Archive for the ‘Economic & political’ Category

European Bailouts And The Structure Of The Financial System

Thursday, November 10th, 2011

There has been a lot of news recently about European bailouts, sit-ins and protests around St Paul’s (there is also an anti-capitalist camp by Grey’s Monument in Newcastle and probably elsewhere, but as usual London-Centric news of the UK largely ignores all those in the rest of Britain) and austerity measures in Greece, then maybe Italy, Governments changing in Greece and Ireland, soon Italy and so on.  But strangely very little is made of where all this money has gone – trillions of pounds, Euros and dollars have vanished, but where have they gone to.  I know that capitalism is about creative destruction but that is destruction on a colossal scale.

In any case since the crisis commenced in 2007 when the world woke up to bankruptcy at the heart the banking system and then later to poor credit of nation states like Greece, I have been pondering the causes and the solutions to the issues.  And while I have very few answers, I have changed my mind on a number of things and one of the main ones relates to the structure of the system, and in particular regulation.

Firstly, let me dispel an important myth.  At its heart, banking and investment banking is not a difficult area and is not that complex, nor is it that interesting and exciting.  Overall, it is a low risk and rather boring type of business activity; I expect some will take issue with that point of view however real banking is prudential and understated.  It does not make anything, but serves to facilitate other people to do things whether it is a government to build a school, or you or I to buy a house, or it looks after our wages until we can do the weekly shop or so we can save for our pensions.

This underlying dullness is perhaps the start of the problem as bankers and investment bankers have sought to make their lives more interesting, so they changed the nature of their business by taking on extra risk to make an excruciatingly boring way of life much more exciting.  The question then becomes how and why were they able to increase systemic risk within the financial system and so bring nation states to their knees with their reckless financial engineering.

I think the answer lies with the regulations put in place by governments, together with an unwitting collusion between governments, regulators and those in the financial sector.  What has happened is that unregulatable monopolies have been created by the regulations themselves; financial businesses appear complex because of the regulatory environment and as the regulations become more complex, financial institutions (whether investment bankers, bankers or auditors) work at ways to get round or benefit from the regulatory environment.  It is a bit like computer hackers and creators of viruses who are constantly trying to beat the firewalls and security systems that exist, appearing one step ahead as they seek mistakes and flaws in the Microsoft or antivirus programs.  And similar to the financial sector, because we (the uninitiated) do not know the language or understand the rules or know the players, therefore we cannot simply go up to them and say quite simply “stop messing with our computers” or “don’t use my savings or taxes as collateral for that”.

So my view is simple – reduce and simplify the regulatory environment for financial services, so that normal people can (a) understand what is going on; and (b) have a voice to be able to say “don’t use my money for that”.

Now most regulators and investment managers will pat me on the head and say “now, now, you simply do not understand the complexities, so why not go back to your day job”, but I say the problem is that those who are meant to be scrutinising the systems are actually part of the system nor do they own the money that is being used as capital, which belongs to depositors whether direct or indirectly via pension schemes or taxes etc, but benefit in terms of wages and salaries from keeping a complex status quo.  And to those who say it is complex – no it is not, investors are simply making judgments about what shares to buy when and where, or bonds or whatever – that is pretty basic stuff and is really a matter of investment quality, an understanding of human behaviour and, frankly, a good old punt*.  But it is a bet with other people’s money.  For example, MF Global collapsed because it made £4 billion in big bets on Eurozone sovereign debt that went wrong, while Bear Stearns collapsed due to overexposure to sub-prime mortgages.  The clue is that regulatory systems does not stop these investment banking collapses nor does it pick up credit issues due to poor loan quality with commercial banks until after the event like at Dexia, HBOS, Royal Bank of Scotland or the need for extra capital like at ING or WestLB – just as a few examples.  They are simply too close to the action, in fact they are part of the system itself and are not independent from it.

Will anyone change the system.  Of course not, because it would mean losing many highly paid and important people losing their jobs!  And also, because governments need these systems to create “money” for them to finance their own pipe dreams.

*  There are parts of the industry that try to minimise risks by manufacturing insurance-style instruments that seek to mitigate downside risk for some business areas or hedge, but most of these instruments are purely used within the financial sector to create extra return, or to use the flip-side of extra return to increase systemic risk.  It is that link between return and risk that most people seem to just ignore – to increase the profits of an essentially boring and low return business sector (accounting, banking, insurance) you need to increase the risk level, then the question is who gets the profits and who bears the increased risks, and it is this basic division between who has the upside and the downside that has created the problem we suffer from.

Food Waste, Food Poverty And Fareshare

Monday, October 3rd, 2011

Food waste is criminal, so it is brilliant when you hear or read of charities like FareShare that collect and distribute surplus food from retailers that would otherwise be thrown away.  FareShare works closely with companies like M&S, Nestlé and Sainsbury’s.  Food poverty is a big issue that needs to be addressed, while charities that look after people can benefit from any savings made by food charity so they can focus on spending money on areas that are important to them like their staffing.  Interesting articles on the BBC website that address waste include the following three:  http://www.bbc.co.uk/news/uk-15141327, http://www.bbc.co.uk/news/uk-15140518 and http://www.bbc.co.uk/news/magazine-10915739.  At Steenbergs, we are lucky in that our product waste is next to zero as our ingredients have long shelf lives and can be stored at room temperature.

So I became a little bemused, and angry, to discover that the local Boots stores, and for all I know all their shops across the country, have been told that all sandwiches beyond their display date must be chucked away.  In the past, they could be sold to staff at a discount, which is not great in the first place.  But why doesn’t Boots give these to charities like the Salvation Army who could make use of these for the benefit of people in food poverty?  And does this happen across all Boots stores?

Strange that Boots devotes a big part of their website to Corporate Social Responsibility, but this seems only to be a tick-box exercise to paint an image of caring through showing off how much money they have given, rather than starting from a caring attitude and empathy to other people.  When CSR becomes something to be met for bureaucratic reasons rather than from the heart, silly wastes like throwing out sandwiches shows the real soul of the corporation.

Sustainability and some final thoughts

Saturday, August 27th, 2011

In the end, politics, economics and perhaps even environmentalism are practical matters dressed up as intellectual theory, following on from my previous blog on the theory behind sustainability.

Economics is good at analysing what happens at the point when things of value are exchanged, but is not much good at anything else.  Real economics cannot tell you how to sustain you or your family.  For example, were you have a budget of £100 to spend on your weekly shop, it cannot tell you what is the best way to spend that money on in terms of your health, or taste or what you have in your cupboards or what takes your fancy as you walk around the store.  It cannot tell you why you prefer one brand over another or why we buy olive oil from one country of origin over another, because none of us really make rational decisions based on utility, however neat a theory.  In fact, many of our decisions are decidedly irrational – for example, it is cheaper and quite easy to cook meals from scratch yet we buy, for example, fish pie or pancakes ready-made rather than make them ourselves.  A rational economist might say that we do this because we can use our labour or time more effectively elsewhere, but how many actually do redeploy that small amount of money or time rationally to optimise their wage earning potential – very few, methinks.

