Tuesday 25 November 2008

Pre Budget Statement - No Way Near Enough

This is an article I wrote for the Guardian's Commemt is Free just prior to the Pre Budget statement. I am an admirer of Robbie Burns but the choice of title is not mine.

Cowering, timorous beastie

This is no time for fearful half measures. Darling must seize the nettle of major, redistributive tax reform and bank nationalisation

Whether the government intended it or not, Alistair Darling's pre-budget statement is rapidly becoming seen as a make-or-break move by a government desperate to prevent the recession becoming a depression.
Just before he finalises his plans, it would pay the chancellor to look up some of the ideas of the last group of Labour politicians who experienced an economic depression.
In the 1930s John Strachey, later a member of Attlee's cabinet, analysed the causes and the response to the depression in his books The Nature of Capitalist Crisis and A Programme for Progress.
His mixture of Keynes and Marx reflected the intellectual climate which influenced the policies of governments for the next 30 years. Step by step, the response to recession was first to cut interest rates fast and hard, second to redistribute income from the rich to the poor by taxation and to increase pensions and benefits also paid for by printing money, third to promote large-scale public investment and fourth to develop a "national and public as opposed to a commercial and profit-making banking system."
Against this checklist the government's response so far looks tentative, indeed pretty feeble, and needs radical change.
Following Strachey's model on monetary policy the government cannot afford any more dithering by the Bank of England. We need an immediate and substantial cut in interest rates. Handing control over interest rates to the Bank of England may have been seen as an adroit manoeuvre in 1997 to reassure the markets as Labour came back into power, but now is definitely not the time for political novices of any sort, even if they are senior bankers. It is time for the government to take back control from the prevaricating Bank of England.
It is also time to recognise that the government's policy towards the banks has been an unmitigated failure. The billions in bail-outs have done little to increase lending, and we are witnessing a startling rise in home repossessions by the very institutions bailed out with taxpayers' money.
The government now needs to move towards the full nationalisation of the banking sector to create a national public banking system run in the interests of the British people.
Darling is trailing a significant fiscal stimulus and a large-scale public works programme paid for by substantial borrowing and deferred tax increases. The introduction of a higher rate of tax for high earners is long overdue but the government's proposals are hardly radical and delaying them until after the next election is pointless.
The higher rate should be the start of creating a fair tax-reform agenda, redistributing wealth from the super-rich in order to take the low paid out of taxation altogether. The public revulsion over City bonuses and bank executive salaries has opened the way for radical tax reform. The government must seize the moment.
Just 18 months ago, Gordon Brown used his final budget speech to abolish the 10p tax rate – raising taxes on the lowest earners. Frank Field and others are right to be demanding that this group is compensated. I would go further by raising the personal allowance so that what was the 10p rate is now a 0p rate. This would put money back in to the pockets of those who need it most and those who will spend it most – bringing the maximum benefit to the economy.
But it is also those out of work who must be protected. Jobseeker's Allowance at just £60 per week is an absolute disgrace. As more and more people are thrown out of work, how can it be just that they are expected to live on less than one-third of the pitifully low minimum wage? The same calculation also applies to the 2 million pensioners, who still live in poverty and who still await a decent pension and the restoration of the link with earnings.
Paying for the fiscal package by borrowing will prove counterproductive and the threat of later tax increases simply encourages hoarding not spending.
Instead the necessary boost in expenditure should be paid for by tax redistribution, lifting the cap on National Insurance contributions and introducing a wealth tax but more importantly by ensuring the corporate sector pays its way.
In its 11 years in office, New Labour has cut corporation tax from 33% to 28% – and much of it remains avoided through various avoidance schemes and the use of offshore tax havens. The US has acted to stop the abuse of tax havens. Yet the UK continues to drag its feet, even when we know that the UK is losing at least £25bn per year – thanks to the excellent work of Richard Murphy. We therefore need legislation in the Queen's speech to tackle tax evasion by corporations and the wealthy.
If we are to depression-proof our economy we may need to pay more attention to the radical ideas and policies of those who witnessed the misery inflicted on so many during the 1930s.

Monday 17 November 2008

New World Economic Order Needed.

Blogging time has been limited recently by political activities but here is an article I wrote for the Guardian's Comment is Free on Friday.

We need a new world economic order
Instead of the G20 summit, we need a new, accountable architecture of global economic co-operation
Barack Obama has decided not to attend the G20 summit convened by George Bush and the lack of involvement by India, China and the developing world in the G7 means that the best we can hope for is that this Saturday's talks are a preparatory session for a more inclusive and wider ranging summit in the New Year.
The timing is just not right to secure anything more than limited agreement on coordinating measures to mitigate the recession – and to set an agenda for the post-inaugural economic summit it is hoped the new president will convene.
Brown and Sarkozy will vie with each other over the weekend for the title of saviour of the global economy, but the reality is that until Obama is installed in the White House and unless China and India are engaged, little will change.
In the meantime, millions of workers worldwide will lose their jobs and homes as the recession bites. Many more people in the developing world will be pushed over the edge of poverty into destitution, with starvation putting many lives at risk. The demand for change, which elected the first black president of the US, has the potential to grow into a demand for change in the system that produces such insecurity and suffering.
Civil society now has a part to play in this transitional period between the G20 meeting and what appears to be the inevitable emergence of a new global institutional settlement that reflects the new world economic order.
Since the post-war world's economic institutions (the World Bank, IMF and WTO) were captured by neo-liberals in the 1970s, they have proved themselves a major part of the problem, not the solution to global economic instability. The same policies that have brought individual national economies to their knees are the policies that these institutions have spread across the globe. They have produced the global crisis.
The globalisation of unrestrained free market, rapacious capitalism by this economic institutional structure has produced inequality and insecurity in the west, desperate poverty in the developing world and a sequence of brutal wars causing immense human suffering. The plundering for profit of the world's natural resources has threatened the very sustainability of the planet.
A new democratically accountable architecture of global economic co-operation is now needed – new institutions pursuing new policies.
Civil society organisations could help set this transformation agenda to focus the minds of the politicians in the same way the popular demand for change after the experience of the 1930s depression created the Bretton Woods settlement. In our own lifetime the Jubilee 2000 campaign forced third world debt onto the global agenda.
An agenda of basic demands from any new global civil society coalition could include:
• A new structure of global economic governance inclusive of China and India and a wider representation of the developing world.
• The establishment of a democratically elected global assembly to scrutinise the policies and operation of the new global economic institution.
• The tackling of destabilising market speculation, through the introduction of a Tobin tax on international currency speculation.
• An end to trade policies and the imposition of trade agreements which are tied to deregulation, liberalisation and the privatisation of public services.
• An end to the policy of global collusion in the operation of tax havens that allow rich individuals and transnational corporations to avoid fair taxation.
• A renewed commitment to achieving the Millennium Development Goals, recognising the productive stimulus this would give the world economy in recession.
• An agreement that every nation signs up to the International Labour Organisation (ILO) conventions on international labour standards so that workers have the basic protections needed as recession sweeps the globe.
With this type of programme we could wrest the process of globalisation from the control of the corporations. The risk of the individual country recessions slipping into a worldwide depression provides the stimulus and the opportunity to create a new world economic order.