Lack of money isn't the problem

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It has long been understood that the one thing that governments can always find money for is war. War is undoubtedly costly, as the US is currently finding out. It is not really, though, a financial problem. As Professor Richard Murphy points out today, the real constraint isn’t financial, it’s about the availability of bombs and missiles and the ability of even the US economy to replace them at a fast enough rate. The US will run out of Tomahawk missiles because it can’t manufacture them with sufficient speed, not because it can’t pay for them. Similar considerations apply to Iran, of course – although an economy using lower cost, easier-to-produce weaponry can to some extent compensate for its relatively smaller size.

There is another corollary to this as well. There is talk that reducing the level of sanctions enforcement on Russian oil and gas to mitigate the economic impact of the war in Iran will enable Russia to prolong its own war in Ukraine by increasing the flow of money into Moscow’s Treasury. It’s true in only one important respect: to the extent that Russia needs materials, components etc from outside its own economy, increasing its flow of foreign exchange will assist it, but to the extent that it can meet those needs internally, then, just like the US, it won’t be a lack of money which constrains it.

Russia is vast; it has a huge range of raw materials available to it. It’s also a dictatorship: switching the use of its natural and human resources from peace time activities to war time ones is a lot easier than it is in a supposed democracy. Much of the response from ‘the West’ to the war in Ukraine has been based on the assumption that economic sanctions will reduce the sums available to the Russian government to spend on armaments and eventually force it to stop its aggression. But if those sanctions only impact Putin’s ability to make purchases outside the Russian economy, and Russia can meet most of its own needs within that economy, then the assumption is invalid. Russia can never run out of money, and can continue its war as long as it has the resources to do so available within its economy.

That’s not to argue that sanctions should not be applied, even if we know that they are widely being broken by back door transactions. It does, though, suggest that merely cutting off economic contact with a country with access to such vast resources of materials and labour will not bring that country to its knees any time soon. It’s more tokenistic than effective. It’s not a new lesson – Iran, for example, has been subject to severe sanctions for decades, and is still able to produce drones not only for its own use but also for export. The mistaken belief that money (or lack thereof) is a constraint on action by sovereign governments running their own currency has a lot to answer for.

The issue of distribution isn't going to go away

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The view that a falling birth rate is a ‘problem’ which needs to be addressed might be being expressed most forcibly by the political ‘right’, but it isn’t confined to that wing, as evidenced by this article last week from Polly Toynbee in the Guardian. Whilst (justifiably) demolishing the arguments of some Reform Ltd figures, she ends up agreeing with the objective (increasing the birth rate) but giving a different rationale.

There is a fringe element amongst those who support increased birth rates which is tinged with both misogyny (men controlling the fertility rate of women) and racism (a belief that the ‘solution’ to the economic drivers of immigration is to produce more native-born workers). Given the roughly twenty-year lead time involved in producing more workers, the latter is economic nonsense, but then racism and xenophobia have never been about logic or economics.

More seriously, the economic case for increasing birth rates revolves around the fact that the ratio of ‘productive’ to ‘unproductive’ adults is changing as the population ages. In an economy built around the assumption that the product of economic activity belongs to those engaged in it rather than to society as a whole, the fact that there is a problem is undeniable. Fewer workers supporting more non-workers – with no other changes to the economic model – will clearly lead to difficulties. Rebalancing the ratio by increasing the supply of people, even if we ignore the 20-year lead time, turns it into something of a Ponzi scheme, in which any increase in life expectancy (generally a good thing) has to be balanced by an increase in population size (not such a good thing in a finite world where resources are already being exploited unsustainably). Another solution, pursued in the UK by governments of both colours, is to reduce the number of non-workers by making people work longer. That would certainly rebalance the ratio and cut the cost of maintaining retirees: fewer pensioners = lower pension costs. But it also makes retirement (and even more so, a lengthy and healthy one) increasingly a privilege for those who have good occupational pensions and are not doing physically demanding work. It’s a ‘solution’, in short, which favours the better-off at the expense of the less well-off.

There is another approach, but it involves a change in paradigm – a shift away from seeing the output of economic activity as belonging only to those actively engaged in economic activity. If, instead, we see the ‘economy’ as being something which belongs to the whole of the society in which it operates, then the question becomes one of how the output of that economic activity is used within that society. A properly functioning society (including the economy which is part of it) needs to meet the needs of all its members – old, young, sick, and disabled members as well as productive workers. The idea that we only need to worry about how big the pie is, rather than how it is shared, has validity only so long as any increase in the size of the pie is both sustainable in terms of its use of finite resources, and equitable in terms of how the extra pie is used. Falling back on ‘growth’ in the abstract – the default position of Labour, Tory, Lib Dem and Reform Ltd politicians alike – is thus no solution at all if, as is the case at present, that growth is not only not sustainable within the resources available, but also the benefits are overwhelmingly captured by a tiny proportion of the population. We cannot simply avoid indefinitely the question of distribution.

