The Welsh Government made a fresh offer to health unions on 3 February which led to a suspension of all health strikes in Wales bar ambulance workers from the Unite union while negotiations continue.
On Friday the TSSA union (17,000 members) announced that members are to be given a vote on offers from the train companies in their long-running national dispute over pay, job security and conditions.
However:
Ambulance workers, teachers and university staff are amongst those striking over the next 3 weeks.
The very much larger union, the RMT (82,000 members), have rejected the train companies’ deal (9% over 2 years) due to the additional conditions attached affecting safety on the railways.
The Scottish Government is in talks with the Royal College of Nursing (RCN) and other unions representing NHS staff over a pay settlement for 2023-24, after imposing a pay deal which would give health workers an average 7.5% rise in December, which RCN nurses rejected.
Nurses from A&E, intensive care and cancer wards could join fresh strikes in England, as the RCN considers a continuous 48-hour strike, which could begin in weeks.
According to Reuters, a recent Chartered Institute of Personnel Development (CIPD) survey indicates that the gap between public and private employers’ wage expectations has widened. Planned pay settlements in the public sector fell to 2% from 3% in the quarter before, compared to a median of 5% in the private sector.
Meanwhile the UCU and the four other higher education unions (EIS, GMB, UNISON and Unite) and employer representatives from the Universities and Colleges Employers Association (UCEA) have agreed to further talks mediated by conciliation service Acas. The discussions began yesterday and continue today, covering pay, equality, job insecurity and workloads.
The strike continues today for three consecutive days. In total 18 days of strike action are planned throughout February and March, with a new strike ballot planned for March.
It seems fairly clear that public sector employers need to offer rather more than they have to date if any of these disputes are going to be resolved any time soon.
Day 3 of the UCU strike and we move onto fiscal austerity. This is the type of austerity we normally think of – increasing taxes and reducing government spending – and the most prevalent feature of all the UK governments we have had since 2010, with the cumulative lack of investment in the economy which is the underlying cause of most of the industrial action now taking place all around us. People are not just upset that their pay has not kept pace with inflation for 12 years, it is also the cumulative degradation of the conditions under which they work, seek healthcare, seek education for their children, travel anywhere or don ‘t travel anywhere that has enraged so many.
Rishi Sunak says he would love to give nurses a “massive” pay rise, but insists the money needs to be prioritised in other areas of the health service. Jeremy Hunt insists that his priority is tackling inflation and that public sector pay rises cannot be allowed to jeopardise this. Health secretary Steve Barclay hints that striking NHS staff could be offered a better pay deal from April – if unions accept “productivity and efficiency” reforms in return.
But improving productivity at work requires investment in where you work, as numerous studies have confirmed (one example here). Whereas, as the FT has shown recently, the UK has done the following since 2010:
Source: FT graphic by John Burn-Murdoch
And what about Jeremy Hunt’s reasons for keeping pay reducing in real terms in the public sector year after year? That paying an inflation matching increase would in some way “lock in” inflation. As Blair Fix tweeted recently:
Most economists accept that a wage-price spiral is possible, leading to runaway inflation. But why isn’t an interest-price spiral also possible? Interest and wages are just two forms of income. So why is one spiral ‘obvious’ while the other is blasphemy?
It doesn’t make sense until you realize that mainstream economists are in the business of legitimizing capitalist income. Wages can drive inflation (bad workers!) … but capitalist income is always productive.
He has also written about the problems caused by following economic theories treating inflation as a single value, when it is of course an average (or in fact usually at least an average of an average, sometimes switching between arithmetic and geometric averages in the process) taken of a highly volatile underlying data set. It is often said that inflation is redistributive: benefitting borrowers at the expense of lenders. However, one of the insights from Fix’s piece, drawing on Nitzan’s and Bichlar’s work in the 90s, is that big business also benefits from inflation: large corporations and oligopolies are raising prices the fastest at the expense of smaller businesses. Why do we never hear that this is driving inflation?
Because capitalist income is, in their view, “always productive”, you won’t hear about rent-price spirals or profit-price spirals from the current Government. Instead we will hear about how inflation needs to be reduced and this can only be done by further depressing the real value of all of our incomes for another year. This is what the Office for Budget Responsibility (OBR) has to say about CPI:
Following the Russian invasion of Ukraine, we now expect CPI inflation to peak in the fourth quarter of 2022 at its highest rate in around 40 years. The increase is driven primarily by higher gas prices feeding into sharp rises in domestic energy bills, alongside higher fuel prices and global goods inflation. Inflation then falls rapidly, and temporarily goes negative in mid-2024 as energy bills fall back and some global supply pressures reverse.
Source: Office for Budget Responsibility
On nominal wage growth and its contribution to Real Household Disposable Income (RHDI) they have this to say:
Nominal wage growth is also high in 2022 and 2023, although not high enough to prevent real wages from falling significantly. The contribution of labour income to annual RHDI growth then settles at an average of 2 percentage points a year over the remainder of the forecast.
