Book of the Month: The Poverty of Growth

I picked this up because it intrigued me when I saw it in the half price section of my favourite bookshop - and when better to buy a book on economics than when it's half price?

The author, Olivier de Schutter, is the United Nations Special Rapporteur on extreme poverty and human rights. If you don't know what that means, neither did I. Basically, it means the UN Human Rights Council regard him as an independent expert on a given topic. He has previously been a special rapporteur on the right to food and also worked for the International Federation for Human Rights.

This book persuasively attacks the pervading political obsession with "growth" as the only economic metric that matters. Olivier says that still may be the case for nations with undeveloped infrastructures and economies, but for the developed world it is disastrous on many levels and leading swiftly to irreversible damage to the environment. 

'Growthism' is the belief that growing GDP is the way to reduce poverty. However, this belief seems misguided, based on the evidence of what is actually happening in the world. 

Instead, Olivier mainly takes aim at wealth inequality, which he regards as the main cause for poverty in the developed world, and is mainly due to the doctrine of growthism. Deregulated economic growth in the developing world is also fueling wealth inequity and actively contributing to extreme poverty in many countries.

Equity is an alternative metric for measuring economic "success". 'Growth' doesn't deliver better lives for the majority of people, unless it is very carefully directed in ways designed to limit extreme wealth and make sure all the benefits of growth are shared equally. Otherwise people just end up working harder, for less money in real terms, and in less stable employment.

A 'post-growth' approach is outlined focusing on key friction points in the economy such as energy use and food. Olivier is quite clear - inequity leads to poverty, inefficiency and environmental degradation. 

It's a compelling case and hard to argue against. It certainly made me think differently about 'the economy' and how it's talked about in the media.

Political blog post: unemployment

One of the unexpected side-effects of working in a job tangentially linked to public health is that I keep discovering new things. I’ve become a gatherer of noteworthy trivia and factoids that actually scare me when I think about them.

One of the more shocking was this: chronic worklessness has an equivalent debilitating effect on a person’s health as smoking 20 cigarettes a day. That means that if someone is unemployed for a long period of time, they are statistically more likely to die at a younger age than someone with a job – to the same tune as if they puffed a packet of death-sticks every 24 hours.

We know the effects of smoking, and most sensible people would support a total ban if any government had the balls to do it. Lung cancer is a truly horrible way to die. I've seen it kill someone I care about, so I know that. But we don’t see the wasting disease of the soul that is unemployment in quite the same way – its impact is hidden.

And yet draw a map of disease and early mortality in any part of the country and the map will always follow a pattern: low mortality = poverty = high smoking = high obesity (i.e. poor nutrition) = low child birth weight = chronic or prolonged unemployment = poor housing = higher cancer rates, more heart diseases, more illness per se.

Poverty and suffering from ill health go hand in hand on any public health map drawn up ever.

And poverty and worklessness go hand in hand on any demographic map drawn up ever.

Just before Christmas the Government announced it was going to put over £400m into efforts to tackle ‘problem families’ – i.e. dysfunctional families with ‘feckless’ dads, tearaway teens, benefits cheats and criminal genes. This wasn’t new news, but it was reported as such. The Government previously said it was going to spend over £300m in October. Inflation means everything costs more a few months later.

A Daily Mail article that ran in October carried the headline “How Britain's Shameless families cost the taxpayer £8bn every year.”

It went on to say:

“The summer riots have convinced the government that drastic steps are required to tackle a hardcore of workless neighbourhoods where no-one has a proper job.

The coalition says Labour’s welfare legacy means there are many parts of Britain where three generations of families have never worked and live a life funded by state benefits.

Some neighbourhoods, particularly in inner cities and on large estates, are so blighted by long-term unemployment that no-one on a street has a job and children never see anyone getting up and going to work.”

We have a scenario, then, where generations of young people are growing up in workless households, where to be unemployed is the norm. There’s a reason for that. Good jobs – and by that I mean jobs that will enable you to pay the rent or mortgage, buy nourishing, nutritional food, pay for insurance, pay for heating and lighting, clothe your kids and yourself, and maybe have enough left over to pay for a monthly night out at the cinema – are hard to come by.

Whose fault is that, exactly?

According to Government, and reproduced faithfully by the bleating Mail, Labour’s welfare policies are responsible for “three generations of workless families”.

I know it feels like forever since Tony Blair’s New Labour victory in 1997, but that wasn’t three generations ago. It must be linked to whoever was in charge before Tony.