For me, I think the best way to think about sustainability is to think of families rather than economics, or at least money economics.  To keep a family going into the future, you first need to have children, which is rarely an economic decision, because under most cost-benefit analyses there is no rational economic justification in having children, but our desire to continue and sustain our genes into the future simply overrides and ignores any financial considerations.  Then you need to consider how you equip your children to sustain themselves in the future and the key things are to give them the capabilities to navigate their way through their own futures, with all its ups and downs, twists and turns.  So we educate them formally to enable them to open up their minds and get employment, and informally we teach them a moral code of what is good and bad and that hard work, honesty, fairness and good manners will get them pretty much anything they desire in time, or at least laziness, dishonesty, unfairness and bad manners will not get you far in life.  We might try and give them some seed capital to buy a home, but they may not get much financial support until they themselves have had a family and we can bequeath them something after death.  Finally, throughout all of this we nurture and love them as best we can.  And so it is in real life with economic sustainability, we must focus on the means of giving people the capabilities to navigate future generations through future uncertainties rather than get bogged down with numbers, which are but meaningless figures on a page or spreadsheet – one can create almost any set of numbers or scenarios that you desire to justify any position you want but to what useful end.

But while Governments, quangoes and international bodies like the World Bank or the United Nations can help with this in certain areas, they are not the best placed to act as custodians of economic sustainability.  Firstly, they have no long term perspective as their terms of office are short and their times of influence are probably even shorter.  Secondly, Governments are remarkably bad custodians of peoples’ money, even as they need that money as it is their lifeblood.  They tax and spend with impunity because they are dealing with other peoples’ money rather than their own.  Milton Friedman perhaps explained this best as he wrote in his book “Free To Choose” – “There are four ways in which you can spend money.  You can spend your own money on yourself.  When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.  Then you can spend your own money on somebody else. For example, I buy a birthday present for someone.  Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.  Then, I can spend somebody else’s money on myself.  And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!  Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.   And that’s government.  And that’s close to 40% of our national income.”

These capacities of Government to tax and spend are the root of their power and without this ability to take and then distribute with seeming largesse, Governments are nothing.  Hence, sustainability becomes another self-justification for why Governments must tax and spend, even though individuals and private collectives may be better at optimising humankind’s response to sustainability.  This takes the environment out of sustainability and it simply becomes a matter of power and control over capital.  For me, economics and environmentalism are different ways of looking at resource allocation, where money has been hugely successful at getting people to organise themselves to do things they do not want to do for a cash reward and also to exploit the natural capital resources (but note per my previous blog that money does not buy happinness or well-being beyond $10,000, while people will do charity and community projects for little or no finacial reward).  Conversely, environmentalism explains that there are limits to the natural capital available and we must all be mindful of this.  They are different, but overlap where the externalities from the economy degrade nature and where natural capital is available for exploitation.  However, they are not the same thing and do not overlap at all times.  Hence, they are different ways of looking at the world we live in, and we must be careful in merging them together.

So we must keep sustainability away from economists, Governments and politicians and per Ostrom focus on personal and community selflessness over selfishness, and look to our children and future generations rather than just the here and now.  Similarly, I would argue money is economics, and that money and sustainability do not mix.  However, I expect politicians, economists and everyone to argue that they all mix perfectly happily together, so the future will be a great and wonderful place.

Is There Any Need For Sustainability?

Thursday, August 25th, 2011

I have recently read Tim Jackson’s “Prosperity Without Growth – Economics for a Finite Planet“.  It proposes that we refocus how we manage our economies to take into account the limits on the earth, but is rather vague exactly how we should do this – relying on less consumerism, more community-based activities and public ownership, but without answering the central question of how and who pays for all of these things.  He accepts that some of these things are already available and people are involved in community activities, but that they are small parts of society, yet he then brushes over the fact that these are currently a minority precisely because most people do not want to work in their allotment or do yoga.  This core structural issue is at the heart of the problem and is the hardest part to change – we are taxed so we must work, so there is insufficient time available to do many of those fulfilling things in life, so we must consume to make up for the time we do not have and chose a few hobbies for the little spare time we have to keep us sane, yet more public ownership and livelihoods simply increases the tax requirement etc etc.  However, what the book does usefully do is focus on the question itself, i.e. how to have sustainability and continue with a market economy and addresses the concerns posed by the classic book of Meadows et al of “The Limits To Growth”  from the 1970s in a new millennial context, without actually adding much to the basic concept that the earth has limits and while we are still within these boundaries today at some point not very far in the future growth in population and resource use because of economic growth will bring these constraints into play, which arguably is the same problem raised by Thomas Malthus in 1798.  Tim Jackson essentially says we must reduce economic growth, accepting that this runs counter to the way the economic discourse is built.  So what is the issue with sustainability and economics?

Sustainability is a key concern in the 21st century.  The Brundtland definition of sustainability is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987).  This can be further clarified as the concept that “the current generation does not have the right to consume or damage the environment or the planet in a way that gives its successor worse life chances that itself enjoyed” (House of Lords, 1999).  However, while the understanding of the environment has increased in the last 100 years, mainstream economics as used by policymakers remains based on ideas developed by Jeremy Bentham towards the end of the 18th century, as expanded by John Stuart Mill in the 19th century.  This raises the issue of whether economic analysis needs to change better to address sustainability in environmental policy response.

Mainstream economic analysis is based on utilitarianism.  This assumes that individuals are rational economic actors whose primary purpose is the self-interested pursuit of happiness, or utility, and that the best route to this end is through the purchase of those goods and services they want at rationally negotiated market prices.  Therefore, when considering welfare, policymakers should arguably consider the aggregate effect of these transactions in an economy, together with the market prices paid, and that their policies should ensure “the provision of the greatest happiness for the greatest number” (Bentham, 1789).  Furthermore, while acknowledging that some individuals may suffer or not reap the benefits of the market economy, “it is the price we pay for progress and the general good” (Galbraith, 1987).

The principal measurement used to inform policy is Gross Domestic Product (“GDP”), which is the value of the goods and services flowing through an economy over a period of time.  As consumption provides utility, GDP is a proxy for the aggregate happiness of individuals within an economy and Government policy should, therefore, provide the conditions for growth in GDP/capita.  Other economic methods that follow include cost-benefit analysis and discounting, both of which are used to evaluate the financial impacts of specific projects or policy areas.  However, as discussed below, the goal of sustainability in environmental policy is not adequately addressed by these economic tools.

