Tuesday 19 April 2011

Debtors and Creditors: Who's Bothered?

Now that the US Treasury has had its warning about its government deficit from the credit rating agency Standard and Poor's, the landscape of the new global capitalism is becoming clearer. It is now not so much that there are debtor and creditor regimes, though this is a feature of the topography. It is more that there are debtors (like the UK and Ireland) who care greatly about their respectability and credit-worthiness, and some (like the USA and Greece) who care far less; and there are some creditors (like China) who are in a strong position to exploit their advantages in global markets, and others (like Japan) which are actually quite vulnerable.

The Americans and the Greeks have insouciance about their credit rating, but little else, in common. In the case of the USA, the bickering between the president and a Republican congress over how to reduce the deficit is an inconvenience, but it is unlikely to damage the living standards of American citizens because the savings-based wealth accumulated in countries like Japan has nowhere else to go; the dollar is still the dominant world currency. So little sleep will be lost in Washington about the Standard and Poor's warning, at least for now; a trillion and a half dollars of debt can continue to mount up for the time being.

In the Greek case, it is the people who refuse to accept responsibility for the government's debt. Acts of resistance, from refusing to pay tolls for roads not yet constructed to witholding council tax payments, are making life hard for the authorities. But they in turn can ultimately afford to shrug their shoulders; everyone knows that it is not a question of whether Greece will default on its debts but when. And that everyone includes its bondholders and its European bail-out guarantors.

Does this mean that Greek stock is plummeting in world markets? Certainly not. Investors recognise that it is only by defaulting that Greece has any chance of achieving economic recovery. If it repays the loans given it as an uncompetitive bankrupt, it will be stuck in a downward spiral of austerity for decades. The resistance of citizen tax-revolters is doing Greece a big favour in the world economy. The compliance of Irish and Portuguese citizens in their collective misery is confirming their continuing impoverishment.

Among the creditor regimes, China can simply go on acquiring the foreign land and infrastructural facilities it needs to supply its export-led boom; others' debts are opportunities rather than constraints. For Japan, the situation is anxious in the short term, because of the cumulative impact of the tsunami and the nuclear accident, but in the medium term the reconstruction programme will stimulate its sluggish economy. Too much saving, not too much debt, has been its problem.

The UK is a more complex case. The 'successful', 'world-class' sector of its economy, the City of London, needs to be seen as solvent and supremely profitable. The government has gone into massive debt to protect its reputation, and must now do an elaborate dance, appearing to enforce a new regime of stricter regulation, while actually allowing it to make its risky fortune in the global financial casino.

Much of the rest of the economy, and the part which supplies employment and income to the majority of the population, is more Portugal or Greece than Hong Kong or Shanghai. While Osborne simpers to the City, Cameron and his Big Society missionaries must persuade the proles to accept a new kind of communal co-operation, the simple pleasures of taking in each other's washing and organising royal wedding street parties.

The problem for the coalition government is to sell this dualised future to the younger generation. Those who run up ruinous debt for the dream of a plum, plutocratic post in the City must eventually accept the reality of the dole queue or a job in a call centre. A career with security, promotion and a pension is a remote prospect; to earn enough to start repaying their university fees and student loan will itself be an achievement. How long before our Tunisian or Egyptian moment?

Tuesday 12 April 2011

Increasing Happiness

'Action for Happiness' is a new organisation with members in over 60 countries, though their total numbers amount to a less-than-impressive 4,500. Its website is a mixture of policy manifesto and homily on personal well-being. The latter includes a list of 'Daily Actions' - 'be mindful', 'be kind' and 'be grateful'. A video clip by a famous psychologist tells you to remember the good things which happened in the day just before you go to sleep.

It would be easy to dismiss this stuff with derision, but it has the backing of David Cameron, and is in line with his political vision - that well-being is more significant than consumption, and that government should promote happiness rather than income per head. And the decision to put four questions on happiness in this year's official Household Survey was masterminded by Matthew Taylor, former policy advisor to Tony Blair, and now head of the Royal Society for the Arts, Manufactures and Commerce.

Speaking on BBC Radio 4's 'Today' programme, Taylor pointed out that research on Subjective Well-being (SWB) is broadly supportive of redistributive policies (countries like Sweden and Denmark with high taxes and benefits top the global league tables for happiness), but also of traditional family and community relationships (close personal ties and the sense of belonging are, along with good health and job satisfaction, the biggest factors in SWB). The questions he had put in the survey were on life-satisfaction, anxiety level and the feeling of meaningful activity. He pointed out that highly competitive routes to economic growth, such as the one set by the USA, produce less happiness among populations.

The Action for Happiness home page urges people to join a group to advance well-being. Clearly this is in line with Cameron's Big Society, and reflects the research finding that activists are happier than passive consumers. The Conservative Party manifesto of 2010 declared the aim of getting all citizens involved in local associations, and Cameron spoke of a 'culture shift' towards collective action which would transform our society.

