13 December 2018 08:38:02 GMT

The Third Rock Forum - Economics

Article Title
The elephants in the room
Author
Nick
Topic Section(s)
Politics
Economics
Society
Submitted : 30-06-2014 17:11
Amended : 10-11-2014 12:14
Status : Approved:  
Likes : 1
Dislikes : 0

 The elephant in the room

Is it just me or do others agree that, on most major issues, the establishment and the media conspire to either ignore or suppress the most important questions?

Let me give you a few examples.  

The Scottish Independence Referendum

The Scots would almost certainly not entertain the possibility of seeking independence were they not assured they would enjoy most of the UK’s oil revenues.  So why has no one raised the issue of the UK’s oil revenues?   It is assumed by the Scots, no doubt correctly, that, if they attain independence, north sea oil revenues will be allocated to them according to the location of the oil fields within the territorial waters of their newly independent country.  But Scotland is not yet an independent country.  So when did the United Kingdom debate and decide this issue.   I don’t think we did or have. 

So here’s my starting point for a negotiation with the Scottish Nationalists on the distribution of oil revenues.  If the United Kingdom is to be broken up, the oil revenues will be allocated to Scotland and the remainder of the United Kingdom according to their  percentage of the UK population: i.e. about 8%.and 92% respectively.   After all, that is how the United Kingdom’s national resources have been allocated to the constituent parts of the United Kingdom, except of course that Scotland did get rather more than its fair share under the Barnett formula.  If, on the other hand,  we’re going to be obsessed with  the geography of such issues, some would argue we should reclaim from Scotland all the money provided to bail out the Royal Bank of Scotland and the Bank of Scotland.  I wouldn’t support that argument, since I believe in the principle of equitable distribution of assets and liabilities across the United Kingdom.  Otherwise, if London and the South East, adopting the same narrow self-interest as the Scottish nationalists, declared independence, the rest of the United Kingdom, including Scotland would be deeply impoverished.

So why has the allocation of oil revenues not formed part of the debate about Scottish independence?   Why was the rest of the UK not consulted?  We could have made it a condition of an independence referendum that Scotland agreed to an equitable distribution of the United Kingdom’s natural resources.  I’m sure the Scottish Nationalists would respond enthusiastically to this principle, since they promote this principle by insisting that they should be allowed to share Sterling.

Crisis in the Middle East

Anyone who knows the Middle East is well aware that the region is riven by religious, tribal and racial conflicts. They are also aware that belief in the Holy Quran as the revealed word of God and the absolute authority of Shariah law do not sit comfortably with democracy and the principle of taking decisions by majority vote.   So it seems pretty clear that the Middle East, as it is constituted today has a choice between ruthless, authoritarian government, in the form of dictatorship, or disorder, civil strife and possibly civil and international war.  Western intervention in the form of regime change or military occupation is disastrous and doomed to fail.  And yet US and UK governments persist in burbling on about democracy and about inclusive government representing all sections of society.  And the media never or rarely challenge the assumptions behind such a policy. 

As a result, we have brought chaos to countries such as Afghanistan, Iraq, Libya and Syria.   We have made no progress whatsoever in resolving the Palestine/Israel conflict.   We have been responsible for the deaths of at least one hundred thousand civilians and we have squandered the blood of our own military personnel.

The alternative strategy would at least have some prospect of success and would avoid the clearly disastrous consequences of the current policies:

1.Vigorously promote through the global media human rights as universal, non-sectarian values

This would have the indirect consequence of exposing the inadequacies of any religions and doctrines that deny such basic human rights.  

2.Serious reasoned debate on all national media of all religions and all systems of government and judicial process

Those who hold on to medieval or barbaric codes of  law and punishment should be forced to face the inadequacies and, in some cases, the idiocy, of their world view.  Reason and evidence should take precedence over respect for the sensitivities (religious, cultural, moral) of others.

3.Spend the money squandered on misguided military adventures on humanitarian aid

This would demonstrate the validity and commitment of the West to the universal human rights promoted in 1.