Raising money for war

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As the warmongering rhetoric of the UK’s traditional parties (Tory, Lib Dems and Labour), along with newcomer Reform Ltd, ramps up, suggestions have been floated that the UK should start issuing war bonds, a method of borrowing from the public which was used to fund both World Wars. One of those floating the idea is Lib Dem leader, Ed Davey, and the call is also being supported by an alliance of defence industry bosses. The keenness of the armaments industry for the government to raise more money to divert into their pockets is understandable – arms manufacturers are the only consistent winners from warfare. Surprise, surprise – arms manufacturers support a plan to transfer other people’s money to themselves!

Even if we assume, for the purposes of argument, that spending more on armaments is a good thing, there is a big question over whether the government actually needs to borrow money to achieve that aim. The constraint isn’t about money – the government can always create money to fund whatever it wishes – it is about real resources in the economy. Are the raw materials, labour, energy etc to produce more armaments actually available, or do they need to be redirected from other economic uses? The way in which they are financed is a separate question entirely. On the scale on which our politicians apparently wish to manufacture armaments, it is likely that diversion of resources from other activities will be required – and which economic activities are selected to suffer the effects of that diversion is a far more important question, even if not one that any of them are in any great rush to answer.

Those advocating war bonds as a means of raising finance seem to think of it as an opportunity for ordinary people to come together and loan their pennies to the government in a great patriotic outpouring, as happened in the two world wars. Except it didn’t happen; it’s a false memory of events seen through biased lenses. And that little dampener eliminates the need to even consider whether the UK’s population would suddenly be overcome by the jingoistic fervour which the proposal presupposes.

In both world wars, the bonds were overwhelmingly sold not to ordinary individuals in the street but to a small number of wealthy individuals and to companies and institutions, unsurprisingly concentrated in London and south east England. The scheme launched in the first world war was actually a spectacular failure, with the Bank of England being forced to buy many of the bonds itself (an early example of what would probably be called quantitative easing today), hide the assets in its accounts, and then lie about having done so. As the government increased the interest rate in an increasingly vain attempt to attract more money, many of the new bonds were purchased by holders of the existing bonds converting them into the new higher interest bonds instead. As might be expected by any rational observer, the motivation of capitalists was more about making money than saving the country.

That highlights one of the issues with governments issuing bonds – they benefit mostly the wealthiest in society. By treating tax and ‘borrowing’ as alternatives, the rich end up keeping their capital and earning interest on it rather than paying tax. It’s also a double whammy – when the government spends the money into the economy, it overwhelmingly flows upwards into the hands of the wealthiest, through profits and dividends. To the extent that even a small number of ordinary people respond to the call, they end up reducing their own spending power as the flow of capital increases social inequality. It's not quite the wizard wheeze as which its advocates seem to see it. Unless you're an arms manufacturer.

The ultimate unwinnable wager

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There was a report a few days ago about the possibility that there had been some insider trading on a web betting – sorry, ‘prediction’ – site where some individuals may have made a killing by correctly ‘predicting’ either the attack on Iran or the death of the Ayatollah. It may, of course, be the case that the involvement of a Trump in the company hosting the ‘prediction’ market is a complete coincidence and/or that one Trump knew nothing about what another Trump was about to do. Perhaps there should be a market in predicting whether Trumps will gain financially from US government actions.

It is, apparently, possible to put money on a ‘prediction’ of almost anything. It seems that the same company hosting the bets on those ‘predictions’ also briefly ran a market in predictions of nuclear Armageddon. That market has subsequently been pulled, apparently because some felt that an attempt to make a bit of money betting on the deaths of millions of humans might be considered a little distasteful. To a compulsive gambler – sorry, ‘predictor’ – there is nothing that’s off limits when it comes to placing a bet, but the company running the market probably considered that whatever it had by way of a reputation would probably not be helped.

I found myself wondering, though, what sort of person would bet money on such an event. If the event happens, then the chances of the gambler being alive to claim his winnings are slim, to put it mildly. The chances of the company still being in existence to take the money from the losers and pay it to the winners are even lower. And what would the winners do with the money if there was no longer a functioning economy in which to spend it? Maybe those betting on nuclear destruction believe that nuclear Armageddon would not be so bad after all. The individual might survive a nuclear war, the company might still be able to organise the pay out, and the money would still be useful. But in those circumstances, the company would be able to argue, justifiably, that what just happened wasn’t nuclear Armageddon after all; and if the event didn’t happen, then those ‘predicting’ that it would happen would neither win nor receive any payout. It’s an essentially unwinnable bet for those predicting that outcome. There were some, apparently, willing to make the bet anyway. Even if they had advance knowledge that someone intended to start the nuclear war, it’s still a pretty stupid bet. As well as being tasteless.

