Shame about the title though. I think the words “Yes we can” should probably be banned. Anyway, here’s Robin Hahnel on “Change how the world works? Yes we can“:
Until capitalism is replaced, we want the tail to stop wagging the dog. Finance should serve the real economy instead of the other way around. If the financial sector improves the efficiency of the real economy, it is helpful. But if it misdirects investment resources to where they are less productive, it reduces production in the real economy by obstructing the flow of credit altogether. Then it is failing to accomplish its only social purpose. Jobs producing useful goods and services, and investments which help us to produce what we need with less human toil and less strain on the environment, are what count. Increases in the profit rates and stock prices of financial corporations count for nothing when they fail to correspond to real increases in productivity, as has too often been the case.
We have offered several positive alternatives to capital liberalization and to the governing structures and policies of the International Monetary Fund (IMF) and the World Bank, such as capital controls and a Tobin tax to protect smaller economies from volatile speculative flows. We have made suggestions on how national governments can restore competent regulation of their traditional financial sectors, and stressed the urgency of extending regulation to cover new financial institutions which were allowed to grow outside existing regulatory structures.
Filed under: Activism, Capitalism, Economics, Politics | Tags: class, class struggle, class war, france, french strikes, greve, manifestation, regimes speciaux, strike
There are lots of interesting political things going on at the moment that I don’t have time to write about. In the UK, the government has lost, and probably had stolen, a copy of the records of 25m people (everyone in a family with a child aged 16 or under). There was also a very interesting looking report into the shooting of Jean Charles de Menezes that I may yet write about if I get the chance.
Here in Paris meanwhile, the transport unions and the students of many universities (not mine) are on strike. The issue for the transport workers is the regimes speciaux whereby transport workers have to work 2.5 years less than other workers before they can retire (37.5 instead of 40).
Much of the discussion seems to revolve around the fact that this measure was introduced because the labour involved used to be much more onerous, but is no longer thanks to mechanisation. Personally, I think that’s not really the point. Sure, if society were organised along rational lines in the public interest, there would be no justification for it. But, that’s not the society we live in. We live in a capitalist, class based society in which different groups fight to keep what they have. The wealthier classes fight a quieter battle, by appealing directly to governments and media, or by moving their capital overseas. The poorer classes don’t have this access or any capital to move, so they use strikes. To be against strike actions to retain or gain privileges is in effect just siding with the wealthy.
It might be said though that the competition here is between the transport workers and other workers, not between transport workers and the rich. But, that’s where the principle of solidarity comes in. The idea is that other workers support the transport workers when they are fighting their battle, and in turn the transport workers support those workers when they fight theirs.
The rail strike is apparently costing €400m /day, and the regimes speciaux cost €5bn/year (government figures), so 12.5 strike days is equivalent to 1 year of regimes speciaux. A reasonable compromise suggests itself. Why does the government not offer a pay rise of a total amount say €2-3bn/year. They would then be saving €2-3bn/year (which means losing the equivalent of 5-7.5 strike days compared to the situation if they could get rid of the regimes speciaux completely), and the transport workers would probably go for it, because for most people earnings now count for much more than earnings some 20 years down the line. I suspect the answer is that this isn’t really about saving €5bn/year at all, but really a strategy to weaken and divide the unions.
The pictures are of the manifestation that was going down my road today (some 300-700,000 people apparently).
Filed under: Capitalism, Economics, Manifesto, Politics, Risk, Surveillance Society
Insurance. Not the most exciting of blog subjects, although that hasn’t stopped Michael Moore’s film Sicko from making $24m in the US alone. It is a subject that fascinates me though, for the simple reason that I don’t understand why people get insurance most of the time.
The nature of insurance is that on average you lose money by having it. It’s essentially just a gamble, and the bookie always weighs the odds against you. Now, there is a real reason to have insurance, which is in the case where you can’t afford the cost if the unlikely thing happens. Insuring your house against being burnt down is a good example of this. Most people can’t afford to rebuild their house from scratch if it gets burnt down.
The other end of the spectrum struck me when I bought a mobile phone a while ago. The salesman tried to persuade me to get insurance for it. Now, the insurance was £20 for one year, which on the face of it seems a fairly minimal cost for the satisfaction of knowing that if your phone is stolen you will get a nice new one. However, the phone only cost me £60, so for it to be worth my while getting that insurance, I’d have to have a 1/3 chance or more of losing that phone during the next year. Obviously a bad gamble. I didn’t get the insurance, and 5 years later the phone is still in my possession. Score £100 for me.
That mobile phone salesman made me realise that insurance is almost never worth having, because the consequences of a loss rarely justify the amount you end up spending on all the different forms of insurance. Take cars for instance. Now, you are legally obliged to have third party insurance, but anything beyond that is a total scam. If your car is stolen, you can buy a cheap replacement for a few hundred pounds. It won’t be flashy, but it will be functional. A few hundred pounds is often less than a single year’s insurance. Comprehensive insurance is even more of a scam, because you either have to have an enormous excess (which means you end up paying for most of the repairs yourself anyway), or you pay enormously high premiums. It gets more complicated, but the basic facts don’t change once you get into the arcanae of no claims bonuses, insuring your no claims bonuses, and the fact that even having insured your no claims bonuses making a claim will affect your premiums anyway. These points struck home with me when an old car of mine was stolen, and I realised (too late) that claiming for it was going to end up costing me more in increased premiums over the next few years than the amount they were paying out – by quite a lot.
