How to earn a living

Jeff Immelt, boss of GE, the World’s largest manufacturing company, has been talking at the London Business School.

He is convinced that in the US  “a 30-year transition from a manufacturing export-led economy to an importing service-based one typified by the growth of Wall Street is over and has left America damaged“.

He believes that the workings of the world economy have been “reset” and are moving onto a new pendulum swing which will see the future dominated by new levels of government intervention, new markets and new technologies based on good old research and development.

I think he’s right and that’s a problem for UK plc.   We are good at inventing new things (at least we think we are!) but commercialising those inventions is something that Britain has been poor at (with honourable exceptions) for 100 years and more.

So how will we earn our living in the future now that banking and finance isn’t looking like such a good bet?

NuLabour buries toxic waste under Jackson tributes

The sudden and premature death of Michael Jackson has a silver lining for a NuLabour government that has more toxic waste than the banking sector.   It is a once-in-a-decade opportunity to bury bad news, really bad news, when the news agenda is otherwise engaged.  So who gets the prize for quick thinking in charge of a disaster?

Step forward Ed Balls, Secretary of State for Children, Schools and Families.  He has ‘let it be known’  that the government is to abandon what the Guardian describes as “Tony Blair’s Flagship schools reform” and “the most significant education reform of the New Labour era“, namely the Stalinist national strategies for literacy and numeracy in primary schools.  The changes will end the centralised prescription of teaching methods whereby Ministers tell teachers how to do their jobs.

As Jenni Russell, also in the Guardian, points out results have been disastrous. 

Teachers feel helpless when they are in front of classes that aren’t grasping the points at the speed the national timetable lays down. There is no flexibility. The national plan compels a teacher to move on, no matter how many children are being left behind. Frantic booster classes at ages seven and 11 teach children the short-term tricks they must know to get them through Sats tests.

Results did improve in the first few years of the National Strategies but only because teachers were learning to teach to the test; once they had done so results predictably stagnated and it soon became clear that children were being turned off education by their stultifying experience of it.

However, it’s not just educationally that the National Strategies have been such a disaster.  Delivering them has involved massive expenditures on consultants; abandoning them could save £100 million per annum on the governments contract with outsourcing firm Capita plc.   In other words, NuLabour’s centralised command and control approach is not only a technical failure but also a financial failure.  

This is, of course, not a one-off failure confined to education only.  The development of a centrally-directed system that Stalin would have approved of is very much at the heart of the new NuLabour project and much of the excessive growth of government in recent years is attributable to it although, in fairness, one should point out that, as with so much else, Labour’s claim to fame is not that it originated this approach – that credit goes to the Thatcher-era Conservatives - but that it developed it to the current obscene level.

Meanwhile what of Ed Balls?   His news management strategy is working well so far.  Last night’s News at Ten on BBC1 slipped in only a brief mention of his change of plan just before the end of the bulletin and Newsnight made no mention of it at all.  Accordingly he has, in the time-honoured way of finessing a catastrophic defeat, declared victory and moved on. 

His latest wheeze is to redirect the money saved to schools to help them build networks with neighbouring schools thus driving up standards and exam results.   How wonderfully cuddly and, well, Internet-friendly  those ‘networks’ sound – it must seem to the poor souls like a shoo-in.   It won’t work of course, but hopefully NuLabour will be long gone before too much more damage has been done.

Lessons from London

According to the Wall Street Journal the US House of Representatives is to start posting expense reports online at the behest of Speaker Nancy Pelosi after the WSJ began publishing stories based on combing through the existing paper records.

It is not proposed that records from earlier years will be published online.  My guess is that quite a few congressmen have been reading reports from London and are keeping their fingers crossed that no-one digs into past expenses.

What a difference it would have made if Speaker Martin had opted for disclosure at an early stage.

However, it seems that the Senate still doesn’t ‘get it’ even though their expenses typically cost millions of dollars per year so there could still be fireworks from Washington.

The Dark Arts of Sith Lord Cheney

Disturbing  and shocking revelations about the Iraq War just keep coming. 

The latest is a piece in the Washington Note by Col Lawrence B Wilkerson, former chief of staff to Colin Powell when he was Bush’s Secretary of State.  A Republican, Wilkerson clearly detests Dick Cheney whose been touring the media extolling the virtues of torture in keeping America safe.

Summarising an MSNBC package he comments, ”Let’s just say that five minutes of the Sith Lord was stunningly inaccurate”.