Since one of the original motivations for starting this blog was the poor forecasting ability of the OBR, I am not going to set too much store on these forecasts, other than to point out the confidence it has that labour income demands will be thwarted and we will all see our real wages fall significantly over the next year. All in pursuit of a policy for which the expected value appears to be 6 months of deflation.
Deflation would be a disaster, As Frances Coppola has written:
Those who have money are happy because they are becoming wealthier. But someone, somewhere, is going hungry.
As she concludes:
So I’d rather money wasn’t deliberately kept scarce to placate savers. Let the supply of money respond to demand for it. When everyone wants to save in the form of money, you need to produce more of it so those who need to spend money don’t starve. Obviously, we don’t want to create so much money that it becomes worthless. But it is better to risk waking the demon of inflation than to deny people the means to live.
So when the Government says that they need to repress my pay in order to avoid locking in inflation, it reminds me of this paragraph from Catch 22:
Morale was deteriorating and it was all Yossarian’s fault. The country was in peril; he was jeopardizing his traditional rights of freedom and independence by daring to exercise them.
A Government intent on crushing real wage growth or even the hope of it while explicitly targeting deflation within the next two years; an extreme assymetry of power between wage earners on the one hand and lobbying corporations and asset owners on the other. This is why so many of us are exercising our traditional rights today.
As we arrive at the second day of UCU strike action, we move from the industrial austerity discussed in my last blog to monetary austerity. With the latest rise in the Bank of England Base Rate to 4%, it also seems timely to consider the history of Bank of England independence.
Go to the Bank’s own website and you will find all the presentations from a 20 years on celebration of its independence from 2017. Ian McCafferty, External MPC Member at the Bank of England, gave a speech in 2017 about the circumstances of its introduction. The main reason given for the change was credibility of monetary policy.
But is this history entirely accurate? The Brussels and Genoa economic conferences of 1920 and 1922 (previously referred to here, and, as in the previous piece, the source of most of the next couple of paragraphs is from Clara Mattei’s excellent The Capital Order) first introduced the idea of central bank independence from democratic control as something desirable (before World War I, the Bank operated much more as a commercial bank and was the only limited-liability corporation allowed to issue bank notes, which gradually became a monopoly power). As Ralph Hawtrey, a senior economist at the UK Treasury of the time, said, the Bank of England should follow the precept: “Never explain; never regret; never apologise”.
The main reason formal independence does not appear to have been sought in the UK at the time, was that it was unnecessary. Montagu Norman was Governor of the Bank of England from 1920 until 1944, but was very close ideologically to Basil Blackett and Otto Niemeyer, who effectively ran the Treasury during those years. For example in 1927, the Governor of the Bank of France, Emile Moreau, relayed the opinion of the French Ambassador to London at the time: “Winston Churchill [Chancellor at the time]…isn’t really in control of the Treasury. The man who does in fact control it is Sir Otto Niemeyer, the intimate friend of M. Norman”.
The result of this was technocratic control of monetary policy, with politicians unable or unwilling to challenge the Bank or the Treasury. So, when Neville Chamberlain was Chancellor in March 1921, he said that: “the price of money is wholly outside government action”. Similarly, in March 1925 when Winston Churchill was Chancellor, he said that: “I think it would be an inconvenient practice if the Chancellor of the Exchequer were to set the precedent of expressing approval or disapproval of decisions taken at any time by the Bank of England”.
This was despite what, to at least some technocrats, must have been a terrifying increase in the electorate at the end of World War I – the size of the electorate tripled from the 7.7 million who had been entitled to vote in 1912 to 21.4 million by the end of 1918 as a result of the Representation of the People Act of February 1918. This gave the vote to 8.5 million women for the first time (those aged 30 or above and subject to some property requirements) and extended the male franchise to a further 5.2 million (all men over 21 if they were willing to serve British rule).
Technocratic rule ended following the 1945 General Election, when the new Labour Government nationalised the Bank, and the call for an independent central bank only really gained ground in 1992 when it was included in the Liberal Democrat election manifesto in that year. We might perhaps have expected this to have been brought in earlier alongside the change in direction towards monetarism under Margaret Thatcher in 1979. Milton Friedman was probably the best known advocate of monetarism at the time, but Friedman rejected central bank independence on the basis that it would be a bad idea “in a democracy to have so much power concentrated in a body free from any kind of direct, effective political control”.
So, viewed in that way, central bank independence can be viewed as the normal state of affairs, and the 52 years between 1945 and 1997 as the anomaly. One thing that is clear is that central bank independence makes monetary austerity much easier. As Gerard Vissering said at the Brussels Conference of 1920 about central bank independence: “A national or municipal government might possibly be powerless against such pressure on the part of the employees, because the latter can make their political influence felt on national government.” He went on, “…[a]n independent banking institution need not however allow itself to be led by the nose by any power whatsoever exercised by the employees”.