And what is Labour’s record when it comes to employment, anyway? One of the sea-changes in British politics came after the Second World War. The newly-installed Labour Government is still, I think, the only British Government ever to state a commitment to full employment. There would be jobs for people as Britain rebuilt itself – that was the plan.

It was ambitious, but it wasn’t a pipe-dream. It was founded on an ethic that saw the social good in employment. Work wasn’t just about earning money – or even a cynical exercise in keeping the population occupied. Work was something that drew communities together. If the majority of people in a community work in local business or manufacturing, it creates cohesion. Never mind the individual health benefits that we now know accrue from being engaged in work.

Another sea-change was the Thatcherite revolution of the 1980s. The privatisation of national industries – gas, telecoms, electric – were all justified using economic arguments. Nationalised industries were inefficient, they had too many employees, they were monopolies that kept prices high.

So they closed the pits and the steelworks, the mills and the mines.

Interesting story – when my Dad was 16, my Granddad had a word with a friend and got my Dad a job at the steel mill that loomed above the small Welsh village where he grew up. Dad had other ideas – he wanted to study medicine and become a doctor, but many of his contemporaries went to work there.

In many respects, Dad chose a hard path. Studying medicine was even more brutal in the 60s than it is today – and I know enough junior doctors to know it’s pretty brutal today. He worked long hours, and later in hospitals and as a GP worked all hours of the day and night caring for people.

But he wasn’t thrown on the scrapheap when the steelworks was shut down in the name of efficiency in the late 1980s. He wasn’t forced, like so many people in their late 40s, to retrain for a new career and cross your fingers there would be work at the end of it. Being a doctor was a stressful career choice, no doubt about it. But he wouldn’t have traded places with the people facing an uncertain future before a retirement in penury.

That’s the thing about ‘efficiency’ – it’s only a benefit in the short-term to the balance sheet of the company. In the long-term, and we’re talking the inter-generational long-term, the social efficiency of keeping ‘inefficient’ industries going is far greater.

So, now the Tories are irked that billions are being spent on benefits for workless communities. Well, you reap what you sow.

Of course, the middle class tax-payers who senselessly vote Tory and equally senselessly read the Daily Mail are regularly up in arms about the work-deprived communities their taxes now subsidise. But Tory policy created those areas blighted by unemployment. Here’s an idea: Stop voting for the short-term, slash-and-burn, quick-buck opportunists.

The history of Tory economic policy is about short-sightedly sacrificing social capital and infrastructure for a few pence. There was never a golden egg they weren’t willing to kill the goose for. As a frivolous example, in the 60s they axed hundreds of picturesque railway routes throughout Britain, never thinking that one day heritage railways could potentially be money-spinners. (The Severn Valley railway once ran through the Ironbridge Gorge into the heart of Shrewsbury – think what that would be like as a tourist attraction now!)

When you are blinkered by the balance sheet you only see the money you will ‘save’, not the opportunities you will miss out on.

That was the 60s. In the 80s they hammered heavy industry – creating poverty blackspots that have drained the public purse for decades in the process.

What are they doing now? Youth unemployment is heading towards an all-time high. Incidentally, so are domestic fuel bills – ending those monopolistic nationalised industries certainly didn’t work in the consumers favour. The NHS is in a process of privatisation; with plans to corral off half of NHS beds for paying customers.

We’re told the NHS, like so much else, has to change because it is ‘inefficient’. But there are different ways of defining 'efficiency'. The NHS is actually very efficient at delivering a central element of what makes a society civilised – care at the point of need for all members of society, regardless of their economic status.

That principle is a bottom line worth more than any balanced books will ever be.

The parable of the 100 Euro Note

A Lesson in Economics, sent to me by a friend.

It is the month of August, on the shores of the Black Sea. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to choose one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The butcher takes the 100 Euro note, and runs to pay his debt to the pig farmer.

The pig farmer takes the 100 Euro note, and runs to pay his debt to the supplier of pig-feed and tractor fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town prostitute who, in these hard times, gave her "services" on credit.

The prostitute runs to the hotel, and gives the 100 Euro note to the hotel proprietor to pay her debt for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism...

And reason number 10 why Peter Griffiths was wrong…

My good lady wife reminded me of another assertion by Peter Griffiths at The Great Fair Trade Debate which either completely missed the point or was a deliberate misrepresentation (your call).

10) Peter Griffiths claimed that fair trade is about paying higher prices so that some of the money goes to the producer. Again, not quite right. Some fairly traded products are more expensive than unfairly traded equivalents. But then many companies who trade, even in this country, tend to drive the hardest bargain they can. Promising one price, then offering a lower price at harvest time is one classic trick.

