Category Archives: review

Brexit: The book

I often feel that the vast majority of people in the UK (including Scotland) know very little about the EU, believing it is basically a glorified free-trade area.

This lack of understanding has made it very easy for the right-wing media to portray the EU as being out of control, when most of the time it is doing exactly what it was supposed to do.

Ian Dunt's wee book about Brexit is thus very much needed. A lot of it is basically teaching the reader about the EU and the associated countries (with chapter headings such as "What is the European project?", "What is the single market?", "Norway" and "Switzerland"), and only then does it proceed to look at the details of Brexit, cataloguing the hurdles ahead (e.g., "How can we keep the UK together?", "How talented are the Brexit ministers?" and "Making a new country").

In general it's a fine book. Many people have described it as really scary, but I actually found it too positive and optimistic about Brexit in places. There are many interesting details in it – for instance this bit about vets was entirely new to me:

Industry estimates suggest that 95% of vets in meat hygiene graduated elsewhere in the EU. British vets simply do not like the work. The problem is not only it is more poorly paid, though it is. The trouble is that someone willing to go through the extensive training requirements of veterinary medicine generally does not do so in order to spend their working life watching animals being killd and the washing of their carcasses by former convicts.

I didn't like the chapter about Scotland much, though. I think the author has spent too much time speaking to Unionists or Yellow Tribe members like Alex Neil, because he seems to think that getting more powers devolved to Scotland (e.g., with regard to agriculture and fishing) would satisfy pro-independence voters, when of course it wouldn't. Those powers would be pointless because they'd need to be handed back to the EU post-independence, and they wouldn't allow us to build a more compassionate and socially just society, which is what motivates most of us.

In the concluding chapter, Ian Dunt suggests that the outcome of Brexit will be a European Hongkong:

Britain is about to experience a toxic mix of weak law and strong lobbying. It is tantamount to switching a country off and on again. Except that it will not revert to its original state. It will revert, in all likelihood, to a low-tax, low-regulation laissez faire economy, more akin to that of Singapore or Hong Kong than the countries on the Continent. [p.161]

As I've explained in another article, I agree this would seem like the likely result, and if we can't prevent a hard Brexit from happening, we need to get out before it's too late.

If you aren't a major EU policy wonk, you'll probably learn a lot of useful stuff from reading this book, and if you are, it's still a useful list of all the options and obstacles in one place. Everybody should read it before it's too late.

The nightmare on Sauchiehall Street

Joe Pike's "Project Fear" is a really interesting book about Better Together and Labour's subsequent electoral collapse, which must be considered essential reading as we prepare for the next independence campaign.

Joe Pike is the husband of Better Together's Director of Policy, Gordon Aikman, so he's been able to speak directly to practically everybody involved in the No campaign:

The majority of the content is based on over fifty interviews with key players, almost all conducted in person, with many speaking for the first time. Every interview -- from junior staff to leading politicians -- was conducted on the same off-the-record basis. Only a handful of people refused to be involved. [...] Many interviewees have kindly provided emails, internal documents, polling information, contemporaneous notes and the content of text messages.

It contains a lot of wonderful wee anecdotes full of inside information, such as the following, which means the book is a fun and informative read:

If [the patronising BT lady] advert had elicited a critical mauling, another -- which never saw the light of day -- would have been far more controversial. This was scare tactics on steroids: a negative, dark, moody and threatening broadcast. ‘Girders were breaking, oil was spurting out. It was awful,’ said one campaigner. ‘There were kids walking up to the edge of a cliff looking over as the UK was being ripped apart,’ said another. ‘It was an "in emergency, break glass and let's roll this bad boy out" option.’ The advert was made at a cost of £50,000, but was never deployed.

[...] Yet it was Maggie Darling who ensured voters never saw it. ‘It's like Nightmare on Sauchiehall Street,’ she told her husband.

The lasting impression is of a campaign that was under-resourced for a long time (because everybody assumed at first they'd win easily) and completely chaotic towards the end as everybody tried to impose their own ideas on the campaign. Also, they spent a lot of money on polling but not very much on actually doing anything.

Will Better Together II be very different from this? I'm sure it will. Firstly, it will get proper funding from the outset; secondly, nobody will think of it as an easy way to get the Nationalists back into their box; thirdly, Labour won't have an army of MPs and Westminster insiders to rely on; fourthly, the campaign itself might be organised in a way that suits the No side better (a shorter campaign, for instance); and finally, I'm sure a lot of lessons will have been learnt from the way the two campaigns were run.

