Gambling with your pension

More insight into how speculation is endemic in our financial system in a piece by Will Hutton in the Observer, this time examining the role of hedge funds and short selling in relation to British financial institutions. Hutton demonstrates how businesses in the real world are being damaged by this hyper-aggressive speculation, fuelled by investors’ greed.

And the money to do this comes from people’s savings and pension funds – it’s the future of ordinary decent people that is being played with by these unaccountable gamblers.  As one cynic is quoted in the article as saying, one definition of a hedge fund is that they are essentially devices to enrich those who risk other people’s money.  And, as Hutton demonstrates, the effect of this gambling is to destabilise the system of a whole, to the detriment of employees and savers.

It’s possible to argue that a sound company won’t fall victim to the short sellers.  But there is a growing sense that these are speculators picking over the bones of other speculators; that the gambling mentality is endemic in modern free-market capitalism.  And the fallout from the instability that arises from this is felt most keenly by the innocent – by workers losing their jobs, by savers losing their pensions, while a small anonymous group of traders enriches itself.

It’s very scary, and, in an environment where the media are obsessed with the trivial doings of celebrities and sportsment, it goes almost completely unreported.

Oil speculators and free-market politics

While politicians continue to blame high oil prices on surging demand in India and China, more evidence emerges of the role of speculators and the way in which Governments hidebound by free-market ideologies have contributed to the current situation.

Writing on Alternet, Pam Martens examines the role of Philbro, a publicity-shy American company that has operated in the commodities market for some years.  What is fascinating about this article is the expose of how the regulatory authorities in the US effectively abdicated their responsibility, allowing oil and other commodities to be traded outside the usual regulatory regime.  It shows that venerable institutions like the Federal Reserve have proved to be easy pickings for corporate lobbyists, and that big oil can all to easily get its way.

There’s a chilling quotation in the piece from Dr Mark Cooper of the Consumer Federation of America, testifying before the Senate Committee on Commerce, Science and Transportation on 3 June this year:

“The speculative bubble in petroleum markets has cost the economy well over half a trillion dollars in the two years since the Senate [hearings] first called attention to this problem. Public policies have made these markets the playgrounds of the idle rich, while consumers suffer the burden of rising prices for the necessities of daily life. We have made it so easy to play in the financial markets that investment in productive long-term assets are unattractive. The most blatant mistake occurred when Congress allowed the Commodity Futures Trading Commission to forego regulation of over-the-counter trading in energy futures. Because there is no regulation of this huge swatch of activity, regulators have little insight into what is going on in energy commodity markets. Large traders who trade in commodities in the U.S. ought to be required to register and report their entire positions in those commodities here in the U.S. and abroad. If traders are unwilling to report all their positions, they should not be allowed to trade in U.S. markets. If they violate this provision, they should go to jail. Fines are not enough to dissuade abuse in these commodity markets because there is just too much money to be made.”

It provides an all too plausible explanation for how the rise in oil prices fails to reflect the underlying fundamentals. But there is a more fundamental question here about when politicians in the West are going to stop talking about soaring demand from India and China, and are going to start examining the reality of the free-market ideology they expound.  Martens is scathing about the ability of Congress to spot what is going on in front of its face; perhaps the shock of contemplating the impact of their ideology is too severe to contemplate.

I don’t doubt that, in the interests of the environment, demand for fossil fuels needs to fall, and the price of oil needs to reflect the externalities of environmental damage.  But leaving oil prices and oil supply in the hands of speculators will do nothing for the environment, or for more general economic and social sustainability.

Sending Iranians back to the executioner: New Labour’s morals

Every so often, one reads something that not only makes one viscerally angry, but also demonstrates why no decent progressive could contemplate voting for New Labour.  Today’s Independent reports that Jacqui Smith has justified returning gay asylum seekers to Iran on the grounds that they will be safe if they adopt a discreet lifestyle.