So when is it worth having? Well, it’s worth having if you really can’t cover the costs of something going wrong: i.e. basically house insurance (but possibly not contents insurance), and, in the US, medical insurance. That brings me neatly on to my next point. I just saw Sicko the other day (recommended), and one of the points it makes very well is that US medical insurers will do anything they can to avoid paying out. In the event of an expensive claim (exactly the sort of claim that justifies having medical insurance in the first place), they will investigate everything about your claim. If you have ever said anything untruthful or inaccurate on an application form or on the phone to them, that will void your claim. If they can manage to persuade a doctor to rule that the treatment is too experimental or not guaranteed to work, they won’t pay out. And to ensure that they can persuade doctors to make these rulings, they pay bonuses to doctors proportionate to how many claims they reject. In other words, even when insurance really does matter (and with medical bills often in the tens or hundreds of thousands of dollars in the US, it really matters) it might end up having been money wasted.
Now, finally I’d like to twist this into a rant about capitalism in general, because, you know, I like to rant about capitalism. It’s my thing.
This story about insurance being essentially a scam, an enormous rip off, and one that disproportionately affects the poorest, is a sort of microcosm of the ruthlessness of capitalism. Because poorer people can’t cover losses as much as richer people, they are more in need of insurance. Perversely, this means that they end up (quite rationally) spending more of their money on insurance than wealthier people.
A more recent development is social sorting, where poor people actually get larger premiums or bills precisely because they are poor. I’ve written about this before, here, here and here. This sort of thing just underlines the fact that the nature of capitalism is that the poor get poorer, and the rich get richer. Now, this has always been true of capitalism, but for a while it was masked. The introduction of the NHS and the welfare state in Britain made capitalism slightly more humane, but it is being undermined, even though the NHS and the welfare state still exist, because of social sorting.
The problem is that as companies know more and more about us, they can extract money from us ever more efficiently. Not only can they do this, but in a competitive market they must do it if they can, because otherwise someone else will. Exploitation of every source of profit isn’t a choice for a capitalist in a competitive free market, it’s a basic necessity. So, assuming that it is profitable for a company to, say, offer cheaper insurance to “intelligent” people, they will all have to start doing it. The logic of capitalism then undermines many of what we think of as social goods. We think it is bad that smart people should be given cheaper insurance than others, because it’s not fair, and also because smart people probably have more money; we think it’s bad that poor people should pay more for the same thing than rich people, but that’s not what’s going to happen because it doesn’t fit in with profit seeking.
Finally, to go back to insurance, the consequence of insurance companies having ever more accurate information about us, and being ever better at evaluating our individual risk levels, is that it becomes self defeating. If you can predict entirely accurately who is going to have a heart attack, then there cannot be medical insurance against having heart attacks. Someone who isn’t going to have one won’t pay because he isn’t going to have one, and someone who is going to have one is going to have to pay anyway so why bother giving extra money to the middle man. Insurance companies have to get better and better at predicting this sort of thing to stay profitable, but by doing so they bring about their own demise.
In this situation, the only thing to do is to have national insurance schemes organised by the state. The purpose is not to spread your own risk (you can’t change who you are, or your congenital risk of heart attack for example), but to spread the good and bad fortune of our circumstances out amongst everyone. In other words, in the long term, effective insurance cannot be provided by a capitalist system, and the alternatives available to us are ruthless capitalism which by its internal logic must get more and more ruthless to stay profitable, or some sort of socialism.
If you have got this far, well done, I’m impressed! and I thank you. Please do write a comment, if only to say you made it to the end. 😉
Advertising is one of my perennial bugbears. It does so much harm and gives so little in return. It saps creative talent from society at large, it distorts culture and politics, and perhaps worst of all, it’s unpleasant, noisy and inescapable. Feel free to take me up on any of those points in the comments if you like. Economics arguments about the signalling function of advertising aside, the only good it does is provide a large budget for things like TV, newspapers, web sites, etc. But is this really a good thing? Wouldn’t it be better if these things were paid for by what people wanted to spend money on?
Like a growing number of people, I use the Firefox web browser with the Ad Block extension to hide adverts on web sites. It makes web browsing a much pleasanter experience, and I highly recommend it to anyone who hasn’t got it already. Since a fairly small number of people are using Firefox, and an even smaller percentage using Ad Block, web sites which rely on advertising revenue have not had much reason to worry about this. A small group of tech savvy people were able to cut out the crap and still enjoy the free content paid for by the 3% of people who actually click on the banner adverts. However, that might be set to change.