I just wish somebody would write a similar book about the Yes campaign. In many ways it'd be more difficult, because the campaign was much less centralised -- Yes Scotland was just a small part of it. However, it was also a hugely successful campaign that achieved much more than many people imagined was possible at the outset, so there are a lot of lessons to be learnt about what worked and what didn't.

This is a bit different from Project Fear, which at times comes across as a series of lessons in how not to run a referendum campaign. However, there are also important lessons for the Yes campaign in it. For instance, it's clear Better Together had expected the Scottish Government's White Paper to be much more like a budget, and they had spent a lot of time preparing their response, so they were almost disappointed when it was published. Would it have been better if the White Paper had been more like what the No campaign expected?

I must say this is probably the best book about the independence campaign so far -- and it's all the better for including the Westminster election rather than finishing the day after the referendum.

Theories of Value

Blue Marx
Blue Marx.
One thing I didn't discuss in any detail in yesterday's
review of Paul Mason's "Post-Capitalism" was his fondness of the Labour Theory of Value (LTV).

The LTV basically says that the value of something is the amount of labour that went into producing it (counting also the labour used for producing the materials and the energy used). The main competing theory is the "theory of marginal utility: that there is no intrinsic value to anything, except what a buyer will pay for it at a given moment" [p.160].

As a small business owner I must says that the LTV doesn't make any sense to anybody who's ever run a company -- the price I can charge for a product does not depend on the number of hours I put into making it. It would be nice if I could just bill by the hour, but I cannot. It does make sense as a minimum pricing guide -- I would like to sell my product at the LTV or more -- but then it's not a theory of value any longer.

The reason Paul Mason is fond of the LTV is because it assigns value to Open Source products such as Linux and Wikipedia which are not for sale and thus not assigned a value by the TMU, but it's quite easy to work out their LTV.

Using the LTV and the fact that the nature of the info-tech revolution is continually reducing the cost of capital and labour he then makes an interesting observation:

Let's run this spreadsheet down to an end-state, over several time periods where capital and labour get shrunk towards zero marginal reproduction costs. Now the labour expended is mainly focused on providing energy and physical raw materials. [p.170f]

Paul Mason seems to think this means capitalism is coming to an end. I'm not so sure, however. Even if robots start producing everything more or less on their own (food, energy, raw materials, products), many things will still cost money. Somebody will be owning the fields the food is grown on, the mines the raw materials are extracted from and the hills the windmills are placed on. Also, all homes aren't equally attractive, so of course some will be worth more than others.

We might thus be heading for a situation where value derives from land (for living on, growing food on and extracting materials from) and energy (which ultimately derives from land, too). So an app or a book will be practically free, whereas a house, a gold ring or a trip to Barbados will still cost real money.

In spite of what Paul Mason is saying, we're therefore not heading for a future without money. Even if you tried, you'd get USSR-style black markets and corruption in order to get the most attractive house or the newest smartphone before everybody else.

I guess the real question is where people will get money from in the first instance if their labour isn't needed. Landowners will be rich, but apart from them only people doing important work (such as building and maintaining robots) will be necessary. The rest can then to some extent make money by providing personal services to the landowners and robot builders and to each other, but it doesn't sound like a very prosperous future to me.

My personal guess is that the only real way forward in that situation is by taxing land and using this money to pay everybody a basic income. That would ensure there's enough money in the economy, and it would enable some people to spend their time producing Open Source products for the benefit of everybody.

If we don't do that, the danger is that we might be heading for a modern version of the Middle Ages, where the landowners are rich, most people are poor, and in addition there will be robot builders as a futuristic version of the medieval Church.

I reckon that rather than trying to resurrect the LTV, we should perhaps be starting to look again at the ideas of Henry George and the other Georgist thinkers:

Henry George (September 2, 1839 – October 29, 1897) was an American writer, politician and political economist, who was the most influential proponent of the land value tax and the value capture of land/natural resource rents, an idea known at the time as 'Single-Tax'. His immensely popular writing is credited with sparking several reform movements of the Progressive Era and ultimately inspiring the broad economic philosophy often referred to today as Georgism, the main tenet of which is that people legitimately own value they fairly create, but that natural resources and common opportunities, most importantly the value of land, belongs equally to each person in a community.

Perhaps Paul Mason's Marxist vision of a Post-Capitalist society will ultimately only be realised if we follow Henry George instead of Karl Marx.

Post-Capitalism

Paul Mason's "Post-Capitalism" is an interesting book. It often feels like a work in progress, and I often disagree with his ideas, but it is the kind of book that makes you think, so it's definitely worth reading even if you don't think you're likely to agree with his conclusions.

