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These are all articles that the Mutualist has read this week that have been of particular interest. Unlike last weeks, a commentary will be given on what was interesting with them. The order in no way reflects a ranking of these articles in terms of preference.
Contrary to conventional wisdom, it appears that not only are UKIP becoming more unpopular among the electorate but voters are more willing to remain within the EU.
This first fact seems completely contradictory to the contemporary political landscape in the line of the recent local and European elections. However, the share of those who perceive UKIP in a good manner have declined since 2009. While the excellent result at the recent elections can be explained away that it was a success with only 36% of those eligible to vote bothering to turn up at all. Most of those turning out would be much more highly motivated to vote UKIP than
This latter fact may discourage the ardent Eurosceptics within the party, such as Daniel Hannan. It is good news for the Conservatives though as the anti European sentiment seems to be focussed upon European institutions rather than wanting to leave outright. This suits the Conservatives on Europe more than any party.
I’ll let you read the article to find out what the other three myths are.
Ezra Klein’s article is a brilliant reminder about how it is nearly impossible politically to succeed in ensuring that climate change over the next century or two will be managed to a safe level for humans.
He cites the limitations of the political system, the nature of the problem of climate change, the historically unprecedented level of international cooperation needed, the lunacy of the GOP and questioning whether the US has left it too late to be able to minimise the risk of climate change.
My only criticism of this article is that it lacks an eighth reason. That is that far too many Americans, along with the citizens of the world, lack the individual responsibility necessary to tackle climate change. It looks increasingly like a bottom-up approach alongside a top-down approach will be necessary to tackle climate change.
Without a bottom-up approach, it will be impossible for the country to establish a culture in which a green economy is a viable way to protect the integrity of the environment from human actions while ensuring that the economy can work for the people. Without a top-down approach, it will be impossible for the radical supply side reforms in energy production and consumption needed to significantly reduce carbon emissions on time. The first graphic in Klein’s article shows how urgent it is that we begin to make these supply side reforms now.
Vodafone’s Law Enforcement Disclosure Reports demonstrates that government surveillance is rife within the telecom industry. Not only that but it is very difficult for companies to either object to the demands of government authorities to be given access to materials, the report also states how surveillance can be carried out without the knowledge of companies within the telecom industry.
The report is scary in that companies we supposedly trust to operate our phone networks do not even know when governments are interfering in such networks.
It is also very worrying that some countries legislate to allow authorities to survey networks with differing concerns to human rights.
While Piketty attributes the rise of inequality onto the rates of capital return and accumulation exceeding the growth rate of the economy, De Long emphasises the role that “tournaments” play in the higher levels of the corporate structure.
In economics, a tournament is a market that offers big prizes to act as an incentive for participants to choose to enter the particular market in question. In the higher levels of the corporate structure, this huge prize is an extremely high wage with an added on “performance related” bonus.
As the incentive to earn more money as growth for the company expands, the larger the winnings or compensation need to be. This creates a cycle in which very high wages become ridiculously larger.
The problem De Long associates with tournaments in that they offer perverse incentives to those who wish to participate ion one. The tournament encourages behaviour that will cause self-harm overall.
Ultimately, though, to win the tournament is more a matter of luck or chance. It is luck to just to be able to enter a job in the market that pays for the marginal product to society. Let alone be paid for a job earning you well above the level of the marginal product of society.
Even though de Long’s case cannot be treated as a general theory of the rise of inequality, for it fails to take into account land inequality, the Mutualist does think it does give a very good explanation as to the role corporate governance and corporate structure plays in the role of inequality. The Mutualist believes that an economy in which cooperatives are the primary corporate structure would likely solve these difficulties.
The article argues for the Hayekian liquidation theory of a recession. This theory states that when a recession occurs, this is due to the liquidation of over accumulated capital with in the economy. Essentially, the recession acts as cleanser for those who have accumulated too much of the wrong sort of capital in the economy.
The article though disagrees with the Hayekian implication that government intervention would interfere negatively with this liquidation. Instead, it is argued that allowing the recession to develop laissez-faire will encourage the conditions described by the Keynesian analysis of recessions.