So central bank independence can be seen to be as much about political control as economic management. As McCafferty says, it was introduced for credibility. But credibility with who? Other governments following the same consensus is one answer and the financial markets probably another. There is also the argument about managing expectations within the domestic economy, another form of credibility – ie if people expect monetary policy to be unbending in pursuit of its inflation target, there is no point hoping that this will not be pursued, and therefore the forces pushing up inflation will dissipate sooner (and therefore, the argument is, you actually need generally lower interest rates to achieve your aim). Let’s call it the crushing of hope policy.
This argument does of course depend on the technocrats knowing best. However, as Martin Wolf wrote in the FT about Gordon Brown in May 2010:
...it is far too easy to blame him alone for the UK’s current plight. The truth, I would argue, is that his biggest error was to believe in the conventional wisdom about the prospects for durable economic stability, the robustness of modern financial markets and, surprisingly perhaps, the strength of the post-Thatcher UK economy.
As Blair Fix has pointed out here, increasing interest rates to control inflation looks more like a faith position than one based on much evidence in many cases. How many politicians would be prepared to die on the monetary austerity hill if the central bank were ever to lose its independence again?
It all began for me on 23 September 1985, the first day in my first graduate role as a management trainee at the home counties factory of a security printing firm. From the beginning I was left in no doubt by my new employers that the fairly powerful print unions at the time (SOGAT and the NGA) were the biggest impediment to the captains of industry within the firm from running the business successfully. Occasionally I was allowed into management meetings, where all of the things we could do if it wasn’t for the unions were discussed endlessly.
During my time in this first role, the printing industry changed dramatically: the typesetting was computerised, massively reducing the number employed virtually overnight and Rupert Murdoch set up his non-unionised newspaper factories at Wapping. There had already been three pieces of trade union legislation in the 1980s by the time I started work, the latest being the Trade Union Act of 1984, which required secret ballots for union elections and strikes rather than the show of hands which had been possible up until then. The Miners Strike had also only just ended in March 1985, which had a devastating impact on the trade unions more generally.
Further legislation now quickly followed:
the Public Order Act 1986 (which introduced new offences related to picketing, and increased police powers over protests involving groups of 20 people or more);
the Wages Act 1986 (which reduced many of the restrictions on employers fining and deducting money from employees’ pay, removed statutory holiday entitlement and reduced state funding for redundancies);
the Employment Act 1988 (which gave workers the right to not join a union, and trade union members the right to challenge strike ballots);
the Employment Act 1989 (which restricted trade union officials’ time off for duties and abolished government support for redundancy payments);
the Employment Act 1990 (which finally removed the closed shop – ie a workplace where union membership was compulsory – and secondary action protection);
the Trade Union and Labour Relations (Consolidation) Act 1992, which consolidated the legislation of the 80s and 90s, while clarifying that the right to take strike action was protected when it was “in contemplation or furtherance of a trade dispute”; and
the Trade Union Reform and Employment Rights Act 1993 (which gave trade unions a duty to inform employers of upcoming strikes).
This would appear to have given my first employers everything they could have wanted in terms of containing union power but, after some retrenchment in the 1990s owing to the incoming Labour Government taking the UK back into the Social Chapter of the Maastricht Treaty (which we had originally opted out of in 1992) in 1997, there was further legislation in the form of the Trade Union Act of 2016, which, amongst other measures:
introduced a new requirement of 50% of union members to vote in a ballot for strike action;
required that workers in important services (health, school education, fire, transport, nuclear decommissioning and border security) must gain at least 40% support of those entitled to vote in a workplace for a strike to be legal;
required two weeks’ notice of industrial action to be given to an employer (the employer can agree to one week);
limited the right to take industrial action after a strike ballot to six months, or nine months if the employer agrees.
Over the period since 1985, wealth inequality, which had been steadily reducing since at least the end of World War I stalled and has been generally on a slightly increasing trend since:
However, perhaps this was a price worth paying, if the forces of creativity and entrepreneurship had at last been allowed full rein, freed from the stifling dead hand of union power? Unfortunately not (TFP stands for total factor productivity in the graph below):
So whatever, the continuing problems of UK PLC, it does not look like union power was ever really one of the major ones. Undeterred, the Government is proposing further restrictions on trade unions and their members, including enforcing minimum service levels during strike action for ambulance staff, firefighters and railway workers and requiring some employees to work during a strike under threat of being sacked if they refuse.
The TUC has made a submission to the International Labour Organisation of the United Nations over what it sees as breaches of Conventions 87 (Freedom of Association and Protection of the Right to Organise) and 98 (Right to Organise and Collective Bargaining). As David Allen Green has blogged:
But regardless of your view on the ultimate rights and wrongs of strikes by public sector and other public service workers, there is something fundamentally objectionable in the current government’s proposals to compel certain “key” workers to attend work when they otherwise would be entitled to strike….Simply prohibiting other key workers from being able to strike, without sufficient alternative entitlements and arrangements to balance this loss of a right, is misconceived and illiberal.
It is an authoritarian gesture, rather than a solution to a problem.
Roy Lilley (at the Institute of Health and Social Care Management) in a postscript to a recent blog, focused on what a strategic failure the proposals represent within the NHS industrial dispute:
HMG plans, to ban strike action by some public workers is a further example of ‘push-back’ management. Push the disputes into the courts instead of dealing with the root-cause of strike action, improve industrial relations and representation.