4.    Put on trial (in their absence) those leaders who run regimes which transgress universal human rights.

By applying judicial process (based on the growing body of international law) to such leaders and, if they are found guilty, by passing sentence on them, the people whom these leaders oppress will know that there is a higher authority which is on their side. The leaders themselves will know that, if they ever leave their countries, they face arrest and punishment.  And while they stay in their country, they will know that, across the internet and other global media, they are considered criminals, unfit to rule.

5.Sanctions and military action

There is a place for sanctions and military action but sanctions should be targeted at individuals rather than countries and military action should be limited to strikes against clearly defined targets with precisely defined goals and exit strategies.

I’m not suggesting for one minute that this approach will solve all the world’s problems.  I am suggesting it is a far better approach than the one the West is  currently pursuing. 

I am also arguing that, in the end, ideas are even more powerful than armies and any civilisation that fails to win the battle of ideas cannot survive and thrive.

Welfare cuts and the fall in unemployment

The government has imposed welfare cuts, arguing it is wrong that those who are able-bodied but not working should enjoy benefits greater than the earnings of the average working person. The natural justice of this proposition has effectively silenced the critics since it is difficult to argue that those who work and receive the average salary should see the able-bodied unemployed receive more in benefits than they themselves receive in pay.

At the same time, the Government is proud to announce a fall in unemployment, attributing this positive economic development to their masterly management of the economy.

Surely a more obvious explanation is that a reduction in benefits will have a tendency to persuade at least some of those who have not been seeking work to look for and accept a job. For many at the bottom end of our society, the welfare and benefits system has made it completely irrational for recipients to seek work unless forced to do so.  If they take a job, they are most unlikely to earn after tax as much as they receive in benefits and concessions when unemployed.   In addition to being no better or even worse off, they must give up their leisure time and spend 30 to 40 hours a week working.  It is not at all surprising that some of those at the bottom end of society decide they are better off unemployed.  What is surprising is that so many of them choose to work rather than live off their fellow citizens.

This particular elephant is not totally ignored but the only solution – to open up a wide gap between the earnings of the low paid worker and the individual on benefits (by substantially increasing the minimum wage and substantially reducing benefits), never seems to be openly discussed.

And while we are on the subject of low pay and minimum wages, what on earth is the state doing in providing supplements to workers whose income is insufficient for them to survive. Surely the companies employing people should pay them enough to live on?  Why should the State (i.e. other workers and tax payers) subsidise companies who will not pay their employees a living wage?

So there you are - four examples of key factors at the heart of major issues that receive scant or no attention in our mainstream media.  As a result our governments pursue policies that are entirely counter-productive and, in some cases, doomed to be horrendously costly failures.  

Is it conspiracy or stupidity?

 

Replies

Status: Approved
Reply Date : 01-07-2014 21:38
Author : georgebundle
Realities in logic and emotions
I am very impressed by Nick Peters’ logic and good will that are the pillars on which his paper rests - The Elephants in the Room. I have, however, a number of issues relating to the premise he uses in each of his subjects under scrutiny.

Right at the beginning he raises the question: “on most major issues, the establishment and the media conspire to either ignore or suppress the most important questions?” Issue number 1: most important questions for whom? Even if they have identified them, the media will find the most trivial angles in which to treat them. Watch any of the paper review programmes and you will see what I mean.
Issue number 2: The establishment’s most important questions are existential and relate only to voter support. The voter responds to issues that directly concerns him/her. There is no conspiracy nor suppression in my view, only different agendas.

Then, Nick expands on two subjects, Scottish Independence and Crisis in the Middle East. Very logical appraisal of the situation in both subjects and equally logical answers for the important questions relating to them. I take these two separate issues in one go because both are subjects that are not susceptible to a logical approach but an emotional one.

Take Scottish Independence. It is a nationalist agenda based on people’s emotional value of their nationality. The issue is, will that emotional value be stronger than people’s fear of the unknown? How do pounds, shillings and pence questions come into this conflict?

