Economy, Brexit, K-Waves & Stuff

This is a rambling post on the state we’re in now and some underlying economic theory (as I understand it) which might help us think through the challenges posed by the Brexit vote.

 

NeoLiberalism – it’s what’s going on

But to start, let’s look at where we are – here’s a video clip where a top economist pretty much tears apart the system we’re living with.
https://www.theguardian.com/business/video/2016/aug/11/owen-jones-talks-to-ha-joon-chang-austerity-is-based-on-lies-video-interview

The way everything is being done now doesn’t look like a sustainable way for the future.   There’s not much doubt that we’re living through a massive transfer form the people to the elite  ( ireally don’t much like thes terms, but can’t think of any alternatives.)  NeoLiberalism isn’t new, it has been going since the days of Pinochet in Chile  (’73-90)  and we can look back at his rule and see how it impacted on the people of Chile.  It was fine for the 1%, but very bleak indeed for the rest of the population.  And this is the same economic system, pretty much, as Reagan and Thatcher imposed on the US and the the UK.  And it’s still going on…..  Our UK Government seems to be stuck with Thatcher’s mantra of “There Is No Alternative”.  TINA can’t be true though.  Everything in life has alternatives so logically there must be alternatives to NeoLiberalism.  It’s just that NL has been the in vogue economic framework for so much of the world for so long, almost a generation, that it has become so deeply ingrained that it’s hard for any alternative to be thought of in the mainstream.  Here’s a little graph showing the changes in household income over the past decades (there are many like this which look the same).  Sorry it’s not got a source on it, I picked it up from Prof David Bell at University of Stirling.  I trust he wouldn’t be using it in public if it wasn’t accurate.

household income.JPG

This is what NeoLiberalism has done and is continuing to do.  Can you tell I’m not a fan?

 

Long Waves

There’s an interesting underlying theory of long waves of economic activity.  It was postulated by Nikolai Kondratiev  back in 1925.  It continues to attract attention because it still seems to fit what’s going on in the global and national economies.  If you’re interested in the theory of this, then look up Kontratiev, Schumpeter and yes, Karl Marx.  What you read might surprise you.

Here’s a representation of  Kondratiev Waves.  As you can see, it;s a kind of 45 year to 60 year cycle.  We’re at an interesting point where, according to this economic theory, we ought to be entering a cyclical downturn.  Maybe this theory is correct?  There’s certainly plenty of people who respect the underlying theory of these long waves of economic activity.

520px-Kondratieff_Wave.svg.png

Source : By Rursus – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=7833300

So my thoughts are that it looks like the UK is moving to the point of diminishing returns for NeoLiberalism. The UK economy is already one of the most open in the world with much of the national infrastructure being owned by non-UK businesses.  As the UK goes to negotiate it’s Brexit it’s not starting with a very strong hand.  Negotiations are about give and take, about ‘if you do this, we’ll do that’.  What has the UK got to offer to prospective trading partners?  Thanks to the decades of NeoLiberal economics being followed by successive UK Governments of all colours, the bargaining chips have already been sold.  What can David Davis offer?  If there’s one thing which is critical to the UK it’s the preservation of the ‘Passport’ rights for the financial services sector in London.  What can Davis actually offer up to the EU to preserve this?  Sure the other countries and companies will want to sell their goods into the UK. But at what cost to the UK?   And if the Kondratiev Wave is right, doing all this when we’re about to enter a period of economic downturns isn’t going to make it any easier.
The graph below shows the value of trade flows to/from the UK, Germany and China.  (source Prof Bell, and the ONS)  Germany sells a lot more to us than we do to them.  Germany sells a lot more to China than the UK does. (Must be all the BMW’s, Mercedes and Porches. If only the UK still had a car industry it owned…….. <tongue firmly in cheek> ) The UK sells a lot more to Germany than we do to China.  Our exports to Germany are facilitated by our membership of the single market.  If that changes, if any form of trade barriers emerge post Brexit, it will hurt. Looking on the bright side, maybe we could sell more stuff to China.  Now what do we make that they might want to buy?   Oh I know, we could flog them the rights to build our new nuclear power stations………….

trade flows.JPG

 

 

Thinking about apples

Apple – a model for the future?