So what has my part been in the downfall of trade unionism to date? In my first job, other than an abortive attempt to develop a new shift pattern(!) for the security guards in the factory, I had few skirmishes with union leaders compared to those with my management colleagues. In the finance sector, where I spent most of the middle 20 years of my working life, I rarely came across any staff representation at all. As a school teacher I joined the ATL rather than the NUT (they have since merged to form the National Education Union) due to its reputation for being determinedly non-militant. And, in my current role, I rather flounced out of the UCU over a difference of opinion over the pensions dispute raging at the time.
So I have not been a very good supporter of trade unionism over the years. However it now seems clear to me that the industrial austerity (ie the crushing of labour power within the economy, further discussed here) described above during my lifetime has been a political rather than an economic project all along. None of the economic justifications given for it since the 1980s have been borne out and the unopposed rugby of industrial management we have increasingly witnessed since has resulted, in my view, in poorer outcomes than if the 99% had been consulted regularly.
I sense that the current Government will only be satisfied when trade union membership levels fall to zero. So if, like me, you don’t want that to happen, the time to push back against running the economy at all times exclusively in the interests of the owners of capital is now.
Photo from the Climate Strike and march in Pittsburgh on 9/24/21. Link from: https://www.flickr.com/photos/9602574@N02/51512352257/. Photo taken by Mark Dixon(https://www.flickr.com/people/9602574@N02). This file is licensed under the Creative CommonsAttribution 2.0 Generic license.
Mark Blyth wrote a great book about how it was a dangerous idea; Simon Wren Lewis described it as a con; Stephanie Kelton defined it as the “deliberate infliction of harm upon society in the presence of alternatives”; Frances Coppola wrote about its terrible price; Steve Keen described it as naive; Mariana Mazzucato, Robert Skidelsky, Ann Pettifor, David Blanchflower and others wrote in the New Statesman on why the UK should not impose it in response to higher debt following the pandemic; and Richard Murphy gave the possible reasons for imposing it as “ignorance, dogmatism and spite”.
What are all of these economists talking about? Austerity. And nearly all of the criticism thrown at this “dangerous” idea is that it does not work economically (ie it will not bring down government debt levels or boost economic growth, the usual justifications given for pursuing it): a criticism for which there is a large and ever growing data set in support.
Now there are any number of Four Yorkshiremen out there to say that this thing we’re calling austerity is luxury and that we are all snowflakes to complain about it, so let’s be clear about what is meant here. Clara Mattei, in her excellent new bookThe Capital Order, describes the three forms of austerity policies: fiscal, monetary and industrial, usually used in combination. Fiscal austerity (reducing public spending, particularly on health, education and benefits and increasing the burden of taxation) and monetary austerity (reductions in the money supply and increases in interest rates) are familiar to most of us and normally the only elements of austerity discussed in the media. To these Mattei adds the idea of industrial austerity, which includes (often described as supply side policies, with the connotation of getting the economy fit to compete in world markets) policies aimed at reducing the negotiating power of workers, from anti-union legislation, to reductions in unemployment benefits, minimum wage levels and wage levels and job security within the public sector.
The contention of The Capital Order is that the reason that austerity has been used again and again in the last 100 years, despite repeatedly failing to achieve the economic goals used to justify it, is that its goals have not been economic but political. The political goal of austerity policies is to defend capitalism whenever events make it seem likely that people will look for alternatives (think World War I or the socialism following World War II or the 2008 crash, or now, the pandemic). Whenever government intervention in the economy has been needed on a sufficient scale to demonstrate that economies can strike a different balance between capital accumulation and labour power, austerity has been brought out immediately afterwards to put labour power back in its box, by making nearly everyone too poor, too busy and too regulated to be able to protest about it.
If this premise is accepted, and I think Mattei makes a convincing case in her analysis of post-World War I austerity policies in Italy and the UK, then the implications are profound. Rather than repeated wrong-headed economic policies by people who do not understand economics, we would instead have deliberate political policies by people who completely understand what they are trying to achieve by them.
The other part of the strategy, via the first international financial conferences in Brussels and then Genoa, in 1920 and 1922 respectively, was to establish an international consensus for policies where “individuals had to work harder, consume less, expect less from the government as a social actor, and renounce any from of labour action that would impede the flow of production.” Lord Chalmers, former permanent secretary at the UK Treasury, summarised this approach as: “work hard, live hard, save hard”. The aim was to return to a pre World War I economic orthodoxy and therefore remove what would be very painful economic measures for most people from the political sphere and into the sphere of “economic science”.
A quotation from the League of Nations in 1920 sums up the how important it was that such a consensus be achieved, to make it extremely difficult for any country to stand against it:
This principle must be clearly brought home to the peoples of all countries; for it will be impossible otherwise to arouse them from a dream of false hopes and illusions to the recognition of hard facts.