We have already seen that the Big Society does not readily embrace student protesters or anarchist activists. Perhaps even more problematic is the issue of how it creates the large-scale solidarities needed to fund something like a universal National Care Service, or an adequate Educational Maintenance Allowance.

There is also an obvious tension between the market-mindedness of the coalition in relation to the NHS and schools, and the community-mindedness of the Big Society rhetoric. It is hard to see how a cultural transformation in favour of collective action, co-operation and mutuality can be achieved within a collective landscape designed to offer choices and incentives for individuals seeking advantage over others.

Individualism is a deep-seated feature of British society, political and social, and its origins lie far back in our history. Rivalry and conflict can arise through many forms of competition for status and resources; they are found in certain cultures worldwide, at stages of development from hunter-gatherer to post-communist transition.

There is a story about the Archangel Michael appearing in the flat of a Hungarian man to tell him that God would grant him anything he desired, on one condition: whatever he chose, his neighbour would get two of the same. The man clutched his head, rocking and moaning for several minutes in deep distress. Eventually he replied, 'Put out one of my eyes'.

We are fortunate in our civil liberties and democratic rights, but it is easy to overlook the collective struggles and sacrifices which brought them into existence. Sustainable well-being requires a framework in which people are free to run their own lives, but also empowered to hold authorities of all kinds to account. It is far from clear whether we are moving in the direction of real power-sharing and accountability.







Friday 8 April 2011

Uneven Development

So finally Portugal has had to seek a bail-out from the European Central Bank. But this was not, like Ireland, because of a collapse in the banking sector or a construction bubble, but because it has never really been up with the required pace for eurozone club members. Its growth rate has been too sluggish, its competitiveness too slack; its private sector has been borrowing too much just to stay in business and its government deficit has grown wider and wider. In this sense it was more like Greece, but without quite the same defiant bravado.

The pundits shrug their shoulders and point out that the smallish perpheral states which have gone bust so far make up only 18 per cent of the EU's total income. It's sad that they are condemned to years - perhaps an eternity - of austerity, because the bail-out is essentially a bridging loan paid to a national economy which is bankrupt (if they couldn't pay the interest charged by the bond market, they won't be able to afford the charges levied by the ECB either). It would probably have been better to default on their debts, but now of course it's too late for that. And yes, Spain may be next, but then again it might just get by. And then there's Italy....

And then, on the same day, the ECB put up interest rates, not by much, but enough to signal which way things are going. The rationale is to prevent overheating of the German economy, the eurozone's one real success story. So now there is not so much a division between the sound, stable, fiscally solvent north, and the spendthrift, shifty south, with its creative government accounting; it is morea division between Germany and the rest. The monetary policies of the eurozone are dictated by the requirements of the one dynamic, world class, globally competitive member state.

A country like the UK must put on a show of conducting itself by Germany's standards, even as a eurozone outsider. It must strike a pose of conducting an industrial revival, improving public-sector efficiency and observing fiscal rectitude. Nothing less will keep the bond market wolf from the door, even if it means running down everything from libraries, museums and theatres to the armed services.

In this sense, the European economic scene mirrors both the global one and the internal economies of most countries. The tune is called by the super-rich, who stride ahead confidently, and everyone else must try to shuffle along in step, in spite of wonky legs or leaky shoes.

Capitalist economic growth has always relied on uneven development, but this has become an extreme feature of every level of the global economy. It has led to political conflict worldwide, as a new, dispossessed generation, without the prospect of achieving the modest security of employment and income attained by their parents, takes up esistance of various kinds.

Historically, periods of rapid growth relied on a combination of new technologies and organisational forms in the advanced centres of production, and large movements of population away from the most backward ones - as happened in China during the past three decades. The trouble for Europe and North America is that the present phase of technological innovation is Silicon Valley, not nineteenth century Sheffield or Salford; it needs a few highly skilled workers, not a mass influx of muscle.

Nowadays large-scale migrations mostly involve low-paid service workers or others doing jobs with undesirable conditions, such as the movement of those from post-communist Central Europe to the affluent member states of the EU. Ireland, Greece and Portugal, traditionally countries of emigration, had come to be hosts to such migrants, especially Ireland during its Celtic Tiger bubble.

In response to the new austerity, many governments are making gestures at reducing immigration, as part of an attempt to combat rising unemployment. For instance, the UK's Agricultural Workers Scheme, under which a succession of young people from the post-communist countries have come to pick and pack fruit, is to be abolished next year. Poles and Slovaks no longer need this system, but Romanian and Bulgarian youngsters will be blocked from entry, until they are granted free movement two years later, by which time they will want more rewarding work.

So who will pick the fruit next year? Migrants from Portugal or Ireland? Or Serco conscripts, benefits claimants doing forced labour to qualify for their JSA?