Crisis in the Middle East? Nick’s description of the situation there is absolutely right, including the West’s “cloud coo- coo land” approach to it. What would have happened in Europe in the 17th Century if someone proposed that European countries should be ruled by democratically elected secular people?

Where you have a region which is riven by religious, tribal and racial conflict - by cultural tradition – people BELIEVE that they are RIGHT. Only they are right in the eyes of GOD and they will be happy to die to uphold this belief. Even worse, within one religion, Islam, you have centuries old deadly conflict between Shia and Sunni.

How is this going to change if you tell them about “universal human rights”? Where is “reason and evidence” going to fit in? One could argue that such attempts might be as naïve and vacuous interference as organizing a military coup to achieve a regime change to establish democracy. Or, accuse a War Lord with war crimes!

Welfare cuts and the fall in unemployment is a completely different animal. Nick sees the subject clearly and argues well on conventional basis. My issue with his approach is that the problem he describes and the solution he offers is not taking into account the realities of the situation. My approach is to try to find the elephants in the room.

How much anyone earns reflects their value in the market place. This applies equally to low paid and highly paid people. If anyone cannot find a job which rewards his/her work at a level sufficient to cover the cost of their lifestyle, then it is for them to increase their value in the market place in order to receive a higher level of remuneration. It is not the responsibility of the government or a commercial company to subsidize the cost of anyone’s lifestyle. That is the theory.

The reality is that, for decades, a considerable proportion of school leavers finish their education without having any value in the market place. They are unemployable. So, the taxpayer steps in and provides them with a living. This used to be a workable solution whilst there were lots of taxpayers and few people to support. Now, another baby elephant is growing in the background. Ever fewer taxpayers and global businesses that provide the Treasury with severely reduced funds cannot support the ever growing population who are basically have little or no chance in the market place.

Great sounding political schemes come along which do not change the actual situation but try to put a brave face while tackling an insolvable problem. The big elephant in the room is that the Welfare State, which was introduced in a different world, can no longer be afforded without taxing out of existence all the wealth creating processes. Its cost has to be reduced in such a way that it damages the least the electability of any political party at the next election. When will the establishment and the media discuss this important issue?

Georgebundle









Status: Approved
Reply Date : 16-07-2014 15:28
Author : Nick

Status: Approved
Reply Date : 16-07-2014 15:47
Author : Nick
Agreement on problems; differences on solutions

I have read GeorgeBundle’s response to my ‘Elephants in the room’ article with interest. In many ways, I think we are in agreement about the facts of the situation; we differ in our response and our solutions.  I am going to consider each of his points, quoting the relevant passage from BG’s article, followed by my (NP) response.

GB: Right at the beginning NP raises the question: “on most major issues, the establishment and the media conspire to either ignore or suppress the most important questions?”


Issue number 1: most important questions for whom? Even if they have identified them, the media will find the most trivial angles in which to treat them. Watch any of the paper review programmes and you will see what I mean.


Issue number 2: The establishment’s most important questions are existential and relate only to voter support. The voter responds to issues that directly concerns him/her. There is no conspiracy nor suppression in my view, only different agendas.

NP: The most important issues are those which are likely to have the most effect on the future of a country and the daily life of its citizens.   Of course, determining which those issues are calls for fore-sight and judgement, but the criteria are clear enough.  GB is right when he says the media tend to trivialise all important issues, but that is my point.  They ignore the elephant in the room.

Again GB is more or less right when he points out that governments and oppositions tends to formulate policy with a keen eye focused on the next election.   This leads to a couple of “isms”: popularism and short-termism.   We all know this is so but, as I understand it, the whole point of the Third Rock Forum is for people to think about these problems and try to come up with answers, not to say “that’s just the way it is” or “that’s just the way people are”.   After all, if you  consider the extraordinary changes in public attitudes in the last 100 years (on capital punishment, race, sexuality, religion), it is perfectly clear that, if you raise (or, in some cases, lower) public consciousness, you can bring about radical changes in public attitudes.

GB: Then, Nick expands on two subjects, Scottish Independence and Crisis in the Middle East. Very logical appraisal of the situation in both subjects and equally logical answers for the important questions relating to them. I take these two separate issues in one go because both are subjects that are not susceptible to a logical approach but an emotional one.

