real terms than they were in 2010 (Full Fact; Full Fact). The median wage is getting closer to the minimum wage (UK Parliamentary Business) – that shows that low pay became more prevalent under the coalition.


If running big deficits and racking up huge debts was the answer, why isn’t the Greek economy booming?

There are so many reasons why that’s not a reasonable comparison to make. First of all, most obviously, Greece is a member of the single currency, the Euro, and it really shouldn’t ever have been admitted. They fudged the figures (Independent). They have structural problems owing to years of corruption (Economist) and massive tax evasion on a scale unheard of in the UK (Guardian), and the austerity is only making the situation worse (Paul Krugman; Paul Krugman [chart below]).



Unlike Greece, the UK controls its own currency, and therefore have fiscal options aside from austerity. That doesn’t mean we think it's a good idea to go out and devalue the pound in lieu of responsible budget management, but rather that the flexibility that we have is reflected in our borrowing costs which are far lower than those of Greece (Benjamin Studebaker). 

Once again, the sensible thing for the UK to do, in the short-term, is to borrow more in these favourable economic conditions of low borrowing costs, interest rates and inflation and invest in infrastructure, housing and a sustainable future for this country. With the boost that the investment will give to the real economy, we’ll start to see our debt-to-GDP ratio go down and equality and social welfare go up.

Saturday, June 20, 2015

Saturday Sound: Robb Johnson

Up to 250,000 people are estimated to have taken part in today's anti-austerity demonstration in Central London, myself among them.

It's been 12 years since I've participated in such a well-attended protest. This music post looks back to 2003, with Robb Johnson.

What Politicians and the Media Aren't Telling You About Austerity

If you're over the age of about 25, you probably remember a time before our politics became pre-occupied with budget deficits and debt-to-GDP ratios. Before "austerity". Aside from a few fringe conservatives, mostly in the U.S., no-one really cared about these things.

You've probably guessed that this sudden shift in the terms of our political debate has something to do with the financial crisis of 2007-08... and you'd be right. The crisis in the banking system that led to the need for huge bailouts paid for from national budgets, was largely contained in the U.S. - but not in Europe.

As shown in the graph, the ratio of outstanding domestic credit to GDP continued to rise in Europe (but not the U.S.) well into the 2010s. The assets of European banks represent multiples of nations' GDPs (the U.K. is one of those nations). By comparison, U.S. banks' assets represent around 120% of GDP - and the U.S. has the advantage of being able to print the world's reserve currency.

So, why do we have austerity? Why has our politics - here in the U.K. and in the Eurozone - become obsessed with budget deficits? It's all about 1) saving the banks and 2) saving the Euro. The lower the debt-to-GDP ratio of a nation - particularly one with no currency flexibility such as those in the Eurozone - the more scope it has for taking bad bank assets onto its books. 

The only trouble is, austerity doesn't work. The economic slowdown that results from austerity policies means that the GDP growth required to get the debt-to-GDP ratio down cannot be achieved. The banks remain at risk of collapse. And austerity itself is socially harmful, hitting the poorest and the disabled hardest.

There has to be another way, because this one is a dismal failure.


Read more about the ideas discussed in this post: Prof. Mark Blyth (Austerity: The History of a Dangerous Idea)


Monday, June 15, 2015

An Astounding Achievement

I'm in shock. It's been a whirlwind week-and-a-half, and I'm still getting used to the fact that the seemingly impossible has become reality.



On this momentous Monday morning, Jeremy Corbyn received nominations from more than a dozen MPs. In doing so, he overcame the formidable hurdle put in front of him by party rules and became the fourth candidate on the ballot paper upon which the next leader of the Labour party will be elected. Jeremy will participate in public hustings and televised debates over the summer, and will surely make the most of the inestimable opportunity that has come his way to make the crucial case against austerity.

Ben Sellers rightly describes this as an astounding achievement. Jeremy's candicacy came about because activists, dissatisfied with the lack of effective opposition to Tory rhetoric about public spending and austerity among leadership candidates, demanded the opportunity to vote for a genuine alternative. When, in response, Jeremy announced that he would run, his chances of chances of getting onto the ballot were seen as remote.

Thousands upon thousands of tweets, poll votes, petition signatures, letters and emails to MPs later, and here we are, in a position to effect real change. Everyone who has participated in this extraordinary grassroots effort has helped to demonstrate that Labour in 2015 has the potential to be a movement again. Now, the real campaigning starts...

Saturday, June 13, 2015

Escape from Bizarro World

Eminent economists have lined up to slam George Osborne's plans for a 'balanced budget' law, saying that it ignores "basic economics" and warning that the imposition of such restrictions on a modern economy risks triggering a liquidity crisis.

Signatories of the letter published in yesterday's Guardian include Ha-Joon Chang, Thomas Piketty, David Blanchflower and Jared Bernstein, as well as professors of economics at Oxford University, the London School of Economics, the University of London and Warwick University among others.

Meanwhile, Nobel Prize-winning economist Paul Krugman, writing in the New York Times yesterday, attacked the British government's austerity policies and shameful rhetoric in no uncertain terms.
The ultimate example of a seriously bad idea is the determination, in the teeth of all the evidence, to declare government spending that helps the less fortunate a crucial cause of our economic problems.
Astonishingly, some in the Labour party believe that the best way forward for the party is to join the Tories in economic Bizarro World – capitulating to the dominant narrative that Krugman calls out for its absurdity. Writing on the ironically-named blog Labour Uncut, Samuel Dale argues that Labour should support Osborne's economically illiterate 'balanced budget' proposal.

Dale's argument is that the economics don't matter: the politics demand that Labour admit defeat on their economic record and move on. It's not an irrational argument, and based on the pronouncements made by all three of the front-runners for this summer's leadership election it's one that the party is somewhat taken by. It's also dead wrong.

Krugman:
Mr. Osborne sounds very serious [about his 'balanced budget' proposal], and, if history is any guide, the Labour Party won’t make any effective counterarguments.
If we are to escape from the Bizarro World of Osbornomics – one that is completely at odds with economic reality as viewed by most serious economists – Labour have to confront the myths and must not capitulate to that dominant narrative. It is extraordinary that the only leadership candidate who has given any indication of being prepared to do so is Jeremy Corbyn.

Regardless of anything else, this is why Corbyn must be on the ballot paper when nominations close on Monday.

Saturday Sound: Robb Johnson & The Irregulars

On Question Time last week, broadcast from Plymouth, an elderly local man speaking from the audience contrasted the austerity policies of the current government with those of Attlee's Labour, elected shortly after the end of World War II in Europe in July 1945:
After [the War] this country was broke. That was austerity. What happened?
Labour gave us the National Health. They gave us houses. They gave us full employment. They gave us that.
Now the Tories are taking it away!
Robb Johnson is one of the finest radical singer-songwriters currently performing. Here he is with his band the Irregulars, celebrating the post-War spirit that man in Plymouth referred to.