These “hard facts” then become the justification for sticking with economic policies, however discredited they might be economically, and buttress them: against alternative economic views (the effective shutdown of the New Approaches to Economic Challenges (NAEC) unit of the OECD being the most recent high profile example) and against popular pressure to change course (eg through such measures as central bank independence from government control over monetary austerity or proposed legislation to limit the scope of political protest).
And of course this effective outlawing of alternative schools of economic thought has other implications too. For example, as Steve Keen has shown, the potential impact of climate change in economic models to date has been disastrously underestimated, allowing fossil fuel lobbyists to delay climate action as a result.
We have all three types of austerity in play at the moment in the UK: monetary, fiscal and industrial. We can either believe that this is designed to force our compliance with the mantra to “work hard, live hard, save hard” even if we do not want to, or that it is for the economic reasons given. The former option requires us to believe that the elites in nearly every government in the world are committed to defending capitalism at all costs and that, if we want to contest this, we will have the political battle of our lives on our hands with the odds steadily more stacked against us with every new piece of legislation passed; the latter requires us to believe that our governments are economically ignorant, dogmatic and spiteful. All our current problems and our solutions to them: from the economic crisis, to the ecological crisis and the increasing political crises globally (what Adam Tooze calls the polycrisis) – depend on what we decide to believe.
The Congress of Berlin: Disraeli as a tooth-drawer, assisted by Queen Victoria, operates on Sultan Abdul Hamid II of the Ottoman Empire, surrounded by political figures from France, Germany etc. Coloured lithograph by J.J. van Brederode after Jan Steen, 1878. (Steen, Jan, 1626-1679 Reference: 778482i)
If you think COP27 is just a virtue-signalling tree-hugging “gathering of people in Egypt” then Rishi Sunak’s decision not to attend it will make a lot of sense as he tries to grapple with his domestic economic agenda ahead of the autumn statement next month. The Treasury has said that the aim of the statement will be to “to put public spending on a sustainable footing, get debt falling and restore stability.” If you remember, the cause of the “instability” was the foreign exchange and gilt markets, and the lack of confidence in the UK’s economic management internationally. One of the causes of the problems with the UK’s economic management was a failure to think internationally.
COP27 is, in reality, an important international economic conference. This conference is going to be focused on, amongst other things, food security, water security and investing in the future of energy. The support with energy bills is, of course, a major element in the debt levels Sunak is worrying about and, as the cost of living crisis worsens (exacerbated by the Monetary Policy Committee’s expected further increase in interest rates on 3 November), food security is going to rapidly move up his agenda in the coming months. The only difference between the most important concerns of the autumn statement and COP27 are therefore timeframes. COP27 is about medium to long-term thinking. Sunak has indicated, by not attending, that he is only concerned with short-term thinking.
Then there is the agenda around providing a just transition to a net-zero world (ie not skewed in favour of the already wealthy countries) and the sustainability of communities made vulnerable by climate change. This is where the conference starts to resemble other famous international conferences of the past which made the reputations of British statesmen. The illustration above is from the Congress of Berlin in 1878, when the then Tory Prime Minister, Benjamin Disraeli, “acquired” Cyprus in a great powers carve up of the globe. In 1944, towards the end of the second world war, John Maynard Keynes famously sparred with Harry Dexter White from the US Treasury at Bretton Woods as the post-war economic consensus was thrashed out at an international economic conference. They matter.
Of course we don’t carve up the globe any more, you may think, but yes we do. As George Monbiot has pointed out in his excellent Regenesis, the ghost acres (ie the the area, outside their own land, that farms need to operate) of UK agriculture can be as much as 2-3 times as many as the acres we farm domestically. A WWF report from 2020 suggested that the UK’s overseas land footprint has increased by 15% on average compared to their 2011-15 analysis. Between 2016 and 2018, an area equivalent to 88% of the total UK land area was required to supply the UK’s demand for just seven agricultural and forest commodities – beef and leather, cocoa, palm oil, pulp and paper, rubber, soy, and timber. Every time we insist on domestic economic growth as a non-negotiable element of our economic policy, we are effectively exercising a land grab in the global south to achieve it. If Sunak was interested in establishing himself as an international statesman, he would be at COP27.
And finally, of course, there is the terrible human rights record of the Egyptian state, which needs to be called out and challenged to avoid COP27 being just a public relations victory for the military regime led by General Abdel Fatah al-Sisi.
But Sunak has turned his back on all of that, so that he can spend a bit more time with the spreadsheets and economic forecasts in his bunker in Downing Street. It suggests a small-minded, short-term thinker, lacking in vision and ambition. Copping out should not be an option for any Prime Minister, even during a crisis.
Three months ago, there was a lot of talk about 1976. My favourite tweet from the July heatwave was this one:
By contrast, 1976 seems to have disappeared from my Twitter feed altogether now, which is a shame because it was a time when a very different type of UK Government was trying to deal with some very familiar issues.
For instance:
Worries about the exchange rate. This is what effectively precipitated the International Monetary Fund (IMF) crisis, with the pound having fallen from the $1.77 level which the Bank of England had been defending with interest rates and reserve purchases ($400 million in September alone) between July and September 1976 to $1.63, with predictions of $1.50 being possible (although $1.63 turned out to be the low point).
