Can we revive capitalism?

Yesterday I went to an interesting event organised by Reform Scotland on ‘The Future of Capitalism’, addressed by Adrian Wooldridge (‘Bagehot’ of the Economist) and Lord Wood.  Most of their recommendations focused on fixing the vices of large companies and restoring the ‘dynamism’ of capitalism through small businesses and worker participation.  I think there are more fundamental issues to address.

The first is: is this still capitalism? It’s a question raised by Tony Crosland in the 1950s, and it’s highly pertinent to the debate.  Our economy doesn’t fit the conventional models of market capitalism in several ways.  Crosland pointed, for example, to the divorce of ownership and control, and the role of the state.  There’s a lot to add to that – for example, the role of voluntary, non-profit and mutual organisations.  (We also have some less appealing non-capitalist elements, such as the survival of pre-capitalist landholding in much of Scotland’s territory – at least 30% is still held by the landed gentry).  We have a complex, diverse, mixed economy, rather than an ideally ‘capitalist’ one.  Measures which aimed to revitalise the economy through a purer form of ‘capitalism’ may well just miss the point.

The second question: is ‘capitalism’ the source of our prosperity?  Many advocates of the market system, and capitalism’s ‘creative destruction’, believe it is; the story is not straightforward.  If we look, for example, at the housing system, people in the UK were able to live in decent housing in most cases through one of two mechanisms: the building societies, which were mutual, non-profit organisations devoted to making home ownership possible, and social housing, mainly developed through local authorities.  Many of our  current problems in that field relate to the ideological destruction of those systems.

Third: is ‘capitalism’ really the source of dynamism in our current  economy?   Successive British governments have been convinced that it must be, and the the key is independent, small business that will grow into larger businesses.  Most other countries are much more likely to have developed large industries through state aid – Mariana Mazzucato’s work on The Entrepreneurial State makes the case strongly.   And in the UK we’re apparently convinced it’s not cricket to do the same.  Our economy may be sinking, but at least we’re playing the game by the rules.

I’m generally suspicious of most analyses of ‘capitalism’.  Like Santa Claus, it’s used as a catch-all expression to explain why some of us get presents and some don’t.  Let’s talk about the  world as it is instead.

The age of criminal responsibility: our legislators leap into action

The Scottish Parliament has agreed to raise the age of criminal responsibility from eight to twelve.  Now there is pressure on the English government to raise criminal responsibility from the age of ten, which is where it’s been since 1963.   Under English law, there are special rules governing children aged 10-14, and there is even talk of raising the age of criminal responsibility to 14.

It’s more than forty years since I studied law, and at the time everyone was confidently saying that the age of criminal responsibility was set to go up any day now. (One social policy textbook of the time said it already had done, because the author had no reason to suppose it wouldn’t have happened by the time the book came out.)   The proposal to raise the age of criminal responsibility to 12 was initially made, if I have it right, by the 1960 Ingleby Committee, nearly sixty years ago.  In England, the Children and Young Person’s Act 1963 raised the age from eight to ten (s.16.1); and then the 1969 Children and Young Person’s Act raised it to fourteen (s.4).  You may reasonably blink at the last part of that, because it never happened.  The Act was passed, but it needed a commencement order to come into force,  and the order was never made – basically, no Secretary of State had the courage to do anything about it.  Eventually the provision was removed by the 1991 Criminal Justice Act, which had a tidying-up provision to cancel laws that hadn’t been brought into force.

I’ve heard it said that making Acts of Parliament is a national sport; no-one should take them too seriously.  It’s a reminder that campaigns can’t afford to stop when the legislation is passed.  It’s also perhaps a reminder of something Churchill once said about another country.  You can always rely on our governments to do the right thing, once they’ve exhausted all the other alternatives.

Thinking Collectively

I’ve just received the first print copies of my new book, Thinking Collectively: social policy, collective action and the common good. In Reclaiming Individualism, I made a case for social and government action in order to protect and enhance the conditions of individuals. Thinking collectively complements those arguments by considering collective approaches to social policy.

These comments are from the reviews obtained by the publisher:

“Paul Spicker asks how to think-with, live-with, and be-with collectives in this important new book which sees afresh the possibilities of collective life. Crucially, it also reinstates the significance of the common good and value of the common weal for social scientists and activists.”   Stephen A. Webb, Glasgow Caledonian University

“This concise and well-written book is a compelling and timely reminder of the importance of collective action and political community.”   Daniel Béland, McGill University

It’s my nineteenth book, my third since leaving Robert Gordon University.