The real reason for torture was nothing to do with keeping America safe; as Wilkerson explains (with my emphasis):

Likewise, what I have learned is that as the administration authorized harsh interrogation in April and May of 2002–well before the Justice Department had rendered any legal opinion–its principal priority for intelligence was not aimed at pre-empting another terrorist attack on the U.S. but discovering a smoking gun linking Iraq and al-Qa’ida.

So now we see the real reason for torture.  In the absence of any evidence from the UN survey teams, the Iraq/al-Qa’ida link had to be manufactured wholesale – dodgy dossiers, torture – whatever it took with Bush and Blair playing off each other.

The Bilderberg Connection – for conspiracy theorists everywhere

The secretive Bilderberg Group, long a favourite of conspiracy theorists and target of anti-globalists,  are holding their 2009 conference in Greece over 14-17th May.

As Paul Watson of globalresearch.ca reports  ”Elitists [are] divided on whether to quickly sink economy and replace it with new world order, or set in motion long, agonizing depression”.  The way he writes it, this lot are puppet-masters pulling the strings that control the World and acting as kingmakers selecting future leaders they approve of.  His heading claims that the Group “plans economic depression“. 

Wow! Not quite up their with fellow Bielderberg critic David Icke who is on the record as believing the the Queen is a reptilian humanoid.

The fact is that the majority of policy-makers world-wide are working with deeply flawed economic theories.  This meant that they failed to see the crash coming until it was too late and don’t really understand it even now.  Not quite Master-of-the-Universe stuff even if many have been remunerated on the basis that it was.

A more rational explanation would be that the Bielderbergers, like anyone else, can spot a rising political talent and that they are free openly to discuss unpalatable truths about just what a big mess we are in in a way they don’t always like to when they know the press is hanging on their every word (even if conspiracy theorists sometimes get hold of garbled versions of their debate).

For what it’s worth there are hard choices to be made roughly along the lines Watson sets out.  Should we purge the system of its accumulated excesses as quickly as possible or try to keep the economy staggering on despite the difficulties until things improve?  The first option implies an intense, but relatively short depression, the second implies a long drawn out affair, possibly lasting 20 years.

I favour the first option, most politicians lean to the second, but I fear the mess may be too big for that to be deliverable; (or, to put it another way, I think the government will run out of credit and bankrupt us before they’ve filled the hole they dug earlier).

Worst Slide Story

West Side Story is deservedly a classic.  This animated remix for our times is another. 

H/T naked capitalism

Lurking in the shadows

HMRC’s rule is that “an employee or office holder may deduct expenses incurred wholly, exclusively and necessarily in performing the its duties” (sic).

Easy enough you might think (apart, that is, from the proofing error), but that is before this simple rule collides with a Parliamentary culture that is long past its sell-by date.   Some, like Norman Baker, have been fighting  to change it but too many MPs, ignobly led by Speaker Martin have used every trick in the book to preserve their cosy sinecure.  It’s long past time to drag Parliament into the 20th century; the rest of us have already moved on to the 21st!

What would Speaker Martin care to say to the three policemen arrested yesterday in connection with a number of offences including misconduct in a public office a.k.a. fiddling their expenses?   We all depend on Parliament to do a good job yet we now have an unconscionable situation where there is one law for them and another for the rest of us.  It is hard to imagine anything so offensive as this.

Yet beyond all the brouhaha about MPs expenses there is an even more serious issue lurking in the shadows; namely that it exposes a quite startling degree of complacency in ALL the party leaderships.

That this was going on they all certainly knew;that it would eventually detonate catastrophically became highly likely once the FoI Bill was passed and a racing certainty many months ago.  Any one of the Party leaders could have put his lot in the clear (at least as far as the more recent years are concerned) by unilaterally instituting a clear party policy on it.  Yet despite some gestures none managed to institute an effective policy leaving them all in an unseemly scramble to react to developments after the event.

I don’t want, and Britain can’t afford, leadership whose highest ambition is to hold office, that thinks it’s adequate to react after the event and whose habitual response it to spin and wriggle its way out of the mess that inevitably results.  We need leadership that is knows where it wants to go, is proactive in this and can analyse and plan accordingly.

There are many good and honest MPs in all parties but they can do little if the culture is against them.  So, before the Lib Dem leadership starts consoling itself with the thought that they got off relatively lightly, they might like to reflect not just on how it is that they failed to dodge this particular bullet but rather on how it is that they still languish in third place in the polls even after Labour has contrived to wreck the economy.