While it is assumed that the more income consumers earn the more they can purchase in the market, so increasing their happiness, evidence by Richard Easterlin found that increases in happiness become slight or negligible beyond middle income levels (Easterlin, 1972 and 2001), while Gregg Easterbrook found that even though people’s objective well-being was increasing they continued to feel life was getting worse so their subjective well-being would stay unchanged or even fall.  Similarly, Amartya Sen focuses on the capabilities and freedoms of individuals to live the life they chose as being important to well-being (Sen, 1993, 1998 and 1999).  Therefore, what matters is what people are able to achieve or do, rather than the products or services that they consume, so learning at school or university is not a matter of utility but of what people may become from having studied even as governments seek to make it into a commercial contract through Student Loans or similar financial systems.  Economic development, therefore, occurs when there are more opportunities open for people to do things they value, rather than when GDP/capita or individual income has grown.  Whereas, unsustainability occurs when individuals become less capable of doing things over time, for example health deteriorates because of air pollution or toxic waste, or the opportunity to farm is reduced due to salinization of the soil or water shortages, or freedoms are curtailed, for example when decisions are made today that preclude choices being made by successor generations, such as decisions made in this generation that affect the environment over 100,000s if not millions of years, for example nuclear power and related nuclear waste dumps like that at Gorleben in Germany.  People will, also, do things for no financial reason, for example vote in elections, tend the plants in a public space or look after someone else’s children, so we are not solely economic beings even if politicians and sociologists wish to cast us as such; in fact I would argue we are human beings first and economic animals second, third or fourth.  So a economy focussing on the capability to flourish is better than one focussed on our ability to consume, i.e. a world according to Sen is better than one based on Bentham.

Traditional measures for well-being have targeted GDP growth.  However, GDP measures material throughput in an economy and does not provide useful information on sustainability.  For example, GDP is the aggregate of monetary transactions in a country, so it excludes bartering, free and unrecorded cash services such as voluntary work for charities, or domestic activities like cooking and housecleaning.  Furthermore, it is an income and expenditure statement rather than a balance sheet, so does not account for changes in the resources of a nation, whether these are physical like forestry and mineral reserves or intangible like education, health and landscape.  Finally, GDP is a snapshot in time of the activity of an economy in totality, so neither provides information about the future nor the equitable distribution of transactions through a society now or in the future.  Understanding the distribution of wealth in economies is important as poverty can be a driver for environmental degradation, and so sustainability.

Mainstream economic analysis, including GDP, does not properly consider the impact of livelihoods on the environment.  The activities of humans through work and consumption cause changes to the environment, which can be encapsulated in the impact equation: I = P x R x T, which is a rehash of Paul Ehrlich’s impact equation.  This summarises environmental impact (I) as resulting from the scale of resource use (R) consumed by a population (P) through using particular technologies (T).  Mainstream economics treats these impacts, or disutilities, as externalities or market failures either to be ignored or to be borne equally by the whole population and environment, because they do not have direct monetary values that are easily measured.  For example, packaging in the UK is transferred from manufacturer to individuals, then to the wider population and environment when it is sent to landfill, shifting the original environmental cost from the manufacturer to the environment, which must bear the sustainability burden, and the taxpayer, who finances the costs.  However, economics dominates political discourse, because money is power and power is money, so these externalities must be monetised and internalized into economic analysis before they can inform policymaking and bring sustainability onto the political agenda.

Finally, the most complex aspect of sustainability is time and how to evaluate future costs today.  Economists utilise financial models to provide policymakers with analyses of forecasted budget scenarios, so enabling assessments to be made of the impacts of “green” standards and taxes on the economy and the cost-benefit of specific political responses.  However, this sophistication hides the fact that forecasts are based on the past, with its uncertainties, discounted back by the relevant rate of time preference. Therefore, forecasting sometimes becomes a discussion over discount rates.  However, discounting creates an issue, being that the greater the risks and uncertainties involved the higher the discount rate, so the lower the current value of future costs.  This approach is, therefore, neither equitable nor appropriate for sustainability where the well-being of future generations should be considered equally to our own.  The societal discount rate for sustainability should tend towards zero (Anand & Sen, 2000) to prevent policymakers devaluing future uncertain, but large, impacts compared to current known, but smaller, environmental problems.

These analytical problems are highlighted in the Stern report on the economics of climate change.  Climate change occurs over the long-term and contains significant uncertainties in how it might operate over this time period in terms of scale, location and timing.  Arguably, it may impact future generations more than the current one, although as successors will have greater wealth and knowledge, they ought to be better able to finance and develop technology to ameliorate any disbenefits.  These issues create problems for policymakers regarding the equitable distribution of uncertain economic costs over generations and across future global populations, i.e. sustainability in terms of costs, capabilities and freedoms over time.  Stern used an utilitarian approach that focused on “the maximisation of the sum across individuals of social utilities of consumption”, cost-benefit analysis and GDP forecasts run over 200 years discounted back at 1.4%i (Stern, 2006b).  Critics of the report advocate rates of around 3-5½% (Dietz, 2008; Dasgupta, 2006; Nordhaus, 2007; Tol, 2006).  Under Stern, estimates of the costs of climate change were of losing “at least 5% of global GDP each year, now and forever” (Stern, 2006a), but by using the alternative rates the impact falls to 1.4-2.5%i.  Effectively, it becomes an ethical judgement over the value of equity between generations, or sustainability – discount rates close to zero place relatively higher values on future generations, while higher rates place lower values on successors.  Or to be brutal, it uses sophistication to hide the fact that the report hinges on the gut feeling of economists and politicians over what values to place on the financial numbers, as influenced by all the baggage of individual presumptions and political leanings in making these big leaps of faith.  I have no issue with making assumptions and running complex models, but the complexity of the modelling should not be used to hide that the report is but a finger in the air, albeit a very clever one!

Therefore, economic analysis needs to change to address these problems and so better inform policymakers about sustainability.  Here are some quick thoughts on ways that these issues can be addressed.

Firstly, policymakers need to consider a broader range of statistics beyond a narrow focus on GDP.  These indicators should include both financial and non-financial data and cover tangible and intangible assets and externalities of an economy, environmental quality and the well-being of the population.  For example, assets may include values for agricultural land, mineral reserves and woodland, together with estimates for education and health.  Sustainability indicators and externalities may comprise data on biodiversity, greenhouse gas emissions, soil fertility, air and water quality, and waste to landfill.  Well-being could comprise both objective and subjective measurements of well-being, targeting capabilities and freedoms as well as happiness.