Worries about the current account deficit, ie the fall of exports relative to imports. Import deposits, where importers needed to put up cash in advance, were being proposed as a possible measure, finally averted as part of the IMF deal.
Worries about deficits – cutting the Public Sector Borrowing Requirement or PSBR (what is now called the Public Sector Net Cash Requirement or, more commonly, just the budget deficit) by £1 billion pa was the UK Government’s negotiating position, although less than the IMF wanted.
Worries about fuel poverty – cabinet papers from Barbara Castle as the Secretary of State for Social Services in 1975 and 1976 focus on this a lot, with detailed discussion papers about the options for helping different sections of the population. This was also when the first winter fuel allowance was proposed.
Cost of living crisis – there were also cabinet papers concerning how to operate price restraint schemes in the wake of a white paper from 1975 called The Attack on Inflation, which involved agreements industry by industry on price increase limits with the CBI, the Retail Consortium and the unions, including specific limits for each of the nationalised industries.
According to Goodbye Great Britain, by Kathleen Burk and Alex Cairncross, published in 1992 about the 1976 IMF crisis, the IMF were partly being used by the US Treasury and other bodies connected with the US administration to force a change in UK economic policy in a way that they would not be able to do directly. There were concerns in the US that the UK would turn its back on the IMF, introduce foreign exchange controls, freeze convertibility, perhaps even default on its loans. Indeed Brent Scowcroft, the US President’s National Security Advisor at the time, said that:
I spent more time on this matter during those weeks than anything else. It was considered by us to be the greatest single threat to the Western world.
That was not the only reason for the IMF to negotiate hard. The 1968 Basle Arrangement on funding sterling balances following the sterling devaluation in 1967 was felt by many countries to have been unduly preferential to the UK compared to how other countries had been treated. The IMF itself was therefore also under scrutiny.
So this was the background to a crisis which seems to have been less about the money (the endorsement of the IMF for its economic policies was more important to the UK for calming the currency markets than the loan according to some accounts, whereas the Under-Secretary for Monetary Affairs at the US Treasury, Edwin Yeo, said that they had “put up the money [for the IMF loan] ‘for the bait’ – ie to hook the UK economy into IMF control when it had to be repaid.”) than about who ran the economy. Andrew Graham, a member of the Prime Minister’s (then Harold Wilson) Policy Unit in 1974 and 1975, remembered the fear of union strength amongst some during that period, with Labour people in Whitehall and Westminster asking each other which side of the barricades they would join – the miners’ or the army’s.
Certainly a year after the agreement the economic crisis seemed to be over. The pound was rising again (it eventually reached $2.40 by October 1980) and reserves increased rapidly. Denis Healey, the Chancellor of the Exchequer at the time, claimed that, if the forecasts he had received had been more accurate, the UK would never have had to go to the IMF, although I do wonder whether another reason would have been found given the concerns of the US Treasury in particular.
However the solution to the economic crisis created a political crisis. In March 1977, the loss of support amongst Labour backbenchers following the Public Expenditure White Paper of 1976 led to an agreement with the Liberal Party (the Lib-Lab Pact) to keep the Government in power and, according to Burk and Cairncross, “one incomes policy too many” led to the Winter of Discontent in the winter of 1978-9, when more than 2,000 workers went on strike in the Liverpool and Merseyside area – rubbish was left uncollected, hospital services were reduced, and bodies went unburied. This was what led to Margaret Thatcher’s election in 1979 and Conservative Government’s and Oppositions and their supporters have continued to refer to this ever since as the consequences of Labour economic policy, rather than the IMF crisis itself.
Yet it was the IMF crisis which seems to have been more formative for Labour. Jim Callaghan made a speech in September 1976, in the middle of the crisis, in which he said the following:
For too long, perhaps ever since the war, we postponed facing up to fundamental changes in our society and in our economy. That is what I mean when I say we have been living on borrowed time…We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that insofar as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.
This statement seems to me to underpin every similar Labour Party statement since, from Liam Byrne’s “I’m afraid there is no money” to Keir Starmer’s recent promise that “there will be no magic money tree economics with us”. It is as if the Labour Party has never stopped trying to prove its credentials to some imaginary IMF mission ever since. The ghosts of 1976 remain with us.
I have been thinking a lot about Ursula K Le Guin’s The Lathe of Heaven over the last few weeks, a book I would highly recommend at any time but particularly at the moment. It is the story of a man, George Orr, who can change reality by dreaming. An ability that terrifies him. He is caught taking unprescribed drugs to try and prevent himself dreaming and as a result is sent for a “voluntary therapeutic treatment” with Dr William Haber, a dream specialist. Haber has built a machine called the Augmentor to make it easier for his patients to have dreams directed by him. He starts to work with Orr, becoming increasingly impatient with Orr’s version of the directions Haber is giving to his dreaming in the machine, until eventually Haber dispenses with Orr and connects himself to the machine instead.