Apple has become one of the most valuable companies on the planet through the rise of it’s music business.  Yet it started as a business making boxes.  Although many have praised Apple  (rightly so) I’ve got a nagging doubt about the way Apple  (and businesses like Spotify) are being valued.  They are after all, just shops.  Apple’s success has been built on it’s ecosystem of Macbook > iPod > iTunes > iPhone.  Now this is fine and makes sense in a normal business model.  But Apple’s model is built on it’s control of the vast library of music. And this is the bit which is an anomaly for me.  Apple’s success can only exist because it has not been involved in any way in the costs of creation of the music it now (almost) monopolises. (OK no shops have direct links into the products they sell – but they pay a rate for the products which suits the manufacturers of the products.  I’m not sure that Apple does this.)  It’s almost the ultimate marketing dream machine, but it make no product.  How many man-hours of musicians,  producers, writers, lyricists,studio time, etc, etc have gone in to creating the music library which is Apple’s key asset?   Classical economic theory about the price of goods says the price should reflect the labour used to create the item.  It seems to me that Apple’s business model doesn’t do this.  Maybe this was Steve Job’s biggest stroke of genius?  Spotify and others are similar.  Without all the millions and millions of pounds and dolars spent making the music/product they’d have no business.

So I wondered – in the digital economy, can this be replicated?  Maybe perhaps in other niches. Scotland has a business which is a world leader in the digitisation of ancestry archives.  This is following a similar model to Apple/Spotify.  Making available something people will want to access in a digital format without having to bear all the costs of the manufacturing the product in the first place. It’s smart, it’s profitable.  What other niches exist?  Apply to me on the back of a postcard please.  I’ll go halfers on the profits with you.

The Political Post-Factual Era

A short post – it’s been hanging around in my ‘drafts’ for a week or so, so publish and be damned.

All through history we’ve lived in different eras.  The mesapotamic era, the steam era, the industrial era,   the information-era, etc.   I wonder what description historians will apply to the era we’re living through now?    The Political-Post-Factual-Era  is where we are. Suggestions on a post card please for a better name for this.

I’m not sure how it’s come to pass, but we’re in a world where facts and politicians are rarely something that go together. It’s not happened overnight, it’s been a long term change. The gap between facts and politicians has been growing for some time, but now it seems  that if you’re a politician you can say anything you damn well please and know that there will be no consequences for you.  No-one will hold you to account nor will anyone be allowed to challenge you.  Just think of “£350M/week for the NHS” or “Taking Back Control” – two recent phrases used by politicians which never ever had any factual basis.  Yet the politicians know they have no personal consequences   (Google for Alistair Carmichael and how he got taken to court by his constituents, found guilty of lying,  yet is still today a Member of Parliament).And that’s before we remember Blair & Campbell’s Dodgy Dossier which has cause so much devastation to the Middle East  and beyond with the rise of ISIS). And Trump in the USA?  Is there anything factual about his campaign?    How have we got to this point?

Is it because the news media very rarely challenge the statements put out by MPs?  We have 24 hour News channels, a ‘machine’ that demands to be fed.   Yet this ‘machine’ just regurgitates the stories the politicians feed to it.  The machine makes very little effort to report a story and to verify its factual content.  Newspapers scream sensational headlines one day then forget the story within 24 hours.   Stories breaking on Twitter can be more accurate than the BBC.  Twitter tends to have a built-in fact checking mechanism of other twitter users who can reply directly to a wrong statement and thus point out the factual errors.

When did you last hear a BBC News presenter interview a politician and say “Hang on a minute, what you have just said is patently untrue.  I cannot continue this interview until you correct yourself” and then stick to that line  (memories of Paxman asking the same question of Michael Howard repeatedly)   When did you last see a newspaper headline calling out a press release from a Government agency for being devoid of facts?

 

 

Sleepwalking to where?

There’s something worrying me about the way the Great Britain is heading.  Scotland is on a different political trajectory from England and the gap is widening.  Northern Ireland is going to be in a the most difficult of all places as/when the Brexit actually happens.  If hard borders are needed on the emerald Isle I’ve not read anything which predicts how this will end up.

It seems that there’s a percentage of the people who are happy to be seen as being “Brengland”.  What’s good for Britain has to be good for England as England is Britain. Right?   Well no, it seems that many parts of Great Britain don’t think this way.  Scotland’s a confusing place for politics. The SNP win almost everything, yet the majority still still seem to be not in favour of independence, the core raison d’etre of the party they vote for most.  Wierd.  There’s a dichotomy there,  how can this party be so successful in Holyrood, Westminster, local authority elections and not yet have an overwhelming mandate for Independence?