In the UK, many of these are already compiled, for example net domestic product (GDP less depreciation) and greenhouse gas emissions, while a new well-being index will include environmental and sustainability measures from 2012.  For example, there is the Happiness Index, which shows the UK’s happiness declined by -10.7% from 1961 – 2005 and that of Australia grew by 21.3% over the same period, or the Human Development Index as developed by Haq and Sen, which currently ranks Australia top and the UK 22nd.  Although these statistics may be measured, sustainability perhaps needs to become central to policymaking.  For example, biodiversity indicators currently have warnings against breeding birds and plant diversity, yet these changes are not driving meaningful policy response (Defra, 2011).  The issue may be that there are too many measurements being compiled versus the relative clarity of GDP, therefore they could be reduced to a smaller number of indicators, for example ecological footprint provides a clear, measureable link between economic activity and environmental burden.  In addition, policymakers should include targets and responses for use when these limits are breached, for example greenhouse gas emissions’ targets are clear and measureable and so policy responses can be proportionate.

However, I fear that sustainability and the environment just do not rank up there against education, health and crime, for example.  This is perhaps because the questions are just too complex and the answers too difficult or wishy-washy for politicians to contemplate, so there is a need for politicians to focus on policy areas that can be addressed within the relatively short term of a political election cycle and are simple enough to be communicable to the media and electorate – a sort of knowledge elitism that goes along the lines of “that’s all a bit too difficult for you, the masses out there, just leave and trust us the politicians and our cronies to sort it out, because we know the best…there, there” with a gentle pat on the head.

Secondly, policymakers must address future uncertainties.  Utilitarianism is reductive and, using projections with suitable discount rates, provides clear choices for policymakers.  However, the environment is entangled and has many unintended consequences, so forecasts based on the past can result in incorrect predictions.  These complexities and uncertainties can cause relatively poor forecasting especially of sudden changes to environmental systems.  For example, policymakers neither predicted the collapse in the Canadian cod fisheries in 1991-1994 (NAFO, 2009) nor the credit crisis that began in 2007, both of which have resulted in significant economic and environmental changes.  No scientist predicted the BP oil disaster in the Gulf of Mexico in 2010, or the Japanese tsunami of 2011 with its devastating human, environmental and economic consequences.  Or to abuse a quote from Harold Macmillan “Events, my dear boy, events” are what make rigid policies tricky.  Therefore, economic analysis should include the effects of high impact, low probability events on sustainability and consider using a precautionary approach to prepare for such eventualities, and even if the responses and policies of those in power does not go down those low probability routes, they should build in sufficient flex into our systems to be able to adjust to new information and haul back systems from potential collapse if and when needed.  We must be wary of committing to routes that are completely fixed in stone, forever, because in a Pythonesque way “noone expects the unexpected”.  Hence, even Rory McIlroy in his amazing golf at the Congressional in the 2011 US Open hit his second shot on the 18th in round two into the lake to give him his first dropped shots and a double bogey – you just never really know what might happen.  In fact, the answer to this issue for economics may be to look at ecosystems themselves and apply understandings of environmental knowledge to financial systems.  This is an approach that Andrew Haldane, the Bank of England Director For Financial Stability, is looking at with Robert May.  They are suggesting that complex systems can be more fragile than simple ones, i.e. the Amazonian rainforest is more prone to collapse than the African savannah or a big multidisciplinary bank is more likely to collapse than, say, a small mortgage and savings focused building society. 

Thirdly, economic analysis should focus on systems and processes rather than financial outcomes.  It is difficult, if not meaningless, to place monetary values on non-instrumental things such as a beautiful landscape or a glorious sunset, or as one of the Pevensey residents said “You can’t put nature on the stockmarket” (Burgess, 1998).  This creates a problem as to get sustainability into the economic discourse and so onto the political agenda, you must monetise it, but this reduces sustainability to choices based on financial values and cost-benefit analyses while excluding non-instrumental values.  An alternative approach is to focus on the systems within economies and how economic processes impact, or are affected by, the environment rather than on the financial outcomes.  For example, these interrelationships between the environment and the economy form the basis for the concepts of the commons and ecological footprints, both of which offer alternative economic models to utilitarianism. So while the original work on the tragedy of the commons by Garrett Hardin was depressing, work by Elinor Ostrom has shown how a decentralised system can manage the commons effectively, together with proposing a framework for how this collective approach can be applied to sustainability in social-environmental systems (Ostrom, 2009).  Therefore, economists could focus on how to provide individuals and communities with the capabilities and freedoms to understand how changes to the environment occur, as well as the tools and powers to respond to change collectively without Government intervention and without pursuing individual, rational goals that may be negative for the common good over the longer term, i.e. selflessness over selfishness.

I see this individualistic, decentralised approach as key to the future.  However, I worry that sustainability, ecological modernisation and the environment will be all used as excuses (or justification) for greater Government and “expert” meddling in peoples’ private and business lives whether through regulation or taxation.

In conclusion, mainstream economic analysis focuses on the maximisation of utility in a population through managing GDP over time.  However, a narrow focus on GDP does not properly address sustainability, because it focuses on consumption within an economy rather than good and bad changes to its asset base, it externalizes the environmental and societal costs of economic activity and it fails to consider the capabilities and freedoms of citizens now or in the future.  Changes are needed to include indicators of changes to intangible and tangible assets, the external costs of human activities and the well-being of individuals or even happiness.  Furthermore, a less monetary approach should be adopted that analyses the processes and systems within economies and how economies, societies and environments interact and can respond to changes in real-time and over longer timescales.

References

Anand, S. and Sen, A. K. (2000) Human development and economic sustainability, World Development, 28 (12): 2029 – 2049, Available from the Internet at http://www.fiepr.org.br/adr/uploadAddress/Anand_Human%20development%20and%20Economis%20sustainability.pdf (Accessed August 2011)

Bentham, J. (1789) An Introduction to the Principles of Morals and Legislation, Mineola NY, Dover Publications (reprinted)

Burgess, J., Clark, J., and Harrison, C. M. (1998) Respondents’ evaluations of a CV survey: a case study based on an economic valutaion of The Wildlife Enhancement Scheme, Pevensey Levels in East Sussex, Area, 1998; 30.1, 19-27

Dagsupta, S. (2006) Comments on the Stern Review’s Economics of Climate Change, Available on the Internet from http://www.econ.cam.ac.uk/faculty/dasgupta/STERN.pdf (Accessed August 2011)

Defra (2011) UK biodiversity indicators, Department for Environment, Food and Rural Affairs, London, 20 May 2011, Available from the Internet at http://www.defra.gov.uk/news/files/2010/05/1905biodiversity.pdf (Accessed August 2011)

Dietz, S. (2008) A long-run target for climate policy: the Stern Review and its critics, Available on the Internet from http://personal.lse.ac.uk/dietzs/A%20long-run%20target%20for%20climate%20policy%20-%20the%20Stern%20Review%20and%20its%20critics.pdf (Accessed August 2011)

Easterlin, R. (1972) “Does economic growth improve the humans lot? Some empirical evidence” in David, D. and Reder, M. (eds) Nations and Households in Economic Growth, Stanford, Stanford University Press