A recession in Keynesian analysis is a lack of aggregate demand in the economy. The aggregate demand is effected as market participants fear that their economic conditions may change for the worse. So the market participants start saving in case the worst case scenario occurs. When this occurs throughout the economy, we have a lack of aggregate demand. This lack of demand will raise unemployment because businesses will stop producing as many goods thereby needing to lay off workers to make costs meet income. This becomes a vicious cycle though as more market participants enter the paradox of thrift.
Keynes argued that government intervention in the economy was necessary to stimulate aggregate demand within the economy to stop the paradox of thrift occurring.
So the analysis argues that government intervention is necessary in a recession to stop the recession liquidating so much capital that the recession no longer acts as a cleanser but a source of difficulty to the economic and social fabric of the economy in question.
The Mutualist believes such an analysis on recessions has a huge amount of potential. However, a more detailed examination of the process is necessary for research purposes. Given that the description of the nature of recessions has changed from Hayekian and Keynesian theories, it is also important that the analysis can give prescriptive account of the nature of government intervention. In particular, the following question must be asked: how can government intervention occur in such a manner that the benefits of the liquidation process are maximised while ensuring that the ensuing paradox of thrift effect on the economy is minimised?
by Michael McLeay, Amar Radia and Ryland Thomas. Quarterly Bulletin, 2014 Q1, p.1-14
This a recent paper published by the Bank of England that explains that most money created in the economy is through commercial lending by banks. Most money in the economy is not created by the central bank. Neither are banks acting as intermediary determining the rate of lending by the quantity of money saved in the economy.
Most money in the economy, approximately 97%, is created via the creation of deposits at a commercial bank. In other words, the issuing of credit is the act of creation of money in the economy. The amount of lending in an economy determines how much the money supply in the economy expands.
The paper also argues that banks are restricted in the amount of lending they can perform due to competition in the financial markets. The myth that banks also get free money is also dismissed. Quantitative easing is also explained.
The purpose of this paper is to tackle the myths and misconceptions about how the creation of money occur in the monetary system by informing the public the operations of the central bank and commercial banks when money is created. .
Idealism, changing the world so that your ideals become apart of reality; utopianism, changing the world by confusing reality with your ideals.
Conservative MEP Daniel Hannan tweeted this earlier today:
If people are intrinsically good, a big state is unnecessary; if they’re intrinsically evil, it’s dangerous.
— Daniel Hannan (@DanHannanMEP) May 30, 2014
The Mutualist shares this sentiment. If people are intrinsically good then there is little need for the state to regulate the everyday affairs of its citizens, other than to tackle systematic risks that individuals themselves may not be able to tackle by themselves. If people are intrinsically evil then the state will most likely be used as a tool for evil purposes.
What happens though if no one is intrinsically good or intrinsically evil. What role does the state play then. Is the role of the state to simply maximise liberty even if at the expense of other consideration? Is the role of the state to maximise liberty but give that little nudge to help people make better decisions? Is the role of the state to protect its citizens from themselves?
Given that most people certainly are not intrinsically good or evil, Daniel Hannan’s quote is devoid of real life application. The quote doesn’t help the libertarians in justifying a reduction of the state. It merely demonstrates their idealism. An idealism that can be applauded, but an idealism that can be potentially dangerous to the impoverished if mistaken for reality.
The quote though is good at alluding to the dangers of a big state whether people are intrinsically good or not. A better one would have been:
Were there is power onto others, lays the potential for the evil heart to rise and seek most of what it craves. Were there is power onto others, lays the potential for the good hearted to be corrupted by its lure. Freedom is the test by which we measure our moral competence to do what is right.
In the European Elections, UKIP gained 27% of the vote share on a 36% turnout. This meant UKIP topped the vote share as well as having the largest number of MEPs in the EU Parliament compared to all the other parties. This was Nigel Farage’s promised “earthquake”.
All the parties are now fretting at the threat UKIP poses to all of them. Ed Miliband has decided to tell the audiences of Thurrock that immigration is a legitimate concern. There is much talk that UKIP are not about to be a party that will see a big decline in its vote between now and 2015.