Every time reality is changed it is as if it has always been changed. The changes become increasingly dramatic and disruptive until a peak of general insanity now referred to by all as The Break:
All over the world the various gods were being requested, more or less politely, for an explanation of what had occurred between 6.25 and 7.08 pm Pacific Standard Time.
But what the book really focuses on are George’s desperate attempts to live in this increasingly unhinged reality, as the only person (apart from Haber) aware of the abrupt changes swinging it around, and to hang onto the one person, Heather Lelache (or Andrews in the final version of reality they arrive at), he has ever loved.
One of the sentences on the last page (when he finds out that she has married) has stayed with me in particular:
He stood and endured reality.
However hilarious some of the moments of the last few days have been (and let us not forget some of the highlights here, here and here), we are all going to have to endure some significantly altered reality over the coming years as a result, from the moron risk premium to the cost of living crisis slowly rippling through all aspects of life, at a time when we already have a climate emergency and other planet-wide issues we need to be dealing with. There are many arguments to be had about the best way to tackle all of these problems, and I intend to throw myself fully into those arguments.
However, I would propose that we have to prioritise ensuring that, as a society, we never ever again let the lone mad scientist or economist or politician or former talk show host or indeed anyone else, whoever or however charismatic they are, take over sole control of the machine.
I think we need to do three things to achieve this, before we start to argue over policy:
Adopt proportional representation in parliamentary elections. We have got to broaden the support for whoever is in power, rather than stick with the current system which focuses on a tiny number of people in marginal constituencies and ignores pretty much everyone else. Make Votes Matter have agreed a cross-party document (which I have signed) called the Good Systems Agreement. This sets out the options on voting systems to replace first past the post and the best way of getting there. More about what is wrong with our current system (from the Electoral Reform Society) can be found here. Never again should there be a small cabal of people (like this weekend) deciding on who runs the country – with a steadily shrinking selectorate as their ability to achieve consensus on anything dwindles with every successive decision. We no longer have a system in the UK that can make important decisions and the answer is not more technocracy (leaving it to the so-called clever people, however foolish they may be) or plutocracy (leaving it to the rich), it is more democracy, ie including all of us in the decisions we will have to live with.
Reform media ownership and promote plurality in support of a more democratic and accountable media system. The Media Reform Coalition has produced a manifesto for a people’s media which I support: it includes proposals for an Independent Media Commons – with participatory newsrooms, community radio stations, digital innovators and cultural producers, supported by democratically-controlled public resources to tell the stories of all the UK’s communities. This will allow a much greater range of ideas to be presented to the public and discussed than the current Overton window (see below) and greatly improve our national debate about the things that matter.
Source: 99% Organisation
Reform election finance. Recommendations for doing this were provided in the July 2021 report by the Committee on Standards in Public Life, with 47 recommendations following a comparison of political and electoral finance regulation in 12 countries (Australia, Canada, Denmark, Finland, France, Germany, Ireland, the Netherlands, New Zealand, Norway, Sweden, and the USA), the majority of which are around reforms to campaign practices, meeting emerging threats around the source of donations, delivering greater transparency and enhancing compliance with election finance law.
We have big problems to solve in the UK and we need everyone to be able to contribute if we are going to solve them. However currently:
Our votes are counted in a way which effectively wastes most of them;
The information we receive about politics is fed to us through a very partial sieve controlled by a small unrepresentative group of people whose vested interests effectively define our Overton Window; and
Influence and access to power often appear to go to the highest bidder rather than the best ideas.
All of this needs to change whoever is Prime Minister in the coming weeks, months and years.
We do it all the time. We assume that the animals around us experience the world as we do, with our obsession with the visual sense. We are used to anthropomorphising animals in our cartoons, but it goes much further than that: for instance if, like a dog, your sensory world or Umwelt is primarily based on smell rather than sight, then that daily walk you take with your dog has very different highlights and notable features (amazingly the slits on the side of a dog’s nostrils allow it to smell on out-breaths as well as in-breaths). We have sayings based on these anthropomorphisms: for example, the “unconcerned” frog in the water as it is heated to boiling (cited by Emily Maitlis in her recent speech in Edinburgh) may not be unconcerned at all, merely showing its distress by filling the air with smells like peanut butter, cashew nuts or curry rather than via the reactions we would expect from a human.
Our vision is not even all that extraordinary compared to some other animals. Mantis shrimps have more classes of photoreceptors covering the ultraviolet spectrum than we have in total. They are the only animals who can detect circular polarization, where the plane in which the light is polarized also rotates. However they are much worse than us at telling our visual range of colours apart and may not even have a conception of colour as we know it at all. We don’t know.
We are not even sure how many senses there are. Aristotle said there were five (sight, hearing, smell, taste and touch), but missed our senses of proprioception (ie awareness of your own body) and equilibrioception (ie sense of balance). There are also animals who have a secondary system for detecting odours, or who detect the body heat of their prey via their brain’s visual centre or have sensors which both detect electric fields and pressure. How should we categorise these and does a clear division between senses make any sense? We don’t know.