Andrew Neil’s figures were out of date, but they weren’t made up

Andrew Neil has been censured by Ofcom for saying in an interview in 2017 that one in five pupils who left primary school in Scotland were “functionally illiterate”.   According to the BBC report of the judgment, the BBC submitted that

“the figure had come from a 2009 report, but that “it was not accurate to say that this allowed the conclusion quoted in the programme  … It should have been made clear that the phrase ‘functionally illiterate’ was not used in that report and that its source was the education spokeswoman of the Scottish Conservatives.” When it published its findings in November 2017, the ECU said that the 2009 survey “contained no reference to ‘functional illiteracy’, and no data which would have justified the claim in question”.

That surprised me, because I’d come across the 20% figure before.

The main source of the figure is arguably a report written by Professor J Lo Bianco, Language and Literacy Policy in Scotland, published in 2001 by SCILT at the University of Strathclyde.  Lo Bianco’s report was a wake up call for Scottish education – it had a major impact on the treatment of Gaelic and BSL.  He wrote that “More than one adult in five is not functionally literate in English and even more people have problems with numeracy.”  He wrote:

The UK-wide Report Improving Literacy and Numeracy, A Fresh Start (Moser Report 1999) notes in its opening paragraph that ‘something like one adult in five in this country is not functionally literate and far more people have problems with numeracy. This is a shocking situation and a sad reflection on past decades of schooling. It is one of the reasons for relatively low productivity in our economy, and it cramps the lives of millions of people.’ Whilst the situation that is reported is indeed shocking it is far from clear that it is valid to make a direct and causal connection between the levels of assessed adult literacy and ‘past decades of schooling’. The International Adult Literacy Study of 1997 suggests that 23% of adult Scots have low literacy skills.

Subsequently, England developed the “Skills for Life” survey, which by 2011 recorded marked improvements in functional literacy.  A Scottish report in 2008, “New Light on Adult Literacy and Numeracy in Scotland”  avoided the question of functional literacy.  Based on a study of adults aged 34, it commented that ” literacy levels in England and Scotland were nearly identical”(p 8)   but commented that ” 39% of men and 36% of women in the survey had literacy abilities at a level likely to impact on their employment opportunities and life chances.”

What’s been happening since is important.  The Scottish Survey of Literacy and Numeracy shows a marked improvement in standards in primary schools, where the foundations of literacy are laid, and now 88% of pupils in P7 are considered to be performing ‘well’ or ‘very well’.  That improvement probably wouldn’t have happened without those earlier reports.

I don’t much like Andrew Neil’s politics, but he’s a terrific journalist.  Even if on occasion he gets things wrong, he doesn’t make things up.  The main charge against him is not that he was wrong, or that his use of the term ‘functional literacy’ was inappropriate, but that he was outdated.  That’s a mistake that any of us who are trying to distill information drawn from a wide field might have made.

Intergenerational fairness shouldn’t mean that we cut pensioner benefits

The House of Lords report, Tackling Intergenerational Fairness, is a strange document. Most of it – six chapters out of seven – is a sober, well-documented account of demographic shifts in the pattern of disadvantage.  When it comes to policy, however, there is a serious disconnect.  There’s precious little about policies to remedy disadvantage within the older population – Pension Credit hardly gets a look-in, Housing Benefit (due to be shifted into PC) disappears, social care is punted into the long grass while waiting for a different report.

What there is an attack on policies that benefit old people: the report tilts at National Insurance, benefits for pensioners and universal provision, suggesting cuts for all of them.  Winter Fuel Payment is attacked, foolishly, because it doesn’t do much about fuel (a category mistake: as I’ve previously argued in this blog, we mustn’t get confused between the title of a benefit and the purpose it serves).  The welfare state, Alan Walker once commented, is largely a welfare state for older people, and the apparent premise behind the recommendations of this report is that the answer to that imbalance is to have a go at the welfare state.  It might be more constructive to think about how the benefits of secure, solidaristic benefits might be extended to younger people and people of working age.

Scotland doesn’t have to have one currency. It could use four.