Marxism revisited

The book at times reminded me of a course I had to take back in 1991 in the "theory of science of the humanities" as part of my linguistics degree at Aarhus University. My teacher was a young Marxist who was completely freaked out by the collapse of Communism and spent most of the time insisting that Marxism was right and that the collapse must be due to some specific errors made by later interpretations -- Marx himself had to have been right.

Paul Mason seems to view Marxism in a similar fashion (but he is much more convincing that my teacher was back in 1991). His heroes are people like Ricardo, Marx, Kondratieff and Bogdanov, but he's very critical of Lenin and especially Stalin and his acolytes. There's nothing wrong with that per se (I don't care where an idea comes from so long as it is good) but at times it's like Paul Mason is willing them to be right -- he seems to be hoping the financial crash of 2008 will be the event that triggers the advent of real Communism as envisaged by Marx.

Sometimes I agree with his hopes. As somebody who has been part of the Open Source movement for a very long time (I installed Linux for the first time in 1994, made my first Wikipedia edit ten years later and participated in the first Wikipedia conference, Wikimania, in 2005), I would dearly want the future to be a place where intellectual collaboration replaces suffocating uses of copyright and patents. However, I'm not entirely sure this is enough to make it happen.

History

The historical chapters are very good and explained several things to me that have been puzzling me. For instance, I never quite understood why the moderate social-democratic parties basically gave up the will to life after the collapse of the Eastern Bloc, given that it was a very specific variant of Communism that had been discredited, not everything based on Marx's ideas. However, Mason explains it well:

Both wings of the labour movement became wedded to the belief that socialism could be introduced by taking control of the state and the organized market. [...] This was the idea that died after 1989, with the collapse of the Soviet bloc, the rise of globalization and the creation of the fragmentary, marketized and privatized economy we see today. The progression Hilferding imagined, which had implicitly guided socialism for eighty years, has been broken and indeed reversed. [p.60]

His also points out that neoliberalism wasn't just an accidental and natural extension of old-fashioned capitalism:

Neoliberalism was designed and implemented by visionary politicians: Pinochet in Chile; Thatcher and her ultra-conservative circle in Britain; Reagan and the Cold Warriors who brought him to power. They'd faced massive resistance from organized labour and they'd had enough. In response, these pioneers of neoliberalism drew a conclusion that has shaped our age: that a modern economy cannot coexist with an organized working class. Consequently, they resolved to smash labour's collective bargaining power, traditions and social cohesion completely. [p.91]

Cycles

One specific problem I have with this book is the length of the economic cycle.

In 2010, the Russian researchers Korotayev and Tsirel [...] used a technique called 'frequency-analysis' to show convincingly that there are powerful fifty-year pulses in the GDP data. [...] Cesare Marchetti, an Italian physicist, [...] concluded in 1986 [that his data] reveals cyclic or pulsed behaviour in many areas of economic life, with cycles lasting roughly fifty-five years. [p.44]

However, Strauss and Howe argue rather convincingly in "Generations" that the normal cycle length in human societies is about 80 years (because this is the time it takes for everybody who remembers the errors made last time to have died (or at least have grown so old that nobody will listen to them). I find it much easier to find current parallels with 1935 than with 1960-65. This matters because one of Paul Mason's main arguments is that the normal capitalistic cycle seems to have been broken because the economy doesn't look at all like it did in the sixties -- if the cycle length is different, that argument doesn't hold.
The effect of combining two different cycles, one lasting 50 years and the other one lasting 80.
Of course, there could actually be two overlapping cycles, an economic one lasting 50-55 years and a societal one lasting 80, but in that case we'll have to go back a great many years to find a close parallel to the situation we're finding ourselves in today (see the graph above).

Cycles are very interesting, but I think much more research is needed before we can conclude that the normal cycle has been interrupted.

What now?

After spending most of the book addressing the history of Marxism and neoliberalism, exploring different theories of value (which I'll discuss in a separate blog post) and using this and cycle theory to argue that capitalism is dyring, in chapter 9 ("A Rational Case for Panic") he points out that the current model is also collapsing in other ways, such as climate change and the demographic time bomb.