The Register has an interesting comment piece on how things might be developing (the article is mostly about the business relationship between Google, which relies on advertising, and Firefox, which is largely funded by Google). Firstly, Firefox itself is becoming much more popular: just recently it was downloaded for the 400 millionth time (which is not to say that 400m different people are running it of course). Ad Block is also growing in popularity, the developers claiming that 2.5m people are using it, and an additional 300-400k per month downloading it. So, it’s beginning to be a serious threat. One web developer, Danny Carlton, wrote a piece of software on his web pages so that if you were running Ad Block, the whole web site would be inaccessible. Of course, this is fairly easily circumvented and there is the potential for a miniature arms race there. The ad blockers are bound to win this race for much the same sort of reasons as attempts to stop people copying music and films with Digital Rights Management (DRM) fail almost before they start.
So the question is: suppose enough people were blocking adverts, what would happen? What people are worried about is that all of these free web pages will have to start charging for access. Indeed so, but that could be a fantastically good thing. With modern web technology, it would be very easy to set up a system of micropayments. You subscribe to a micropayment service where you have an account you can top up just like a mobile phone. When you visit a web site, you pay a tiny fee to view their content. This fee could be the same or less than an advertiser pays to a web site. I don’t know how much that is, but it can’t be an awful lot given that on average only 3% of visits to a website end up with the person clicking the banner ad, and even then only a small proportion of those end up with an individual making a purchase. If the technology was unobtrusive and didn’t invade privacy, this could easily be very successful.
There is a danger though. Web sites might begin to rely on more subliminal forms of advertising and PR, like the ‘advertorial’ (an ‘editorial’ that is paid for) and subtler variants which are no doubt already out there. Like product placement, this is a form of advertising that can’t be blocked. Another short term danger is that the squeeze that this will put on content producers will mean they become much less adventurous with their output, and stick to what they know works (as is perhaps already happening).
One commenter on The Register article had an alternative suggestion: a “Reasonable Advertiser Network”. That is, an index of advertisers which do not use distracting animated or Flash adverts on web pages, but relatively unobtrusive, static images which do not take up too much space on the page. Users could choose not to block these adverts, but only the ‘unreasonable’ ones. That might sound far-fetched, but it has already happened to a certain extent. Part of the commercial success of Google is down to the fact that it has a very unobtrusive and straightforward advertising scheme: certain key words cause a clearly labelled ‘Sponsored Link’ to be included in your search results. You know exactly what the advert is, how it came to be there, and it doesn’t dance around your screen and sing at you.
My preferred solution however is the death of advertising, and there are some signs that it might be coming about anyway. Newspapers are apparently very concerned that advertising revenue is drying up, as are TV stations, etc.
It will be interesting to see how it plays out, and whether or not solutions that are easy to implement on the web (like a micropayment scheme) could be extended to other mediums like TV and news.
Now over to you: how do you feel about advertising on web pages and more generally? Do you use ad blockers? Would you be happy with a micropayment scheme like the one I suggested?
One of the defining themes of the New Labour government is that it claims not to do anything ideological, but just “what works”. But in fact, it’s largely just a cover. They invent elaborate and confusing ways of evaluating options so that their preferred choice seems to be objectively the best. PFI/PPP projects are the usual example of this, but this extremely interesting (although a little dry) article shows they’ve been doing the same thing with their road building programme.
Studies show that new roads do not solve congestion – they just generate more traffic. They add to pollution and, of course, they raise Britain’s greenhouse gas emissions. Road transport already generates 142m tonnes of CO2 a year – about 25 per cent of Britain’s total. As the European emissions trading scheme puts an ever-higher price on carbon, those emissions could cost the taxpayer increasingly dearly.
The Treasury and Department for Transport know this, so why do their economists give their blessing to Labour’s £13bn roads programme?
The answer lies far away from public scrutiny in the arcane and biased rules under which proposed roads are assessed. These New Approach to Appraisal (Nata) rules were introduced by Labour in 1998…
Under Nata, road builders such as the Highways Agency and local authorities must submit detailed assessments of proposed transport projects to the government. These are meant to be balance sheets showing the costs, benefits and environmental impacts. In theory this is a good thing, but in reality the rules are designed to make road schemes look better than any greener alternative, every time.
Take section 3.5.11 of the Nata rules. This awards extra points to schemes that generate more traffic because more cars and lorries on the road mean more fuel sales – and hence more tax revenue for the government. By contrast, public transport schemes, which take motor vehicles off the road and so reduce fuel sales and tax revenue, have points deducted.
Then there’s the rule on journey times, where planners can claim that a road will bring economic benefits if they can show it will cut the average journey time of each user. Every minute saved for a car driver is valued at 44p – which can be offset against the cost of building the road.
Just how biased this system can be is set out in the Nata rules that assign lower values to other types of traveller. A minute saved on a cyclist’s travel time, for example, isn’t worth 44p but just 28p. A bus-user’s time is valued at 33p a minute. The implicit assumption is that cyclists and bus-users make less contribution to the economy than car drivers.