But what about those fairly traded products that are cheaper than their equivalents? They do exist. What’s going on there, in Peter Griffiths’ view of the fair trade world?

If fairly traded products do cost more, there are often a number of different reasons for that. Trying to trade across geopolitical trade tariffs and barriers are reasons for higher prices. Simple economies of scale play a part too. Nestle dominate the world coffee market and can drive down their prices if they want to (guess whether they do or not), but they also have their own packaging plants and can fill chartered planes with coffee. They don’t have to pay a third party to have their coffee packaged and transported, so it’s cheaper for them to get the coffee to market.

Plus, ‘fair trade’ is more than just ‘we pay more money’. Yes, sometimes there is a ‘fair-trade premium’. But at its heart, ‘fair trade’ is about sustainable relationships – where the buyers pay the agreed-on negotiated price and don’t try to wiggle out of it later, where long-term trading relationships matter, and where producers are often paid some of the money upfront so they don’t have to go into debt while the crops are growing or the products are being made.

Thinking that ‘fair trade’ is all about money, and not realising that actually it is a life-affirming dynamic, is the kind of error made by the kind of person who doesn’t understand that human beings trade with other human beings – and trade is just one of many human relationships. Or, to put it another way, the kind of person who extrapolates behaviour based on the premise that everyone behaves like automatons, then wonders why there complex models don’t work in the real world. Or, to put it a third way, a person who is a classically trained economist.

And just to set the record straight, because my good lady wife told me I’d got one of my facts wrong, the chap from the Windward Islands wasn’t actually from a co-operative. He was a member of the Windward Islands Farmers Association (WINFA), which works on behalf of the farmers e.g. to get the Fair Trade Mark on their bananas.

But even if he wasn’t from a co-operative, he still (rightly) took offence at Peter Griffiths’ assertion that someone in the developing world would automatically steal if they had the opportunity. But then that statement was based on an anecdote, and according to Peter Griffiths, anecdotes don’t count as evidence…

And finally…
I stood up and said something at the debate, challenging Peter Griffiths on a couple of these things. Obviously when I sat down I thought of several more things I could have said. That always happens.

Anyway, Cath has told me that she met people at a fair trade fair at the weekend who commented that what I said was helpful. When she went into the shop at the weekend, one of her co-workers said that she’d heard I’d stood up and made a good point. Fame.

But my encouragement to you is speak up and speak out in those situations where you just know you have to speak up and speak out.

Take courage, because other people want to, and will love the fact that you have.

And the more of us who do it, the more other people will.

And the brighter we shine, the more we roll the darkness back.

The Fair Trade Debate

We went to a debate on fair trade last night, which featured an economist called Peter Griffiths, who has worked in the developing world and written a book about it. He was very critical of fair trade as a concept, blaming it for various economic ills and for being “dishonest”.

Now it’s tempting to just dismiss his views on fair trade as those of an arrogant idiot, and certainly that’s the persona he put across, and move on. But the problem with idiots is that they tend to be noisy and promulgate their idiocy aggressively. So, here are some of the basic things Peter Griffiths got wrong last night.

1) He characterised “the fairtrade” as one homogenous movement with one website and one point of view. But it’s a bit more complicated than that.

There is not one business model, not one monolithic outlook, not one dictated point of view. It is a heterodox movement, of many trading and education organisations, in both the developed and the developing world. To attack the concept of fair trade as not relying on statistics, of not presenting facts, of being dishonest in the way it presents itself, on the basis of visiting one website (as Peter Griffiths implied was his basis for his attack) is at best naïve, or at worst willfully ignorant.

2) He was factually inaccurate.
“The first thing the fairtrade says is that it will only deal with co-operatives.” Rubbish. Fair Do’s isn’t a co-operative. As a Director there, I’m a director of a Limited Company. We trade with some co-operatives, charities, other limited companies, small family-run business, sole traders and Traidcraft who are a PLC. When he states nonsense as fact, Peter Griffiths shows he doesn’t know what he’s talking about when he talks about “the fairtrade”.

3) According to Peter Griffiths, “the fairtrade” is primarily agricultural and is a food-oriented issue and that keeps people in poverty, ergo “the fairtrade” is bad for people.

Visit our shop, Peter, and you’ll see that we sell crafts and low-tech produced goods, like soap. The reason many fairly traded goods are agricultural produce is because there are hideously unfair trade barriers and tariffs, which prevent value-added products from being exported to the developed world.