Change we can believe in – if only!

A funny thing has happened almost by stealth sometime in the last two weeks or so.  Progressives, who might be excused for thinking that Obama’s election would indeed lead to “change we can believe in”, have had to admit that he’s getting it wrong, badly wrong as far as the financial crisis is concerned.

Now an excellent interview with William Black on Bill Moyers Journal provides much of the context and moreover shed an uncomfortable light on developments on this side of the pond.  (The video is about 30 minute long but well worth it.  A transcript is provided if you prefer).

William K Black is now professor of Economics and Law at the University of Missouri, Kansas City and was formerly a regulator during the savings and loan crisis of the late 80s. 

Black’s thesis is simple; the financial crisis is driven by fraud on an epic scale.   He explains to Moyers how it works:

WILLIAM K. BLACK: Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you’re a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there’s going to be a disaster down the road.

BILL MOYERS: So you’re suggesting, saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans?

WILLIAM K. BLACK: Yes.

He goes on to explain that the big banks knoew perfectly well that the liar loans and the like were fraudulent, but that complex financial instruments were deliberately created so that swindlers could exploit them.  The fraud became widespread.

BILL MOYERS: And was this happening exclusively in this sub-prime mortgage business?

WILLIAM K. BLACK: No, and that’s a big part of the story as well. Even prime loans began to have non-verification. Even Ronald Reagan, you know, said, “Trust, but verify.” They just gutted the verification process. We know that will produce enormous fraud, under economic theory, criminology theory, and two thousand years of life experience.

And now there’s a cover up.

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

But the whole thing tracks back to a small number of individuals.

BILL MOYERS: This wound that you say has been inflicted on American life. The loss of worker’s income. And security and pensions and future happened, because of the misconduct of a relatively few, very well-heeled people, in very well-decorated corporate suites, right?

WILLIAM K. BLACK: Right.

BILL MOYERS: It was relatively a handful of people.

WILLIAM K. BLACK: And their ideologies, which swept away regulation. So, in the example, regulation means that cheaters don’t prosper. So, instead of being bad for capitalism, it’s what saves capitalism. “Honest purveyors prosper” is what we want. And you need regulation and law enforcement to be able to do this. The tragedy of this crisis is it didn’t need to happen at all.

Which brings us back to the beginning.  How is a highly intelligent man like Obama getting it so badly wrong?   Ditto Gordon Brown?

The ostrich strategy (European edition)

The European elections will be on us before we know it so it was pleasing to find a well produced leaflet from my MEP on the mat with the strap-line “reporting back to you in 2009″.  While not strictly a campaign leaflet, it’s timing cannot be accidental!

Unfortunately, the early promise is not sustained; the stories covered are:

• Saving post offices – MEP working with local campaigners and councillors to save them.
• Campaigning for investment – MEP again with a councillor and blaming the local Labour council for false starts on regeneration.
• Renewable energy and recycling – the new three-bin recycling is proving popular with residents in the flagship Lib Dem council in the area and is endorsed by MEP.
• Fighting a local landfill site – MEP represented residents after the site operator breached four of its operating conditions.
• Home heating – MEP says cavity and loft insulation should be a government priority to save energy and prevent climate change.
• Green jobs – our MEP has negotiated a Directive which will ensure that 20% of all EU energy comes from renewable sources by 2020.
• Standing up for consumers – MEP has reported EasyJet to the CAA after passengers complained the airline has not been complying with EU rules when flights are delayed or cancelled.

All good stuff no doubt but mainly relevant for a local council election.   The European dimension – where it exists at all - is extremely weak and confined to low level complaint handling or legislating that specified outcomes MUST happen by a safely remote future date.

Now I’ve no beef with the MEP concerned who is a thoroughly decent and hardworking individual and who recently circulated a newsletter to members in the region which actually mentions some European issues.   

What I DO have a beef with is a Party and a campaign that is afraid to speak its name; that succeeds in almost entirely avoiding Europe and which, when it does tangentially mention Europe, has no narrative whatsoever – no concept of how Europe fits into the scheme of things.   There not even a basic awareness that different tiers of government have different responsibilities – and that this matters.   Just how stupid do we think the voters are?