Elephants can hear each other several miles apart just after sunset, but we don’t know what they are listening for. Beaked whales have a range of crests, ridges and bumps on their skulls which are not outwardly visible other than via the echolocation they use, but we don’t know why.
And finally, for now, the cuttlefish of the title. When cuttlefish sense sharks, who have passive electroreception (ie the ability to detect electric fields in other animals), they stop moving, hold their breath and cover their gill cavities to reduce the voltage of their electric fields by up to 90%. I could go on, but all of this and so much more is contained in Ed Yong’s masterful An Immense World, which I could not recommend more highly, not only for the content but also for the wonderful joyful writing throughout (AC/DC’s Rock and Roll Ain’t Noise Pollution even gets a mention!).
The recurring theme for me is how much we still don’t know about all of these animals, and the amazing new discoveries which are being made every year. Every animal perceives a different world from the one we think we are living in, many of these perceptions currently (and in some cases perhaps permanently) impossible for us to understand. It takes an extraordinary level of anthropomorphic arrogance for us to convert all of those strange and wonderful lives into the concept of natural capital.
The Institute and Faculty of Actuaries’ Biodiversity and Natural Capital Working Party defined natural capital in their paper from April 2021 (which acknowledges the concerns I am raising here and those raised by others) as follows:
The concept of ‘natural capital’ therefore aims to recognise nature as an asset and aims to ensure that the goods and services offered by nature become a part of decision making by governments, businesses, and individuals regarding resource allocation, growth and development.
The Dasgupta Review has gone further, focusing on the economics of diversity. As it acknowledges:
The Review has developed the economics of biodiversity by viewing Nature in anthropocentric terms. That is an altogether narrow viewpoint, but it has a justification. If, as we have shown in Part I, Nature should be protected and promoted even when valued solely for its uses to us, we would have even stronger reasons to protect and promote it if we were to acknowledge that it has intrinsic value.
I strongly disagree. As George Monbiot pointed out several years ago, markets change the meaning of the things we discuss, replacing moral obligations with commercial relationships. The latest article in The Actuary magazine on natural capital discusses ecosystem collapse in its final paragraph in terms of how it would “negatively impact GDP” and “economic value”.
Once the diversity of nature can be reduced to a monetary amount or metric value, it can obviously be modelled much more easily but, as we have seen again and again within the finance sector and elsewhere, that is at the expense of consideration of any other aspect of our relationship with it.
Perhaps cuttlefish do dream of the passive electroreception of sharks. If they only knew what we were up to, they might instead have nightmares about their balance sheet entries in our spreadsheets.
But how do they know where they’re going? Spikes! Stop eating them!
I am currently reading a wonderful book – An Immense World by Ed Yong – which I am certain will feature in much of my writing over the next few months. Today I want to talk about what Ed’s book has to say about ants and, in particular, ant pheromones.
Pheromones override all of an ant’s other senses. An ant will walk itself to death if its pheromone trails are laid in a circle (“the army ant death spiral”). And if an ant happens to get covered with one of the pheromones that signal that it is dead, it will continue to be treated as if it is dead however much it protests.
Compared to ants, the current Conservative Party leadership candidates obviously bestride the world like colossi, but I think I have spotted a similarity in the contest so far. Public First have attempted to put all of the policy announcements by each of the candidates together on a single spreadsheet and what is noticeable is that there is only one row which has an entry for every candidate: tax and economic growth. More popular than immigration, Brexit & Europe or any of the other issues one would expect any Conservative leader to have an immediate policy on. And, with one exception (the architect of the current economic policy which has been going in a different direction, Rishi Sunak), they all seem to be proposing a variation on generating economic growth as a result of tax cuts. I will not comment further on whether this is a coherent policy, as that has been done very well here.
However it did occur to me that tax cuts might be doing the same job for Prime Ministerial hopefuls as pheromones do for ants, ie something which, once emitted, makes everything else about your policy positions irrelevant. The problem of course is, whereas the success of an ant colony depends very largely on the coordination of a huge number of individual insects to follow a path, recognise an individual (or more likely a member of a group), identify their own young, etc, the leadership race is supposed to be giving the candidates a chance to differentiate themselves from each other. Even allowing for the fact that many in the race have no expectations of making the last two, but are merely indicating their level of ambition in a way designed to be noticed by one of the two who do, it does seem as if they have already coalesced into two teams – Ready For Rishi and Not Remotely Ready For Rishi. And noone running appears to be obviously looking for a job from Rishi Sunak.
The dangers of making policy a reflex rather than a reflective activity, particularly with respect to the economy, are obvious. Because the pheromones act on all of the ants, including those emitting them, this doesn’t suggest an eventual winner who is likely to be able to change economic direction beyond usual Conservative Party instincts, whatever is actually going on in the economy. Ed Yong has already used the army ant death spiral as a metaphor for the United States’ response to the pandemic.
It should all become a lot clearer tonight when the ones who cannot get 20 MPs to support them will drop out. It would be great if one of them would make a break with Elgar and use Ant Music as their campaign song instead. Then we would all know where we stood.