This was very convincing, and I was looking forward to getting a convincing answer to everything in the last chapter. However, it was somewhat underwhelming. His best proposal is a computer simulation:

We need an open, accurate and comprehensive computer simulation of current economic reality. [...] It would start by attempting to construct an accurate simulation of economies as they exist today. Its work would be Open Source: anybody could use it, anybody could suggest improvements and the outputs would be available to all. It would most likely have to use a method caled 'agent-based modelling' -- that is, using computers to create millions of virtual workers, households and firms, and letting them interact spontaneously, within realistic boundaries. [...] The prize [...] is an economic model that does not just simulate reality but actually represents it. [...] Once we are able to capture economic reality in this manner, then planning major changes in an accountable way becomes possible. [p.271f]

He does make some other suggestions, but it does make sense to focus especially on this. If we had such a model, we could answer many questions much more convincingly. For instance, during the Scottish independence referendum, we would have been able to respond to Project Fear's scaremongering in a much more authoritative fashion if such a model had been in place. We would also be able to show exactly why austerity is the wrong answer in the present situation and why benefit sanctions don't increase employment, so this is definitely worth doing.

Conclusion

I disagree with many specific ideas in Post-Capitalism, but that's not a problem. The purpose of this book is to make you think, and it achieves that extremely well. I would definitely recommend reading this book, even if your purpose is to fix capitalism so that it starts working in everybody's best interest again.

Varoufaki’s aporia: The ptocho-trapezocracy

Arrivals
Arrivals by EU Council Eurozone, on Flickr.

After putting it off for a while, I finally got round to reading The Global Minotaur by Yanis Varoufakis (Γιάνης Βαρουφάκης), the Greek finance minister.

If you're not put off by a healthy dose of Latino-Greek loan words and grammatical constructions that sound rather academic and/or foreign, it's a wonderful book. Here's a typical sentence: "Our current aporia is a variant of the puzzlement engendered by the simultaneous progression of commodification, financialization, and the crises these processes inevitably occasion."

The book isn't really about Greece, or even Europe. It's about the global financial system that was created by the United States after World War II, how it developed over time, and how it got fatally wounded in the financial crash.

His discussion of the 1929 crash and its aftermath is good, but things get interesting when he starts discussing Bretton Woods. For instance, the following was new to me:

During the debate on what that new syustem should look like, John Maynard Keynes made the most audacious proposal that has ever reached the bargaining table of a major international conference: to create an International Currency Union (ICU), a single currency (which he even named -- the bancor) for the whole capitalist world, with its own international central bank and matching institutions. Keynes' proposal was not as impudent as it seemed. In fact, it has withstood the test of time quite well. In a recent BBC interview, Dominique Strauss-Kahn, the IMF's then managing director, called for a return to Keynes' original idea as the only solution to the troubles of the post-2008 world economy.

Of course, this never happened. Instead, the US came up with what Varoufakis calls the Global Plan, "according to which the dollar would effectively become the world currency and the United States would export goods and capital to Europe and Japan in return for direct investment and political patronage".

The book then discusses why the US chose to make Germany and Japan the regional pillars of this system, rather than some of the WWII victors (and as an aside, how this damaged the UK's economy hugely).

What Varoufakis calls the Global Minotaur is the system that arose when the Global Plan collapsed after 1970, and the world economy instead started to depend on US deficits: "America began importing as if there were no tomorrow, and its government splurged out, unimpeded by the fear of increasing deficits. So long as foreign investors sent billions of dollars every day to Wall Street, quite voluntarily and for reasons completely related to their bottom line, the United States' twin deficits were financed and the world kept revolving haphazardly on its axis."

The book then describes how the financial crash fatally wounded the Minotaur, and how nothing has stepped in to replace it.

A lot of the book is concerned with surplus recycling mechanisms, and the point here is that there needs to be some mechanisms that allow surplus capital to be put to good use elsewhere in the world, so if the US can't or won't do this any more, the world economy won't fully recover until some other way has been found to achieve this.

This is of course also the problem in the Eurozone: Germany and other Northern European countries are generating surpluses but tend to hoard the cash. Ideally they should either invest the cash elsewhere (in Greece, Portugal and so on), just like the US did as part of the Global Plan, or they should start to run massive deficits and in this way create a market for Greek and Portuguese products, like the US did during the reign of the Global Minotaur.

Finally, the book discusses how the bankrupt banks managed to dictate solutions to governments, in the process creating what Varoufakis calls a bankruptocracy or a ptocho-trapezocracy. (Although the book doesn't discuss it, it's interesting to compare this with what Iceland did instead.)

I must say the book was quite depressing to read. Varoufakis sees things a bit too clearly for comfort (this is what he calls an aporia), and to realise you're living in a ptocho-trapezocracy is not a cheery thought.

However, if you can face it, I thoroughly recommend this book.