Easterlin, R. (2001) Income and happiness: towards a unified theory, Economic Journal, 111: 465 – 484, Available on the Internet at http://onlinelibrary.wiley.com/doi/10.1111/1468-0297.00646/abstract (Accessed August 2011)

Galbraith, J. K. (1987) A History of Economics, London, Penguin Books

House of Lords (1999) Management of Nuclear Waste, Select Committee on Science and Technology, Session 1998-99, Third Report, London, HMSO, Available from the Internet at http://www.publications.parliament.uk/pa/ld199899/ldselect/ldsctech/41/4101.htm (Accessed August 2011)

NAFO (2009) Northwest Atlantic Fisheries Organization, Canada, Available from the Internet at http://www.nafo.int/about/frames/about.html (Accessed August 2011)

Nordhaus, W. D. (2007) Critical assumptions in the Stern Review on Climate Change, Science, 12 July 2007. 317: 201 – 202, Available from the Internet at http://nordhaus.econ.yale.edu/nordhaus_stern_science.pdf (Accessed August 2011)

Ostrom, E. (2009) A general framework for analyzing sustainability of social-ecological systems, Science, 24 July 2009: 412 – 422, Available from the Internet at http://www.sciencemag.org/content/325/5939/419.abstract (Accessed August 2011)

Sen, A. K. (1993) “Capability and wellbeing” in Nussbaum, M. and Sen, A. K. (eds) The Quality of Life, Oxford, Oxford University Press, Available online from http://books.google.com/books?id=pJaz1471B68C&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false (Accessed August 2011)

Sen, A. K. (1998) “The Living Standard” in Crocker, D. and Linden, T. (eds) The Ethics of Consumption, New York, Rowman and Littlefield

Sen, A. K. (1999) Development as Freedom, Oxford, Oxford University Press, Available from the Internet at http://books.google.com/books?id=Qm8HtpFHYecC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false (Accessed August 2011)

Stern, N. (2006a) “Summary of Conclusions” in Stern Review on the Economics of Climate Change, Cambridge, Cambridge University Press, vi – ix, Available from the Internet at http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/media/3/2/Summary_of_Conclusions.pdf (Accessed August 2011)

Stern, N. (2006b) “Part 1: Climate Change – Our Approach” in Stern Review on the Economics of Climate Change , Cambridge, Cambridge University Press, 23 – 40, Available from the Internet at http://webarchive.nationalarchives.gov.uk/20070701080805/http://hm-treasury.gov.uk/media/5/9/Part_I_Introduction_group.pdf (Accessed August 2011)

Stern, N. and Taylor, C. (2007) Climate change: risk, ethics and the Stern Review, Science, 317: 203-204

Tol, R. S. J, and Yohe, G. W. (2006) A review of the Stern Review, World Economics, 7 (4): 233 – 250,

WCED (1987) Our Common Future, The World Commission on Environment and Development, Oxford, Oxford University Press

Sports And Winning

Sunday, July 10th, 2011

I read with amusement about the Duke and Duchess of Cambridge competing against each other in a dragonboat race in Quebec and that the Duke won and he reportedly said to Kate “There is no chivalry in sport.”  At this time of the year as we seem to move from one school sports day to another via a school swimming gala, I thought about sport and how important it is. 

The other day Jay played a game of U11s cricket for Studley Roger versus Knaresborough Forest and Studley Roger were winning until the last pair went in and were out 3 times, so losing 18 runs for their team (they play pairs cricket).  One of those who was out came back in tears, threw his helmet down and sat on a bench with his back to everyone, so his mother went over and used those disastrous words “Don’t worry, it’s just a game”, to which he rightly replied “No, it’s not just a game: I let down my friends and we lost” or as Bill Shankly said “Some people think football is a matter of life and death.  I assure you it’s much more serious than that.”

Sport teaches us teamwork, including responsibilities to others, and individual skills.  Most importantly it teaches us about working hard to succeed and win.  Sport is nothing without winning, without the sweet joy of beating others in a race or a football match, but it also teaches us to hurt when we lose.  There is nothing worse than measly phrases that go along the lines of “It’s all about the taking part”.  No, it is about hurting when you lose, getting up from the floor and trying harder to get better and win next time.  There is too much sympathy given to average performances, and mediocrity in general, and we must all strive in our lives to do a bit better and to win a little more.  Then when we have won and done with winning, we can be gracious in our success and spread some of your joy in winning to help others improve and teach and hand on our secrets of success.

Sport, also, teaches us about taking risks, embracing risk to achieve things we never expected to be able to do.  We live lives that are too soft and cosseted by rules and regulations, so have become almost incapable of understanding and balancing risks in our daily lives, expecting rewards to come to us without any risk attached or hard work put in.  We must all get real.

My Dilemma With The Alternative Vote System

Sunday, February 20th, 2011

With the impending referendum on the Alternative Vote System, it seemed appropriate to rehash my thoughts on this area.  I had my first foray into considering the election system during the General Election in May 2010, and having favoured the first-past-the-post system was roundly criticised for my lack of real thought, which was harsh but perhaps fair.  I followed this up with a couple of blogs in August on different voting systems in the first and a discussion of the key issues relating to electoral systems in the second.  Since then I have continued to mull over the issues in my mind and it leaves me with a dilemma.

While first-past-the-post (FPTP) is not a fair system, however (in my opinion) the alternative vote system (AV) is not much advance on it in terms of fairness.  In fact, although AV is arguably fairer than FPTP, it is perhaps not worth the effort in changing from the devil you know for a new system unless it is palpably better and AV really is not good enough.

Conversely, we do need a fairer voting system in England and proportional representation is the only sensible system, with the single transferable vote method (STV) being the best.  I like the proportionality in STV and the idea of multiple members for enlarged constituencies.

So what to do?  Can AV be regarded as a good stepping stone that moves the electoral debate a smidgeon forward? Or is it a sop that will legitimise a new status quo centred on either AV or even worse FPTP, without the argument moving into the territory of proportionality and a fairer voting system?

In the end it is a gamble, or at least a game of tactics, in which I remain undecided and perhaps worse relatively unexcited. 

I feel there are bigger issues than the voting system: is the “old” Western world losing out to the new and rising stars in the East? Has Britain wasted its capital by investing its wealth in non-productive assets and putting itself in hock with its creditors who all sit in the Middle East, India and China?  Are we wasting our intellectual capital by letting them get involved with consultancy and investment banking rather than building the UK into something great?  Does the taxation system force Britons to focus on short term returns rather than investing for the longer term to build/rebuild equity and productive assets?  And so on…or should we fiddle like Nero as Rome burns.