I was puzzled when Alex Salmond, during the referendum on Scottish independence, opted to push a particular model for currency in an independent Scotland; it simply wasn’t necessary.  As Iain McWhirter recently argued in the Herald, it’s the sort of decision that can be put off till later, and it’s perfectly possible to change the model if something isn’t working.    In the current debates, I think we’re seeing a reiteration of many of the same arguments.  All of them seem to me to be based on a false premise: that Scotland must choose its currency.  Why?

The Growth Commission, which fell victim to the same elephant trap, starts off its discussion by identifying  three purposes of money:  as a medium of exchange, as a unit of account, and as a store of value.  They could quite reasonably have added a fourth, because it’s most of what their discussion is about: money as an instrument of economic policy.  The histrionic criticisms made by some of the pro-independence commentators have suggested that it is not possible to be independent without an independent currency.  This quotation from Wynne Godley, objecting to the Euro, is going the rounds on Twitter:

the power to issue its own money, to make drafts on its own central bank, is the main thing which defines national independence. If a country gives up or loses this power, it acquires the status of a local authority or colony.

Have at you, France!  Italy, you are a local authority!  I blow my nose in your direction!

Let’s take some of the heat out of this. Money of all kinds can be used as a unit of exchange.  There are lots of places where currencies of different sorts will be accepted, regardless of what the official currency might be.  I’ve been places where they wouldn’t accept local currency, but asked to be paid in dollars.  As someone told me in Croatia, asking for payment in  pounds:  “Money is money.”  And money can be a unit of account in one currency while it is being exchanged in another.  When I was in Poland, my formal contract was paid in zloty, as the government requires, and tax was deducted in zloty, but the job offer and the pay were in Euros.

Scotland could survive while using the British pound.  Despite some of the nonsense that people come out with – such as George Osborne’s preposterous claim that Britain would “stop” Scotland using the pound  and that there’d have to be trucks crossing the border carrying notes and coins – whether or not Scottish people use the pound, or any other currency, is down to them.  But things don’t have to stop with the pound.  The Scottish economy, for those who haven’t noticed, already uses two currencies.  Most people use the pound sterling in ordinary life, but the oil industry conducts its transactions in US dollars.

In the past, it’s been difficult for buyers and traders working in multiple currencies.  The main issue has been the practice of the banks.  A combination of technology and competitive innovation has already largely overcome that.  Most retail payments in the UK are now made by card, not cash.  I use a bank which offers me parallel currency accounts and transfers without holding or transaction fees.  As transactions are cashless, there’s absolutely no reason why people shouldn’t hold accounts in Euros, pounds, dollars and other currencies at the same time; traders could make their own choices.  Scotland could reasonably have four currencies: a Scottish currency, the dollar, the pound and the Euro.  The main reason for having a separate Scottish currency would be as a unit of account and a tool of economic policy.  Whatever the choice is, we don’t need to get hung up about it.

Winners and losers from Universal Credit

In any benefit reform, there are likely to be winners and losers; unless there is a substantial increase in the budget, the gains for some can only be made because others are being paid less. A fascinating report from Mike Brewer and his colleagues at the Institute of Fiscal Studies looks at the difference between short- and long-term gains and losses from Universal Credit. The difference is important, because Universal Credit has in theory been designed to maintain contact with large numbers of people over extended periods of time.

What the IFS report finds includes

  • greater lossers for people on long-term low incomes,
  • losses for people with disabilities
  • short term losses for self-employed people with low earnings, that are less likely to last as their circumstances change, and
  • some large gains and losses in the short term, which are not always reflected in the long-term outcomes.

The report is concerned with entitlement, rather than the actual amounts of benefit received – the serious problems there have been in practical delivery, and the impact of conditionality and sanctions, are going to mean that many more people are worse off than they ought to be on paper. Short term losses matter, too. For people on very low incoimes, a short-term loss means, in practice, that people have periods of severe privation, often going without food and accumulating debts.

This blog entry is suspiciously green

Richard Murphy has written several blog entries on the possibility of environmental taxes, including a tax on the consumption of products from cows, sheep and goats, because of the environmental damage done by the livestock industry.  He hopes that this will promote a shift towards consuming vegetables instead.