We have gone from the uncritical enthusiasm for all things Euro of a few years ago to a kind of embarrassed silence while hoping that no-one will notice.  Yes, it’s the ostrich strategy.

We do not support Labour simply because they are the government and we support democracy.  So why do we support everything EU however bad, however abusive of power and position, simply because we support the idea of a pan-European government to handle pan-European issues? 

I passionately support the concept of a European Union that is constitutionally mandated to take responsibility for those things (and only those things) that national or local government cannot effectively handle.   I reject the notion that the (socialist-inspired) gravy train version of the EU we now have is the only option.  What nonsense!

It’s not even as if there were any shortage of EU-relevant themes (some of which might even prove electorally popular) that we might usefully adopt, for instance:

• Democracy in Europe - bullying small nations to vote again until they get the ‘right’ answer is no way to behave.  Whatever its rights and wrongs the Lisbon Treaty is dead by the Irish vote.  Had Britain and France been allowed to vote, both countries would have massively rejected it.  This makes a mockery of any claim to legitimacy.
• Reforming the CAP – it should be ‘repatriated’ leaving each country to make its own arrangements.  I know this would cause apoplexy in Paris and be vetoed, but so what?  Silence can only be construed as tacit support for a scheme that taxes ordinary people to subsidise (mainly) large landowners.  From Antony Hook I learn that Labour has vetoed a limit on payments to rural oligarchs.   Brown should be made to pay for this at the polls.
•  Reforming fisheries – the EU regime was not actually intended to cause massive damage to both fish and fisheries – it just happens to work like that with (at times) simultaneous subsidies for new boats and restrictions to preserve fish stocks.  Clever stuff!
• Reforming Brussels – the nonsense of EU accounting (or lack of!) and its profligate ways is a target the size of a barn and Lib Dems actually have a good story to tell following good work to expose abuses.   So why keep quiet about it?

All this would be bad enough if it began and ended with Europe but it doesn’t;  there is obviously ‘cross talk’ between themes in Europe and themes in domestic politics.  How can anyone take Liberal Democrats seriously when democracy in Europe is not central to their agenda?  What are we to make of a Party that proclaims its commitment to fairness but in practice has nothing to say about oligarchs?

Others are not so confused.  UKIP have a perfectly clear, if entirely detestably, narrative.   Now Libertas has entered the fray as a pro-Europe Party committed to “creating a new democratic and open European Union. … A Europe for and of the people” – a far more liberal vision of European possibilities than any articulated by Cowley Street.

Europe should be a positive for us but we need some coherent leadership to get to that point.

Banana republic

Glenn Greenwald hits the bullseye with a superb post on Salon.com comparing the US now to Russia and Argentina during past crises.   His article is a must read by any standards.

He starts by quoting Desmond Lachman, a former IMF official, who describes his experience of Russia and Asia.

I still recall the shock I felt at a meeting in Russia’s dingy Ministry of Finance, where I finally realized how a handful of young oligarchs were bringing Russia’s economy to ruin in the pursuit of their own selfish interests, despite the supposed brilliance of Anatoly Chubais, Russia’s economic czar at the time.

And.

I often heard Asian reformers such as Singapore’s Lee Kuan Yew or Japan’s Eisuke Sakakibara complain about how the incestuous relationship between governments and large Asian corporate conglomerates stymied real economic change.

Greenwald observes (following Yves Smith) that this is now also the road the US is on.

 … Citibank and Bank of America are now using TARP funds they received not to extend more loans (the ostensible purpose of the bailout), but rather, to buy up more and more of the very distressed assets that Geithner insists they need to be relieved of, because they now know that, under Geithner’s plan, they will be able to sell them at a substantial profit courtesy of public funds (i.e, the Government will buy those crippled assets at well above their current market price).  

Quite simply, this is looting of the public purse by a powerful elite.  Greenwald goes on to put his finger on the central problem.

The key dynamic underlying all of this — the linchpin that allows it all to happen and, historically, the primary hallmark of a deeply broken nation — is the total elimination of the rule of law for the ruling class, with a simultaneous intensification of the law as a weapon against the citizenry.  Does anyone expect there to be any widespread prosecutions for those most responsible for the looting, systematic fraud and grand-scale theft of the last decade? 

It’s not quite as bad as that here in Britain as yet but we need to be alert; it’s a very slippery slope. 

The choice is between holding unequivocally to the rule of law or becoming just another banana republic.

(H/T naked capitalism)