It is a view that beggars belief.  Gay people are routinely executed in Iran – up to 4000, according to human rights groups, although the Government claims it is fewer.

What is disgraceful here is not just how it confirms the sheer inhumanity at the heart of the British immigration and asylum system, led by Ministers whose sole aim seems to be to pander to tabloid prejudice; it’s the sheer abject stupidity of what Smith is saying.  It’s the implication that by daring to be open about their sexuality, gay people in Iran are bringing this on themselves.  It’s at heart no different from the argument that women who wear revealing clothing are asking to be raped – is this what Smith believes?  Is this New Labour’s position on sexual equality – cover up or you deserve what you get?

I cannot think of a more graphic illustration of the sheer moral squalor at the heart of New Labour.  I assume that these people believed in something once – but now there’s just a vacuum.  No humanity, no self-respect, no decency.

Educational elites?

I’ve only just picked up on a couple of news stories on educational matters

First, this from the Independent on the real cost of grammar schools.  It indicates that when the Government recently named and shamed what it described as “failing schools”, local education authorities that have stuck with selection have contributed disproportionately to the list.

And, interestingly enough, New Labour’s flagship academies also do very badly indeed.

Now, there are lessons here.  Of course if you cream off the top achieving pupils, the remainder will do less well statistically; and of course some of the flagship academies have been set up in succession to deeply troubled schools.  But there are lessons here about underlying social problems; you can’t wish away social problems and social divisions.  And it is interesting to note that, in this report, academies are failing on the value-added scores which are supposed to offset the effect of social deprivation.

All in all the much-derided bog-standard comprehensive seems to come out of this rather well.

Holed below the waterline

Meanwhile, in another altogether more privileged part of the forest, Rear-Admiral Chris Parry, whose allegations about feral behaviour in state schools I mentioned in an earlier post, has resigned as head of the Independent Schools’ Council after a mere six weeks in the job.  The Independent report suggests that his tenure was disastrous for reasons other than his comments about state schools; both here, though, and in the Guardian, the clear implication is that this employers’ concern was more about the tone than the accuracy of his comments at a time when the charitable status of private schools is coming under scrutiny.

It all looks like a classic establishment “man overboard” job to me.

Some essential truths

I have a lot of respect for Jeremy Seabrook, and I read his article on the Guardian’s Comment is Free site with a strong sense of agreement with his diagnosis about the impact of rampant consumption.  There are some really important truths here that are apt to get forgotten in our commodified world, this in particular:

The greatest threat to global stability comes not from the poor but from the rich. This startling proposition runs directly into another received idea, which is that the risk of disorder is a result of excessive materialism. What we suffer from is not a surfeit of materialism, but a deficiency of it; for if we truly valued the material basis upon which all human systems depend, we would exhibit a far greater reverence for the physical world we inhabit. If materialism means respect for the elements that sustain life, then we are gravely wanting in it. What is sometimes referred to as “materialism” is actually something else: perhaps a distorted kind of mysticism which believes we can use up the earth and still avoid the consequences of our omnivorous appetites.

And, particularly importantly:

The first task in achieving a decent security for all people on earth is to affirm the distinction between human nature and the nature of capitalism.

The latter sentiment is about as fundamental and important a statement as one could find of what it needs to bring our society back to its senses.

Where I find it hard to agree with Seabrook is in the optimistic tone of some of his argument.  He is of course absolutely right when he argues that consumerism is unsustainable; but I’m not sure that I can agree that some of the glamour of extreme wealth is wearing off, at least here in the Anglo-Saxon West.

In part, this is about addictions that are extremely difficult to break, and in whose maintenance a lot of very powerful people have a strong vested interest.  It is going to be extraordinarily difficult to break out of the web of envy, conformity and greed that sustains this set of addictions.  And the blame for the underlying dissatisfaction can always be laid off somewhere else, at migrants, for example, or simply at people who are different.  Watch the nastiness in our society increase as, in the months ahead, Western capitalism hits one of the bumps in the road.