The objection I have to this kind of scheme is much the same as the objection I raised to the Green proposal for workplace car parking levies.  I replied to Richard in these terms:

There are two key problems with attempts to direct behaviour through ‘repricing goods and services’, and your proposal to tax foods derived from animals suffers from both of them. The first problem is that repricing is a blunt instrument. Changing the relative price of goods also changes the relative price of possible substitutes, and the substitutes may be as bad or worse than the options that are being controlled. What would you do, for example, if it emerged that the high relative price of dairy products prompted an increase in the consumption of environmentally destructive palm oil? Now I’ve pointed to the problem, you can probably say that it ought to be restricted too – but for any policy which takes in such a broad sweep of behaviour, there’s a limit to how many outcomes you can anticipate and provide for. There are nearly always more, unexpected consequences that aren’t visible until the damage has been done.

The second, and more important, objection is that repricing can (and often does) have unacceptable distributive consequences. Many environmental taxes have the effect that they allow richer people to carry on as they were, while poorer people suffer the restrictions and bear the cost – congestion charging is a clear example. And the thought of increasing the price of staple dairy products at a time when people on low incomes are going without food and having to seek help from food banks is frankly alarming.

The central flaw in the argument lies in one of the standard assumptions made in economic textbooks, which is that supply and demand can be controlled most effectively through the price mechanism. I’ve argued in my own blog that rationing by price is rather inadequate as an instrument of public policy. It offers nothing to protect us from inappropriate inclusion or exclusion from access to resources, and while some people think it’s a fair procedure (which is debatable), it is unlikely to be fair in its effects.

Richard took it that I must be arguing for a free market, when in fact I’m arguing the opposite; some things are not well left to the market, and attempts to tweak the price mechanism have unpredictable and undesirable affects.  Traditional markets don’t work.  But something else might.

Those of us who have been around for a long time might remember the Marketing Boards:  Eggs, Milk, Meat and Wool.  Despite the name, these schemes did something far beyond ‘marketing’: they took over the bulk of the markets, guaranteeing returns to producers, subsidising prices for consumers, and avoiding the problems of instability for which agricultural markets are notorious.  Here is a description of the egg marketing scheme from Hansard in 1956, as proposed by the Conservative government of the day.

Changes in supply and demand do not have to be very large before biggish changes occur in the price, which may have a disrupting effect and leave room for harmful speculation, with all that that entails….The board will have power to require that by far the great majority of eggs produced for the wholesale market will be sold by producers only to the board. … Every day the board will fix its selling price for eggs, and the distributive trades will be able to purchase those eggs from it at the prices settled. Any unsold eggs will be retained by the board and will be either moved to other markets or stored, for sale later.

In other words, the Board took over major aspects of production and distribution, protecting producers to an agreed level and ensuring consumers had access to a quality product at a stable price.

Britain eventually abandoned these policies, for two reasons: first, because food production was no longer seen as essential for national defence, and second because the UK joined the Common Agricultural Policy instead (it’s a markedly inferior system – unlike the Boards, the CAP rewards both excess production and acquisitive land ownership).  Only the Wool Marketing Board still exists, a collective, non-profit organisation that manages a centralised distributive market for fleece wool.

If we want to have general, secure access to vegetables at a subsidised price, taxing the alternatives to vegetables is not the best route.  And if we want to promote the consumption of vegetables, it may make sense to focus on that rather than developing policy relating to meat and dairy products.  Should we perhaps be thinking about a Vegetable Marketing Board?

 

The shape of inequality is not what Piketty thinks it is

Half of England, a Guardian report tells us, is owned by less than 1% of the population.  That sounds, on the face of the matter, like a justification of the Marxist view of the concentration of capital – and, for that matter, of Thomas Piketty’s argument, in Capital in the 21st Century, that inequalities are increasingly likely to  be concentrated in the hands of wealthy individuals.  But the figures for land ownership in England don’t quite show that.  The largest group of landowners are still the aristocracy and gentry, fundamentally a pre-capitalist source of inequality still accounting for 30% of the land.  17% of the land is owned by ‘new’ money, oligarchs and capitalists.  But 29% is owned by corporates, institutions, public authorities and organisations.  The central weakness of Piketty’s analysis is its  failure to engage with ownership that isn’t in the hands of private individuals.  Organisations and other non-human entities have an advantage over human beings; once their wealth is concentrated, it will either remain or it will pass to other non-human owners.  In the long term, this, rather than the hands of private individuals, is where wealth will be concentrated.

Research is not a private matter

I was in Italy this week, taking a view of research ethics for a seminar organised by Pro-Res , a project to develop guidance on ethics for the EU.  The seminar was under Chatham House rules, which means I can’t comment on other contributions, but I can share my own, which I ran under the title “Research is not a private matter”.  The slides are here.