Despite pointless stories in the media Scotland isn’t anything like a one party state though  It’s just that the alternatives to the SNP are so dire as to be unvotable (is that a word?)   Wee Ruthie is keeping a low profile as the Tory party gets away with an internal coup d’etat by it’s right wing.  Omnishambles isn’t strong enough to describe the performance of the Tories over the Brexit vote.

And we’re still £1.7 Trillion pound in debt.   That’s a number with 12 zeros in it.  £1,700,000,000,000.00. It’s an incomprehensible amount of money.  Here’s what One billion looks like as a stack of dollar bills (we don’t have £1 notes anymore and I couldn’t find a picture of £1 coins). And we’re at almost double that amount.
1-trillion-dollars.jpg

Think of the debt this way –  a single pound coin weighs 0.095Kg.  So we can get about £10,500 per tonne of £1 coins.  So a Million £££s will weigh about 95 tonnes. That’s about 12 double decker buses.  So a £Billion will be 12,000 buses.  If these buses were all end to end they’d line up for 100 kilometers. And that’s only a £Billion pounds.  A £Trillion is  £1Million x £1Million.  Oh this is getting unimaginable……  But these are the numbers our politicians blithely throw around these days.

Or another way – A million seconds is 12 days. A billion seconds is 31 years. A trillion seconds is 31,688 years. A million minutes ago was – 1 year, 329 days, 10 hours and 40 minutes ago. A billion minutes ago was just after the time of Christ. A trillion seconds ago…. we were neanderthals.  

And the thing is, regardless of how you measure that debt, it’s still going up. Every single day our Goverment is spending more money than it takes in. Oh but we’re using Austerity to reduce the deficit they say.  (deficit = how big the gap is between what the Government gets in and what it spends. Debt = the sum of all the ongoing deficts) Yes, credit perhaps that the Tories are using Austerity to do something.  But it’s not to reduce the countries debts. It’s to channel money from those who pay tax to those who pay to avoid tax.   More on this in another post I think.

Down in England though, the transition to being a one party state is well on track.  The Labour party has disintegrated.  It doesn’t matter whether Jeremy Corbyn is voted as leader again, the disintegration has happened.  Resorting to the courts to decide who is eligible to vote in internal elections is really just the last rites being administered.  There’s no way back for them to being a party of Government.  Which is a desperate shame because what both Westminster and Holyrood are crying out for is effective opposition.  In Scotland the main opposition is provided by the media who relentlessly follow an “SNPBad” storyline.  But in Westminster it is different. The same media give the Tory party a feather bed ride in comparison to the treatment they give to Labour.

So where is this leading us to?  Even though we’re living through the most incompetent Tory Government in living memory 38% of the population voted for them. And they’re about to change the electoral wards.  Advantage Tories.  In fact, it looks like Game, Set and Match to the Tories for a very long time to come.  The Electoral Calculus site has this (grim) prediction for the 2020 elections following the boundary reviews.

electoral calculus.JPG

So stop and think where we’re all heading as the most invasive, right wing Government I’ve ever lived under looks set to consolidate its grip on Westminster.  As their high priestess said “There  is no alternative”.  For Brengland this looks like the truth.  But there is an alternative for Scotland.  We’ve just got to be brave.

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Much ado about nothing….

…’coz I’ve not blogged anything for a couple of weeks. Kind of been on holiday I guess. What’s been happening?

The UK economy is still in dire straits. The £/$ exchange rate is still down to what looks like it’s going to be a longer term level for the ££.  OK so the FTSE100 and the FTSE250 are back to the levels they were at before the EU vote, but the Bank of England has just reduced interest rates and started another round of giving the banks money.  That has worked sooooo well for all of us in the past hasn’t it?    Sure the banks are still in business (are they really, truly successful bussineses ?)  RBS doesn’t seem to be. We’re almost a decade on from the great crash when it was near-nationalised and still it’s making Billions of £££ of losses.   Under what principle of capitalism is this rational?  A business which can’t make a profit should close – isn’t that what our capitalist economy is all about?  Except for banks which are “too big to fail”.   But steel industries are allowed to fail.

To keep any readers I may have entertained may I point you in the direction of the always excellent blogs by Grouse Beater?   Here he writes on the lunacy of nuclear weapons.  https://grousebeater.wordpress.com/2016/08/05/the-folly-of-nuclear-war/

More to follow next week.