But, additionally, part of the point about glamorous consumption is that it provides a very good smokescreen behind which real wealth and power can hide – for every footballer or pop-singer in the public eye there are grey men in suits who manage the system in obscurity, who will use an unprecedented range of strategies to protect what they own.

What is the answer?  Beyond a critical mass of individuals who will stand back and look critically at what is happening around them, and reject the sheer irrationality of it, it’s difficult to say.  But that’s probably where it has got to start.

Sick of capitalism

Red Pepper carries an interview by Mat Little with psychologist Oliver James about his book The Selfish Capitalist. James’ thesis is familiar; that economic growth and the unfettered market bring misery and mental illness in their wake, while we as a society languish in denial – especially in the English-speaking world.

James argues that not only is this misery a by-product of market capitalism; but capitalism actually needs it. Little writes:

What James regards as his ‘most interesting claim’ is that selfish capitalism does not merely leave depression and anxiety in its wake, it also actively works to destroy anything that might improve the well-being of the population ‘It is absolutely critical for everybody to go around feeling miserable, filling the emptiness with commodities, dealing with misery by trying to give yourself short-term boosts with hamburgers or drink,’ he says.

The system is ‘akin to the biological notion of natural selection’. For it to work, we have to be unhappy. Materialism produces anxiety, and anxious people consume more. It loves divorce and separation, he claims. Besides legal fees, each partner has to buy or rent a new home and get a new set of electrical essentials (TV, DVD player) and furniture. Misery equals economic growth.

Renewal on the Left?

James argues that a Thatcher of the left – probably a woman – will appear who can offer the analysis and leadership to start pulling things around. He is encouragingly dismissive of the focus-group politicians who believe that their job is to follow public opinion – what he seems to be advocating is a real form of democratic leadership, in which politicians lead and promote what is right. And he is surely correct in arguing that this is in effect what market capitalism is doing already. It’s the elephant in the room of modern political discourse; here in Britain, with three political parties arguing over the increasingly small area of political space defined by market capitalism, it’s a powerful and liberating argument.

Utter, witless stupidity

I am grateful to that excellent blog The Enemies of Reason – which exposes the inanities of the British tabloid press – for this story, which seems to me to lay bare the utter imbecility that lies at the heart of what passes for quite a lot of public discourse in Britain today.

The Daily Mail was working itself up into a furious lather the other day about a leaflet on the dangers of child abuse circulated to 8-year-olds at a Worthing primary school a few weeks ago. The leaflet, produced by the National Society for the Prevention of Cruelty to Children (NSPCC), set out scenarios in which abuse was happening. The result was predictable – condemnation, outrage at the content, hasty withdrawal of leaflet by backbone-free head teacher. The comments attached to the Mail story tell their own story.

The Mail grudgingly gives an NSPCC spokeswoman the chance to reply. She refers to the fact – easily verifiable by anyone who is interested in the facts – that the victims of bullying and abuse tend to suffer in silence. The purpose of the campaign, she says, is to get children to speak out. And, yes, if that involves children learning that there are things that are right and wrong, and that what is being done to some of them is unacceptable, I believe that it’s absolutely right. Eight-year-olds are not stupid, but they are vulnerable, and if they are being abused they have already learned that there is nobody to stick up for them. It’s ignorance that does the real damage, and allows the abuser to get away with it.

So, what is the argument here? Are the Mail and its readers happy that children should continue to suffer bullying and abuse to spare the feelings of a moralistic few who want to ignore the facts, or wish them away? It’s an inference that is all too easy to draw. But I don’t think that’s the whole story here. I think this is yet another example of the appalling witless stupidity with which we in Britain deal with issues relating to children and sexuality (although of course abuse is about power, every bit as much as about sex), and how that stupidity is preventing us as a society from getting to grips with these issues in a grown-up and sensible way, least of all through proper sex education

More fun, less stuff

I’ve always liked this slogan from the American Green movement. It came strongly to mind when I read a piece by Martin John Brown about the American love-affair with self-storage, published on the ever-excellent Alternet site.