These trade barriers are designed to protect Western jobs and keep the developing world reliant on trading agricultural products. It’s not the fault of “the fairtrade” that the EU, America and various other powerful nations limit what developing world countries can export. As an economist, you should really know that.

4) Also, according to Peter Griffiths, paying fair prices stimulates over-production, which results in lower prices for everyone else, thereby causing a greater social evil. This is one of the main things he accused “the fairtrade” of being dishonest about.

But as another panelist said, the power of fair trade organisations to influence global productivity, pales in comparison to the power of large multinational companies and the Western governments the multinationals use as stooges.

5) On that note, coffee is a price-volatile commodity. So, how does the guaranteed price offered by most fair trade organisations cause price volatility? Stabilising prices should surely have the opposite effect, unless “the fairtrade” is a convenient scapegoat for Western corporate greed.

6) Peter Griffiths described co-operatives as a ‘dirty word’ in the developing world as they are ‘inevitably corrupt’.

“The guy doing the books has never seen thirty quid before in his life, so it goes into his pocket…. If, as a co-operative manager you don’t take the kickback, someone else will.” Those statements didn’t go down at all well with the chap who was at the meeting and who works for a co-operative in the Windward Isles.

Let’s not be so naïve as to say that corruption doesn’t occur in co-operatives, but come on, Peter. Describing everyone who works in a co-operative as a thief-in-waiting is slander. Our own hands aren’t so clean. Not long ago the EU had to shut down for several months while it investigated internal corruption. And many farmers say they value being in a co-operative because of the open-ness, the transparency, the regular audits, and they know what everyone else is getting and whether it’s being fairly distributed.

7) Anecdotes aren’t evidence. Peter Griffiths railed against the dishonesty of “the fairtrade” and the lack of fact-based evidence. But then based his slurs about co-operatives on his own (negative) experiences. He presented no stats to back up his 'facts'. He offered no hard evidence.

8) Saving money is only half the solution. Peter Griffiths trumpeted how he had saved millions of pounds for developing world governments in food programmes and the like. Well done.

But saving is one thing, earning is another. If I go to town and buy a bargain I might have saved £20, but I will still have spent money. Enabling people to spend more efficiently is a good thing, but the bottom line is you are still helping them spend. And the money you save is just figures on one side of a balance sheet.

Trading fairly with people, on the other hand, enables them to earn. They end up with real money, which they can then choose to freely spend on the goods and services they need. Freeing up capital in the developing world to stimulate local economies is the great boon of “the fairtrade”. The savings Peter Griffiths has made won’t ever be spent, because they’re only numbers in a ledger, not real dollars in a pay packet.

9) And finally, Peter Griffiths attacked the whole of the “the fairtrade” as unprofessional and incompetent. Well, if I can return the favour and tar all economists with the same brush, I’d like to say this: economists like Peter Griffiths have had billions of pounds of resources from various institutions to sort out global poverty and decades to do it in.

And so far, they haven’t delivered.

Peter Griffiths may not like fair trade, he may even have valid criticisms to make, but compared to the mess economists have made in Africa, for example, the ‘damage’ caused by “the fairtrade” is negligible.

What fair trade as a method of business has done is bring real change to poor and marginalised communities, provided sanitation, education, security, health and wealth. It has given people benefits today and the hope for a brighter tomorrow. And it has done this, generally, as a grass roots movement, in the face of opposition from powerful institutions and governments. It has succeeded against the odds because it has proven that there is another way to do trade. And, frankly, it has rendered the opinions of economists like Peter Griffiths about “the fairtrade” irrelevant.

A final note.
When I was a kid we lived in a country in West Africa. Economists from various international bodies like the IMF and the World Bank, almost all of whom were white Westerners like Peter Griffiths, advised the government to stop people growing maize and to grow rice instead. Now thirty years later, that country has to import rice and other food to prevent its people starving to death.

When it was obvious that the switch to rice wasn’t working, the economists encouraged the government to promote peanut harvesting instead. And they said the same things to every other West African country. When we returned to the UK, the value of the peanuts which were being harvested was less that the value of the sacks they were being sold in.

Those are anecdotes, not evidence, although you can look it up if you like, to check out whether I’m lying or not. But, those stories indicate, perhaps, why I don’t really rate the opinions of ‘development economists’. The advice of economists destroyed that country and kept it impoverished. So forgive me for trying to find a better way to make life better for people.

Have you noticed?