Yet the European elections should be a sign of optimism for the mainstream parties. For UKIP to make big strides in terms of taking seats from the likes of Labour, Conservative and Liberal Democrat, John Rentoul stipulates they need about 30% of the vote.
This is a figure very close to what UKIP’s actual vote share was. This though was a share based on a low turnout. How will UKIP be able to keep its a share of the vote when the turnout at the next general election will be almost twice as large?
It is a harder getting a high share of the vote on a higher turnout, especially when the party is so polarising to large sections of the electorate.
The polls show though that 58% of UKIP voters at the European elections intended to stay UKIP voters at the General Election. This would translate to 15% share of the vote. A very similar figure to what the UK Polling Report average for UKIP is.
Roughly, UKIP only have about half of the support necessary to make large in roads in terms of taking seats.
This share of the vote is enough to upset the calculations of the strategists within the political parties. Shock results may very well end up being on the cards.
But it is not a big enough share that the mainstream parties should try pandering to UKIP voters. This strategy is flawed as none of the parties will be able to compete with UKIP on issues such as Europe and immigration. Pandering to UKIP will raise their momentum even further.
Instead, the parties need to refocus their efforts on finding an identity that will alleviate the concerns and fears of ordinary voters. The UKIP vote is a clear rejection to what the mainstream parties stand for. Their is a vacuum in British politics at the moment. It is up to the party leaders to find the vision, principles, messages and values that will fill up that vacuum. It is time for the leaders to actually lead with boldness rather than lead out of fear.
Here are pieces from other writers and bloggers that have caught my attention in the last week or so.
1. Left Foot Forward | Can the left learn to live with the self-employed? – Benedict Dellot.
2. Stephen Tall | Why I am one of the 39 of Lib Dem members who thinks Nick Clegg should stand down as leader. http://stephentall.org/2014/05/28/why-i-am-one-of-the-39-of-lib-dem-members-who-thinks-nick-clegg-should-stand-down-as-leader/
3. London School of Economics British Politics and Policy Blog | Low voter turnout is clearly a problem, but a much greater worry is the growing inequality of that turnout – Matthew Flinders http://blogs.lse.ac.uk/politicsandpolicy/archives/40224
4. Bleeding Heart Libertarians | Crony Capitalism and Crony Communism – Matt Zwolinski.
5. Financial Times | Why I was won over by Glass Steagal – Luigi Zingales. http://www.ft.com/cms/s/0/cb3e52be-b08d-11e1-8b36-00144feabdc0.html?siteedition=uk#axzz338yu8DVt [Registration required] (Article was written in 2012)
6. Sex and Censorship | Bad Taste Police Internet Blocking – Sephy Hallow
[Amended to include the article by Sephy Hallow on the Sex and Censorship blog.]
Resign? Even enthusiastic supporters of Nick Clegg such as Stephen Tall think the time is right for Nick Clegg to leave the Liberal Democrats. The position of Nick Clegg is a hindrance to the Liberal Democrats if they become king makers again after the 2015 general election. The more gloomy Liberal Democrats, or the former ones in the case of Lord Oakeshott, believe that Nick Clegg is leading the party to oblivion at the next election.
But what would Nick Clegg’s resignation do to help the Liberal Democrats in their precarious position with the electorate? The evidence suggests very little. If Danny Alexander or Vince Cable were to lead the party, only modest gains would be seen.
Even though the message bearer may be hated by large numbers of the electorate, something much deeper lurks behind the amount of vitriol directed towards the Liberals.
Tony Blair has suggested that it may have something to do with the fact that before 2010 they were a progressive party. Now they are party supporting regressive policies instead.
Matthew Oakeshott believes similarly that the Liberal Democrats have betrayed their identity and values. Instead of being a radical progressive force in politics, Clegg has turned them into the bland centrists seeking to restrict the excesses of the left and right of the political spectrum. That is hardly a strategy that will appeal to the supporters of the party in the long term, let alone the rest of the electorate.