Take Scottish Independence. It is a nationalist agenda based on people’s emotional value of their nationality. The issue is, will that emotional value be stronger than people’s fear of the unknown? How do pounds, shillings and pence questions come into this conflict?

NP:  I have to guess here but, my estimate is that about 15% of the Scots hate the English and would vote for independence even if it meant returning to the Middle Ages.  The remaining 85% are, like most people, primarily concerned with their own lives, their families, their jobs and their prospects.  That is why I predict the Scots will vote No.  Despite grabbing most of the oil revenues, Scotland, under a socialist regime, faces a bleak prospect economically – and I think many Scots know it.   (Pounds certainly come into it; after all Alex Salmond expects to keep sterling.!)  

In passing, I will add that the bid for independence by the 15% who hate the English is a perfectly respectable position.  On the other hand, if a majority of the other 85% vote for independence, then a majority of the  Scots will have shown themselves greedy, short-sighted and ungrateful, in that they have decided simply that they will be better off if they snatch the oil revenues.   Scotland has enjoyed the benefit of England’s stature and economic strength for 300 years.  It has had more than its fair share of the United Kingdom’s wealth.  It would be far less distasteful if London decided to declare itself an independent city state and keep all its wealth for the benefit of Londoners.  At least London earns its wealth; whereas Scotland would be relying on an accident of geography.   And before GB says: “Don’t blame the Scots. That’s the way people are”, I invite him to explain why London is not a city state.

GB: Crisis in the Middle East? Nick’s description of the situation there is absolutely right, including the West’s “cloud coo- coo land” approach to it. What would have happened in Europe in the 17th Century if someone proposed that European countries should be ruled by democratically elected secular people? Where you have a region which is riven by religious, tribal and racial conflict - by cultural tradition – people BELIEVE that they are RIGHT. Only they are right in the eyes of GOD and they will be happy to die to uphold this belief. Even worse, within one religion, Islam, you have centuries old deadly conflict between Shia and Sunni. How is this going to change if you tell them about “universal human rights”? Where is “reason and evidence” going to fit in? One could argue that such attempts might be as naïve and vacuous interference as organizing a military coup to achieve a regime change to establish democracy. Or, accuse a War Lord with war crimes!

NP:  Again GB and I agree on the facts.  My suggestion that we vigorously promote universal human rights and civilised standards in education, medicine and all other fields of knowledge is not to bring about world peace.  It is a practical strategy to confront the rise of extremism and an alternative to the disastrous consequences of military intervention. After all, the extremism of the extremists is based on extreme views  i.e. ideas, and the best way to deal with ideas is to present stronger ideas..  Most of these extremist views are provably wrong. The world wasn’t created in six days.  Knowledge is not evil. The pursuit of knowledge is endorsed by all world religions, especially Islam, so repression of education is inconsistent even with the belief system of the adherents.   So we should engage at the intellectual level with extremist ideology.  We probably won’t convert the extremist but we can make it a lot harder for them to recruit new adherents.  All my suggestions were practical, relatively cheap and avoided the cataclysmic disasters of current Western foreign policy.   I therefore persist in recommending them to the house!

GB: Welfare cuts and the fall in unemployment is a completely different animal. Nick sees the subject clearly and argues well on conventional basis. My issue with his approach is that the problem he describes and the solution he offers is not taking into account the realities of the situation.

My approach is to try to find the elephants in the room. How much anyone earns reflects their value in the market place. This applies equally to low paid and highly paid people. If anyone cannot find a job which rewards his/her work at a level sufficient to cover the cost of their lifestyle, then it is for them to increase their value in the market place in order to receive a higher level of remuneration. It is not the responsibility of the government or a commercial company to subsidize the cost of anyone’s lifestyle. That is the theory. The reality is that, for decades, a considerable proportion of school leavers finish their education without having any value in the market place. They are unemployable. So, the taxpayer steps in and provides them with a living. This used to be a workable solution whilst there were lots of taxpayers and few people to support.