It seems the adverts offering easy credit have disappeared from our TV screens. You know the ones: “Have you been refused a loan elsewhere? Got bad credit ratings? Insolvency and county court judgments? Can’t afford to pay more bills? Come and rack up even more debts with Idiotloans™”

Who would have thought that an industry built on giving money to people who had a history of being unable to pay money back would have been an unsustainable business model? Or that lending money against a house which is already mortgaged to the hilt will result in there being no money to pay you back when house prices start to drop?

(Insider tip - secondary mortgage companies which give you a new massive loan to pay off all your old debts suddenly have no assets to claim. If you can’t pay your bills, your primary mortgage provider gets the money from the sale of your house, and if you’re in negative equity your secondary mortgage provider will get nothing if the primary mortgage provider has taken it all. Which is why 'consolidate your debt' companies are suddenly not touting for business. Their 'secured' loans are no longer secure.)

So I guess that’s one positive thing about the “Credit Crunch”/financial meltdown/death of capitalism - Carol Vorderman won’t be patronising us with talk of ‘one monthly payment’ and pretending that you’ll pay less under the scheme she’s pitching.

Ironically, it was the Republicans

Well following my rant about the governmental bail out of the Wall Street banks, it seems Congress has gone and voted against the bill. Some people are already hailing it as the death of capitalism.

The big question: is that such a bad thing?

And, ironically, it was the Republicans in the main who voted against it... because it actually conflicted with their capitalist convictions (and also because the voting public has turned around and let it be known that this bail out isn't popular).

Call it justice; call it karma

The weather was apalling for a bank holiday at the end of May, so we went round to our friends Bryan and Elaine, ordered in pizza and played The Big Taboo, which has extra 'taboo' categories, including one you have to act out with a furry puppet called Bob. (One of the actions you have to make Bob mime is breastfeeding a baby. Fun!)

Elaine is currently unemployed having been laid off by a struggling finance company, who are suddenly discovering that if you lend money to people who have managed to get themselves into debt, they might have trouble paying you back. Apparently, Elaine's former employers aren't the only ones.

Rumour has it one loan/mortagage provider tried to sell on their debts, but people wouldn't buy the whole company, so now they've got to get themselves out of the mess. And many of the companies who always said they'd never repossess a house (they'd just sell the debt on to some bastard who would!), are having to start taking property over in order to get their money back.

So, she's philosophical. Maybe it's better to be laid off and get paid for a further month while looking for a new job, than to stay in the job and get nothing if the company went under. Also, she'd be the first to say that nobody's really going to cry if loan companies start going to the wall.

For a long time these companies offering their 'lower monthly fees' and 'consolidation loans' have traded on people's anxieties to actually shove them further into debt. The 'easy credit' mentality has seen people rack up unprecedented levels of personal debt. I know several people who have simply ended up in an unmanageable situation and had to resort to IVAs or other desperate measures in order to get out of debt.

It's harsh, but the loan companies - and Carol Vorderman who promotes one of them on TV - have been complicit in offering vain hope of a way out of debt by adding to your debt, but not really explaining to people what 'combining all those debts into one easy payment' implied. Call it karma. Call it justice. Whatever you want to call it, it's coming back to bite people.

A few days ago I read a Proverb which said: "He who leads the upright along an evil path will fall into his own trap." Or, to put it another way: 'if you trick people into debt, you'll end up ensnared by debt yourself'.

The only problem is the people who will really get boned by this are the (almost) innocent people who work for the companies doing admin and other ordinary jobs.

The season starts early

I was one of the 3,000+ who turned up at Shrewsbury's new stadium to watch Town take on the A-Line Allstars. Because it was their first match at the new ground they couldn't fill it to capacity anyway for safety reasons, but they were hoping for 6,000. Although the first thing you learn in economics a-level is that price determines demand. £12 to see a collection of fading pros and Macclesfield Town trainees is perhaps a bit steep.

Still we could marvel in Gianfranco Zola's silky skills as he deftly swept the ball around League 2 defenders. It looked as if he'd somehow magnetised it to follow his foot obediently, and he could easily be the best player playing at our level if we could somehow tempt him out of retirement. Besides Zola, who is arguably the most skillfull footballer ever to grace Gay Meadow, Graeme Le Saux, Gustavo Poyet, Gianluca Festa and 48-year old Mickey Thomas added a bit of fun and star quality to the occasion. Ex-town legends Mickey Brown, Steve Cross and Tony Kelly also made it onto the pitch.

For those interested in results, Town won 4-0, with two of the goals scored by triallists my die-hard brother had never heard of. But who knows, they just might become household names in Shrewsbury by this time next year.

You can see photos in my Facebook photo album.