Breathe The Air, Relax And Just Be

Friday, December 31st, 2010

What have I learnt through my attempts to understand the matrix that we call life, if anything?  What have I learnt by seeking to comprehend ideas that are beyond the wit of man and certain beyond my ken like the origin of species, creation, time, matter, space and the fundamental forces?  Firstly, I have learnt that trying is most of the fun and benefit as it certainly gave me brain-ache and those cogs in my head were very rusty.  Secondly, that how you see the world, the universe and life is personal to you as we do all sense reality differently, in our own way, so how we conceive of reality, the models we build to rationalise life are simply our way of seeing the world and as such are correct for us.  Hence, the old adage that “I am right and the rest of the world is mad” is actually the correct maxim for each and every one of us.  But I must beware of hubris, because I will be knocked down by many of those who read this for being but a gibbering fool; actually, a fool’s fool.

As for the science, I feel that I may be on to something in my re-jigging of the origin of species and those models I conjured for how the universe began and how time comes into being.  As for the standard model, I confess to being way out of my depth, so what I wrote is speculative and while I feel intuitively that the key is shapes and symmetries, I have no mental capacity to formulate an experiment to prove/disprove this nor the math to express such ideas; I shall continue to read popular science in this area, but humbly accept defeat, even though I did enjoy having a go.  So don’t begrudge the attempt.

However, returning to the rationale for trying these thought experiments: I wanted to consider how we sense our world and then see if you could model the evidence differently to enable us to have a new perspective on how we understand where and how we fit into our space around us.  From these thought exercises, I have learnt a few things that work for me, being: (i) everyone conceives reality differently; (ii) everyone’s reality is unique and real to them; (iii) how people and other organisms model reality is special and individual, so must be respected and protected; (iv) everyone’s model for living is impacted by their history; (v) life is about sustaining life through the adaptation of the interdependent web of living organisms to constantly changing circumstances; (vi) survival of the fittest is wrong, or at least a smaller part of how the world works than it is billed to be.

So what does that mean for society?  Are there any lessons for our socio-political environment?  Firstly, as a fundamental principle, everyone must be respected as individuals and be given the freedom to live their lives as they chose and see fit without interference from others; secondly, we are part of an interdependent web of life and every person, and species, has its place momentarily within that structure.  However, on the flipside, it means that in living your life you must consider the impact of what you do on others and so seek to minimise any negative impact you might be having on other people and organisms, while we must accept that as the living environment changes so will there be impacts on the makeup of the web of life, i.e. other people and species.  In other words, respect people’s individuality and let them be.

Does that mean anything, or is it just fatuous pseudo-intellectual nonsense of a teenage scribbler to misquote Nigel Lawson (would that I were that age again)?

I think it might.  But before we move on to that, we must understand a few other facts of life: money has no morals and so a way of living based purely on economics will be necessarily amoral (money is purely and simply one possible way of placing a financial value on an item, no more and no less); while science in its true form is neither moral nor not, those who apply science may not necessarily have morals; religion has not managed to act as a suitable counterweight either to economics or science; humankind is a part of the web of life and its purpose is not economic (in spite of what our lords and masters might wish us to believe).  Finally, as a word of warning applying ideas from science across to life can be fraught with danger as the concept of survival of the fittest has been used to justify everything from fascism through to competition in the business environment, while classical mechanics is used as a basis for much of politics for the last several hundred years (if I just put this policy or rule in place here, it will move these people around over here which will be the general good of our country or even the world; let me let you into a secret, politicians are usually be good at heart but they have no better grasp on how people and countries work than anyone else, so sometimes it seems to work and at other times it does not).

We are born free.  Everyone’s liberty and right to act, think and do as they wish should be everyone’s guiding light.  In everything you do, you should weigh up the consequences of your actions and how that impacts other people or organisms, and you should be comfortable that your gain/benefit is worth the loss/disbenefit on the other (there is no such thing as win-win in the real world, there is always a loser).  If you make a superprofit or something turns out really well for you, be sure that there is someone for whom it is less great; look into yourself and be sure that you are pleased with what you have become.  In a world where we measure everything in money, remember, also, that money has no morals and cannot be a measure of happiness, so to justify an action by a profit is no moral justification for anything.

So obviously, we need something to guide us through life or we would stand stock still and never move for fear of the consequences of what we do – that something is fairness.  Now, fairness is difficult as everyone has a different moral compass or view of what fair is, but that is okay as in most societies, we have come to the view that the best way to assess fairness is through the judgment of our peers based on the facts, whether through councils of elders, religious leaders or a legal system.

Beyond these is little else needed to underpin in society, because all ideas ranging from protection of life, privacy and property through to freedom of religion and speech and even the concept of equality can flow from these basic ideas of liberty and fairness.  Some might add equality to this, but surely that simply flows from fairness and there is no such thing as true equality as some will always regard others as being more equal than themselves.

However, what these ideas do militate against are rules and regulations emanating from a powerful central state as these fall foul of the ideas of individual freedom  and that someone else’s model for the world is more correct than that of the individual.  Furthermore, imposed rules and regulations are rarely a good benchmark for fairness, often focussing in the manner of a political science on what is possible to control and measure rather than on the morality and fairness of a given set of circumstances; a good example of this is a driving speed limit, which, while there is an excellent correlation between speed and accidents and fatality of accidents, does not tell you whether a driver is good or bad, i.e. you can have a good driver doing 45mph and a bad driver doing 35mph in a 40mph zone, so if the 35mph drives their car and crashes, are they necessarily absolved of any fault?  Of course, there needs to be a balance between having some rules in place to protect our basic freedom, but no one should be criminalised because of arbitrary rules that no one except legal or other experts knew about, i.e. there are simply to many rules and regulations in place, which has made the act of living in a modern society simply too complex for many people and you could spend your whole life checking that every step you make on your way through your daily routine does not breach some law or regulation.  No law should be anything other than obvious to most people; once it becomes really arcane then it should not be anything other than a legal fantasy.

In modern times, liberty and fairness has become a tick box exercise, which trivialises the fundamental nature of these two principles, while the number of laws, rules and regulations are simply too great, acting as a dead weight on citizens squeezing the life out of them.  Much more prominence should be given again to these simple guiding principles, as well as the capability of our fellow citizens to be able to judge what is right and proper in a given set of circumstances based upon these ideas of liberty and fairness.  Under no circumstances should someone be tried except by a jury of your peers.  In fact, while I am not a religious person and there are obviously those who are bad religious leaders, but I suggest in general religious leaders are perhaps better at judging good, bad and fair than politicians, lawyers and certainly than me; maybe it is seeing day in day out people who are good, those who suffer and those who are bad rather than meeting rule breakers in a court every day.

This focus on centrally imposed rules and regulations results in a political system that is mechanical and lacks intelligence.  A better approach could be that of nature which sees life as an interdependent web of organisms that adapts in many different ways to changes, following a few basic rules that it can tweak and adapt as the circumstances demand.  Rules should not be rigid, but must be adaptable, and life cannot be just about rules for, if it has become such, then you are focused on the false structures of an arbitrary model of life rather than living your life.