Brown examines how the self-storage business has become very big, very fast; he looks at how people take units for a short period and never quite manage to get round to getting their stuff out – it just sits there, not thrown away and not used, with the payment going out. And it’s not necessarily about space – many of the people concerned are middle-class people with big homes and plenty of storage space of their own.

It’s not, as the piece points out, an American phenomenon; all over the developed world, people have stuff they don’t really want but can’t bear to part with.  Brown argues that the items in storage have become repositories of people’s dreams; I’d be tempted to argue that it’s not quite that.  I think it’s about a fetishisation of things; I possess, therefore I am.  The mass advertising media constantly push acquisition, but there’s nothing about letting go.

At is seems to me that, at the root of this parable, there is an important lesson for green politicians.  We can be as rational as we like, argue the case about global warming and the social damage caused by greed and the worship of the market; but we’re not really in a terribly rational place, and telling people things are for their own good is never going to be popular.  Moving the discourse on is really very difficult.

Could do better

I’ve been reading with some interest the recent claims that state schools are failing pupils applying for top universities – and the associated claims that Oxbridge is taking state school pupils in significant numbers.  It seems to me that there are a number of points worth exploring here.

Pious hopes

Top of any pious hope league is the suggestion by Education Minister Bill Rammell, who argues that state schools need to push their pupils more and to coach them properly.  Rammell’s comments are, of course, unaccompanied by any thoughts on resources.  There’s nothing about matching the tens of thousands of pounds per annum that rich parents pay to buy the near-personal tuition of A-level students in the private sector, and of course there’s New Labour’s traditional silence on the vast sums of public money being pumped into the private school trough through charitable status and VAT exemption; and nothing about the fact that these children come from homes where they are strongly (if occasionally somewhat misguidedly) motivated and economically advantaged.

It’s the same old lie that unites New Labour and the tabloid press – where one section of society does better than another because it enjoys huge advantages, blame the disadvantaged for being losers.

Evidence-based?

But Rammell’s comments look quite rational compared with those of Chief Executive of the Independent Schools’ Council, Chris Parry, as reported in the Daily Telegraph.  School bullies from disadvantaged backgrounds were running riot in state schools, denying the studious the opportunity to gain their Oxbridge prize.  Now you don’t need a public school and Oxbridge education to realise that this article is a shameless sales pitch – an evidence-free rant designed to play on the fears of the middle classes.  I’m not going to dismiss school bullying, because I’ve been there (except that the bullying I experienced was in an elite prep school, but that’s another story) and I’m certainly not going to deny that we live in a profoundly anti-intellectual culture in Britain.  And, yes, the public schools and even Oxbridge are implicated in that too.

The day when I for one will take any comment from the private school sector about social deprivation seriously is when I see some evidence that this sector has any experience in dealing with it.  State education has to cater for everyone; private schools, awash with public subsidy through charitable status, can quietly remove anyone whose face doesn’t fit.  I used to be a primary school governor; I remember time and time again that our school had to deal with children who had been thrown out of private schools, often with very minor learning difficulties that a competent teacher could have spotted and remedied; but teachers in private schools simply weren’t good enough to spot the problem and by the time they came to us, the children had fallen further and further behind and had had their confidence destroyed by the hothouse atmosphere in the school.  Motes and beams, Rear-Admiral Parry.

A corrective to the Rear-Admiral’s poisonous sales pitch might be this article by Jenni Russell in today’s Guardian, which points to some of the realities of the widening social gaps in New Labour’s Britain.  The fact is that the real failure, after eleven years of Labour government, is that education in Britain is still fundamentally about class.  When Bill Rammell and his ilk have the honesty – one might say the guts – to tackle that, things might just change.