NP: Again we agree on most aspects of the situation. I agree that many school-leavers are ill-equipped for employment (25% of the UK population is functionally illiterate).  I also believe that we have created millions of ‘unreal’ white collar jobs to provide employment for the waves of graduates who hold degrees but who remain poorly educated and lack the mental capacity or the training to be efficient white collar administrators.

However, we disagree on a couple of points.

While, in theory, the market mechanism is a perfect system, in practice, it is far from perfect and easily subverted.  The most obvious method of subversion is monopoly or oligopoly.    This danger is widely recognised and efforts are made to counter it (MMC and its counterpart in other countries) but the fact remains that the pure market model itself does not deal effectively with monopoly situations.

This is only the most obvious defect in the 'perfect market mechanism' theory.  GB argues that “how much anyone earns reflects their value in the market place.”   Well that depends what you mean by ‘value’ and what you mean by ‘market place’.  In recent years, company bosses have increased their rewards for the work they do many times over, at a far higher rate than almost any other type of worker.    Has this increase ensued from the market mechanism; or has it ensued from a subversion of the market mechanism whereby a small group of non-executive directors have conspired to increase senior executive pay, confident in the knowledge that those whom they favour will, when their remuneration is reviewed, then favour them?   In the ideal market mechanism model, the shareholder would intervene; but the shareholders are pension funds, run by executives whose own remuneration often depends on the generosity of those whom they have already over-rewarded.   That is not value determined by the market place; it is an abuse of the market mechanism by a clique of powerful, self-interested individuals.

If we look at the financial sector, where banks have been fined billions for fraudulently manipulating libor and other rates, even the most enthusiastic proponent of the market mechanism will admit the system is open to abuse on a biblical scale.  Yes of course the law or the regulators can step in – but that’s my point.  The market mechanism on its own doesn’t stop such abuses.  For all its undoubted merits, It is an inherently faulty and unstable system.

There is a deeper problem for those who blindly believe in the market mechanism.  It centres on what is meant by ‘value’. If you define value as what you can get in the market, everything is simple and clear.  Let’s say Fred Goodwin is worth £2 million a year and an annual pension of £500,000 because that’s what his contract said he should have.   But there’s another meaning to ‘value’ which involves benefit to others, benefit to society, benefit to mankind. The market mechanism is not very good at estimating that kind of value. Why didn’t the market mechanism make Alexander Flemming a billionaire; why does it pay some footballers £25,000 a week, while paying a first-class care-worker £25,000 a year. I accept the market mechanism does not purport to be able to handle such discrepancies but it certainly makes me realise that a mechanism that can’t even begin to take account of such anomalies is not such a fine thing after all.

GB: Now, another baby elephant is growing in the background. Ever fewer taxpayers and global businesses that provide the Treasury with severely reduced funds cannot support the ever growing population who are basically have little or no chance in the market place. Great sounding political schemes come along which do not change the actual situation but try to put a brave face while tackling an insolvable problem. The big elephant in the room is that the Welfare State, which was introduced in a different world, can no longer be afforded without taxing out of existence all the wealth creating processes. Its cost has to be reduced in such a way that it damages the least the electability of any political party at the next election. When will the establishment and the media discuss this important issue?

NP: Again I agree with the identification of the problem.  But it’s not insoluble.  As has been argued by other members of the TRF elsewhere, the welfare state needs reform so that unemployment benefit is set well below the lowest income of a full-time worker.  This means the government needs to increase the minimum wage and decrease benefits to open a sufficient gap to motivate all those who can to get a job.   This, as I point out in my ‘elephants in the room’ article, is already happening.

At the same time, today’s workers must pay more of their salary into a genuine pension fund to give themselves a reasonable pension when they retire.  That is probably about 20% of income throughout a 50 year working life. Unfortunately, because the old age pension was never funded as a pension scheme, today’s workers are also having to pay the pensions of those who have already retired, so it’s a tough call.  But it is what needs to be done.  Yes, it’s true that politicians find it hard to face the truth.  But that doesn’t change the truth.