This concept of freedom flows through to taxation, which basically means that there should be as little taxation as possible as someone’s property is theirs to enjoy rather for someone else to use in a way they see fit, i.e. an individual’s model of how to spend is theirs and right for them and no one should impose an alternative model and say I can spend my money for you better.  Once again, there needs to be a sense of balance, because some things might be better arranged centrally.  However, once again, politicians and civil servants might not be best placed to spend that money as they are both seeking to impose their model of reality on others and without money they have no power.  In fact, politicians and civil servants arguably misuse their role as tax collectors, because there is really a compact between the state and citizens that a proportion of someone’s earnings and wealth can be used for the greater good, however that is provided on the basis that the state is a trustee of its citizens and so should look after that money properly and be accountable for the expenditure of that money, but clearly it regards itself as above that and so that it as a unilateral right to tax and spend with impunity.  Moreover, ever since Keynes, the state sees itself more as a munificent provider of employment rather than as a guardian of its citizens’ money, which is also arguably in the long term an economic mistake as who pays the state and has the power to bring it to account.  I am not clear in my own mind that the state has any right to tax, but it needs to tax to have power over its citizens and the power to dispense financial favours to create a dependency power over its employees and beneficiaries.

Taxation ensnares citizens and business in a real struggle to survive, where they must work perhaps until death simply to feed the greed of the central bureaucracy to pay itself and redistribute funds indiscriminately.  This is a hugely inefficient, ineffectual and cruel basis for the building of a “better” society.  There needs to be a sense of proportion to how much we are taxed and a sense of prudence and accountability for how that money is used, because at its heart that money does not belong to the state but the citizens who have originally generated that cash. 

Similarly, as you move into the commercial world, the same ideas apply and a tick box approach to employment, ethics and safety inter alia is mechanistic and rigid rather than being intelligent and flexible.  And companies should look to the consequences of their actions on other businesses and people rather than purely justifying their actions on profits.  Greed is not good.  I remain constantly amazed at how much people earn for so little real skill, or seek to charge for no real “added value”, and fail to understand how a prudential type of activity like banking and money management generates such high returns for its practitioners and such a mediocre return for its stakeholders (investors and policy holders).  I think that people are so focused on money that they forget that every action taken has consequences, but by focusing on the monetary flows, they become disconnected from the physical and moral reality of transactions.  It is a bit like watching a fight or battle and focusing on, and analysing, the energy that flows from one person as they strike the other rather than the reality that this is a fight and people are being hurt; energy like money has no morals.  Like greed, hurting another is never good.

Finally, fairness is not a scientific concept.  Science and its disciplines are strong and unforgiving areas of study, except areas such as psychology and the like.  Morality, equality and fairness do not come into the origin of species, or creation, or particle physics, or classical mechanics.  They are perhaps truly what differentiate humanity from other species as this peculiar sense of morals is not something a great white shark or Escherichia coli feels when they attack or infect a seal or person.  On the other hand, fairness, and morality in general, does enable humanity to live together.  I often wonder at how so many people can live on earth and I do feel that one of our greatest skills is to be able to get on with life through ignoring each other, then when we do come into contact with each other there are standard rules of engagement that underpin those encounters, being fairness, a sense of the core abhorrent forms of crime and hospitality.  There is then a wide range of interpretation of what constitutes fairness, equality/balance and the punishment of crimes, but we all seem to start from a common sense of good.

The closest, that science gets to morality, is mutuality.  This is the idea that species live together and depend on each other to continue to exist, so a predator cannot kill all its prey for then it would run out of food.  Similarly, subatomic particles need other subatomic particles to exist and to work together with to make bigger pieces of matter, forces and energy and so on until you get atoms that work together to make molecules, then physical things and living things etc etc.  I sometimes wonder whether this sense of mutuality has gone out of our modern society, with everything being about how much can I get for myself out of life without a thought for others; how much cash can I earn? how many things can I own? how much profit can I make? what new idea can we make a policy on and spend tax money on?  We live in a culture of “me, me, me” rather than “us” and it is not a particularly pretty sight, forgetting that there are consequences of our actions.

To conclude, science teaches us that everyone perceives existence differently.  We must, therefore, accept that no one will interpret their reality in the same way, so we must not seek to ridicule or trample on those unique ways of seeing the world.  This idea of individuality should not be subsumed by the greater weight of collective thinking or the enforcement of a stronger centralised diktat.  Conversely, we live together with other people and other species and must work together to live together without destroying this delicate mutual web of life.

Finally, I return to the idea of models.  How life is structured and how the collective model for life is built does not really matter as it is just a model, a fabrication.  We must beware of seeing only the model and becoming encaged within it.  Life is to be lived, not to be an economic slave, nor a slave to the rules nor ensnared by time and diaries.  Close your eyes, the reopen them.  There is a world out there that is living life as it should be without bosses, cars, chocolate éclairs, computers, diaries, insurance, money, newspapers, supermarkets, pensions, planes, politicians, sunscreen, tax, train timetables, TV or the web. 

Breathe the air, relax and just be.

We Are All In the Matrix

Sunday, December 26th, 2010

The matrix shimmers.  The world shifts an iota and your eyes refocus. 

You see the world for how it is: gone is the incessant background hum of electronic equipment, the drone of internal combustion engines as they parp around the globe and the clickety-clack of the railway tracks; gone are the sharp lines of black roads criss-crossing the landscape and the lines of telegraph poles plonked through fields and over hills; gone are the houses, shops and industrial buildings; gone are the bright lights blaring from shops and overhead street lamps.  And the sound and voices on the television screen run out of synch.

You see the green leaved trees generating oxygen, clouds and streams and rivers bringing freshwater to nurture the earth and feel the clean air against your face just waiting for your breath.  Birds fly in the sky during the day and small Pipistrelle bats flit about at dusk.  Fish swim along the rivers and in the sea.  And everywhere insects, spiders and bacteria dominate air, land and water.  Nature lives, nature feeds, nature breeds and real life rolls ever forwards just outside your focus.

As man has sought to control the world, he has created his own paradigm, his own artificial physical, biological and virtual world to live out his dreams.  A world that enslaves his soul in the chains of hard labour as he pursues the distant glistering of money; money that powers the political engine and feeds the daily hit of consumption of geegaws.  We have created our own cage on earth, climbed inside, locked the gate and thrown away the keys.

The lights change and you must drive forwards.  You must make some money to pay to live, even as living offers you no freedom.  You cannot escape as the price for freedom is set too high, ensuring serfdom for you and generations to come. 

Yet you can live on with a smile knowing that there is another reality out there, a better place, a sweeter life outside of the matrix, away from our self imposed life inside this thought experiment, this artificial model created by our lords and masters.

Should We Encourage People From Countryside To Cities?

Saturday, September 11th, 2010

…Self doubt gets you thinking.  I am still thinking through my concerns about Fairtrade and I wonder whether I’ve got it arse over tip. 

People who live in the countryside are relatively poor compared to people who live in an urban environment, but is that because there are, firstly, too many people in the countryside trying to eke out an incremental profit from cash crops to keep themselves above water, and secondly you actually are richer and better off just by being in a city or town. 

There is a strong argument that workers shifting from rural Amazonia and moving to Manaus (the regional capital of the Amazon region) to carry out industrial activity have taken farmers out of Amazonia and so reduced pressure on deforestation, allowing those remaining in the countryside to farm more efficiently and spread their profits across fewer people, while simply the act of going to a city has improved their personal finances.  So rural-to-urban migration is good for everyone financially and great for the environment! 

There is a strong case (and made by people much cleverer and knowledgeable than me) that people living in the slums of big cities and the favelas of Latin America are one of the most dynamic and happening economies of the world.  These are people getting on with life, generating income and stepping up out of poverty.  These places are not the pits of despair that we all once thought and continue to be taught.  Okay, they’re not perfect but they’re significantly better than rural poverty.  And city dwellers have less children, so women are liberated from their historical rural position as child-bearing machines that must cook, fetch water and bring up children.  City life gives them freedom and the creative energy of the fairer sex is a massive force for good and economic improvement.

So should we be encouraging rural-to-urban migration rather than preserving current rural farming structures.  Urban living is better for the environment as it is more efficient on the world’s resources.  Urban living is better for women.  Urban living reduces overpopulation as people living in towns and cities have less children – overpopulation is effectively a rural problem.  Finally, when people move to the city it reduces the amount of people living in the countryside and so reduces the burden from humanity on the countryside and nature quickly recovers – yes, the rainforest does just simply regrow when people leave it be. 

Lastly, is our nostalgic lova affair with the countryside and rural idyll and farming (I don’t know if it is just an English obsession, and I mean English in this case as I cannot speak for others here) simply wrong and something that just makes us look via rose tinted glasses at all rural farming, believing that this must be a great, wonderful and rewarding life for everyone in the countryside, rather than something most farmers just want to escape from, and be liberated from the back-breaking, never-ending drudgery of subsistence living and would rather become housekeepers, labourers, doctors and accountants or whatever is available in the nearest mega-city.  Who are we in the developed world to deny those in the developing world from wanting to live a better life with loads more consumer stuff to ease their daily grind?  Who are we (the great polluters and destroyers of the world) to deny the rural poor a new start and free women from the potential prison of a rural life?

I suppose what I am saying is that if farmers cannot make a living wage from growing sugar or tea or vanilla or fruits or rice, shouldn’t we encourage more of them to move to cities so then less people grow these crops, so then there is a relative shortage of supply over demand and then prices will go up until farmers can then earn a living wage or more.  Are we not just perpetuating an imbalance of excess supply over actual demand by offering a bit above market prices via Fairtrade?

In stark figures, a rural farming family in Madagascar earns $600 per annum, with Fairtrade vanilla they can earn $2000 per annum, but what could they earn were they to live and work in the capital city of, for example, Madagascar – Antananarivo – and perhaps their family size might also fall*.  So isn’t it better to get them to migrate to the cities where education and public services are better and they will have a lower impact on the environment?

I honestly don’t know the answer, but it remains a dilemma that is constantly fighting itself out between my heart that says “yes to fair trade and ethical food” and my head that says “yes to free trade” and reducing levels of rural farming and shifting population towards the cities.

As in everything in life, the answer I suggest is a fudge – we need to trade ethically to ensure that those farming now are not disadvantaged and abused hence Fairtrade, while at the same time providing incentives for people to move from the villages and rural economy into the nearest cities, and then to ensure that cities become as economically vibrant, socially responsible and environmentally sustainable as possible.  But I will probably never answer this quandary to my own personal satisfaction, so will remain racked by doubts and indecision.

* I asked The Foreign Office and World Bank for help on numbers here, but the former could not help and the latter never deigned to answer or acknowledge my request.  That is a worrying starting position for Madagascar.

A Big Shout Out To Small Business Owners

Monday, September 6th, 2010

We, the small business owners and micro-entrepreneurs, are the forgotten, ignored and trodden upon solid foundation of the British, American and every other economy in the world.  We employ most of the employed people and generate much of the new, ground-breaking discoveries that have shaped the world.  We pay huge amounts of employment taxes, local business rates and tend to have greater loyality to our fellow local businesses, supporting local support services rather than going for the national groups.

However, big Government pays little heed to our plight.  They presume that all business is big business with unlimited amounts of time and deep financial pockets, and so able to consume all the new bits of legislation, digesting and understanding the intricacies of what the legislature has to say for itself, while carrying the financial burdens of increased local and national taxes to pay for quangoes, pensions, sinecures and further layers of bureacratic inefficiency.

Sometimes it feels as if no-one really gives a damn nor that they will ever give useful help or advice.  They criticise; god, isn’t everyone good at telling you what you should have done, what you have done incorrectly and what they would have done better, but practical, helpful, apt advice never seems to be available.  Armchair advisers rarely seem ever to do anything themselves; yes, they have worked for big businesses or government, but actually to have done something starting from scratch and doing it all themselves, those people are really few and far between, then few (if any) of those ever have time to give you any help.

In spite of their best efforts, the lobbyists for small companies are pretty ineffectual as they do not have real, small business entrepreneurs at the centre of government that understand the difficulties of small businesses – what did Alan Sugar know about small business, having built a large empire and so assuming that all small businesses grow like big oaks from a small seed; most of us just run around in a never-ending wheel, getting tired but not much further forward despite our heavy exertions and great, grand schemes.

Nor am I talking about the bright and sparkly, sexy start-ups that find media favour on TV programmes like Dragon’s Den, nor techie startups that can find early stage capital from Enterprise Ventures like Yorkshire Seedcorn and live by cash-burn and flip on to a new buyer, rather than building a profitable, cash-generative business.  Our newspapers are full of these successful, media savvy small companies. 

I mean the small retailers, the pie makers, the painters and tilers, the gardeners and the tea shops, as well as the small butchers, brewers and shoe shops etc etc.

We toil.  We busy ourselves.  We strive.  We have business dreams.

So from us, we say well done, you are all doing a great job.  It is damn hard and at times soul-destroying, but carry on and you never know we might all become successful one day. 

But do not expect any useful help from Government, bureaucrats and bankers as they do not genuinely have your best interests at heart; you are just there as cannon fodder to win elections, to tax so they can create new jobs, to busy themselves with in inventing mindless regulations to tie you in knots and waste your valuable time and so prevent you growing your sales, and to charge humungous arrangement fees and overdraft rates when you need leaner margins and overextend loans to you on low rates just when you should not be taking them.

This is a big shout out to all small business owners.  You are doing great.