Judge them by thir actions, not their words

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The Home Secretary has announced that because people from certain countries who come to the UK as students are more likely than those from other countries to then apply for asylum, she will ban anyone from those countries coming to the UK on a student visa. She could just as easily – and just as truthfully – have said that students coming from a country where there is conflict are more likely to apply for asylum than those from countries where there is no conflict. Who’d have thought it? It’s almost as though people coming from places where they have genuine reasons to seek asylum might be more likely to seek asylum.

Treating people on the basis of being able to place them in a certain category rather than looking at them as individuals is always going to be problematic. I’m pretty certain that people with dark skin coming to the UK on student visas are more likely to apply for asylum than people with fair skin, although I’ll admit that I don’t have hard evidence to back that up, other than the entirely coincidental fact that it is true of all the countries she has selected. If the Home Secretary banned all those of a darker hue from applying for student visas, she would be more roundly condemned than she has been. Her announcement yesterday was not as overtly racist as that would be, even if the effect might end up indirectly discriminating on race. It is, though, much the same thing – treating people on the basis of a collective attribute rather than their individual circumstances.

It is essentially a lazy response to a complex issue. “Some of that group might apply for asylum, so we’ll ban all of them from studying here” might attract a positive headline from the right wing media, but it doesn’t reflect any sense of fairness or compassion. Insofar as I understand ‘traditional British values’, it’s also deeply un-British. But then again, I’ve long stopped trying to understand those values in terms of what people say they are – actions tell an entirely different story.

Hooray for English culture...

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‘Culture’ is hard enough to define; it’s even harder to prescribe it. Yet that, apparently, is what the Tories under Badenoch are proposing to do. If only a single, universalised form of British culture could be inculcated into young people, the British nation would be more united, resolute and generally happy than it is today. Allegedly. How this would be achieved is not entirely clear, but there would be something called an ‘integration and cohesion plan’, and schools would play a role in teaching a single ‘national story’. I’m struggling a little, though, to distinguish between what she is proposing and what Russia is doing, not only in its own territory, but also in occupied areas of Ukraine.

It is, of course, heavily Anglo-centric. Whilst the culture warriors of Britishness are generally keen on promoting Shakespeare and the benefits of Empire across the whole of the UK, they’re not usually so keen on introducing Dafydd ap Gwilym or Robert Burns to English pupils. It also takes us into the realm of those ‘great British values’ which distinguish – in their eyes – the people of these islands from everyone else in the world. Things like deference to the rule of law (except international law, obviously, given Badenoch’s complaint yesterday that Starmer was too slow in supporting Trump’s illegal war against Iran). Things like parliamentary democracy (unless ‘silly people’ in parliament might dare to vote the wrong way). Things like due process (unless that process gets in the way of the government doing whatever it wishes).

Harri Webb’s somewhat irreverent caricature of English culture (“tuneless songs and tasteless jokes and blowsy bags undressing”) was not particularly complimentary; nor was it the sort of language a serious politician would use today. Refuting it, though, requires a definition of what exactly English culture is, and that is something which sound-bite Badenoch hasn’t even attempted. We shouldn’t be surprised, though. Defining culture is hard – and it’s a moving target, because no culture stands still. That statement might, however, go to the heart of the problem with Badenoch’s proposals. It’s a good rule of thumb that any politician seeking to inculcate a particular view of the world – whether it be based on values, culture, history or whatever – is usually espousing an idealised or romanticised version of how things were in some unspecified golden age in the past. Invariably, it wasn’t even accurate then.

Dealing with rogue states

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As an approach to winning the Nobel Peace Prize, starting an illegal war is certainly a novel one. Maybe Trump has abandoned all hope of ever winning the prize, or maybe he thinks that by starting a war which he can end at any time he chooses, he will shortly have another war to add to the list of the ones he’s personally ended. He certainly talks and behaves as though he assumes that no-one will remember what he did or said yesterday, never mind last year, so by the time he ends it, no-one – in his mind – will ever believe that he started it.

There is a huge difference between the world views of the late Ayatollah and Trump. On the one hand, the Ayatollah believed that he was god’s servant, doing god’s will by imposing his version of religion on the people of Iran and the wider world whereas, on the other hand, Trump believes that he was sent by (the same) god to impose divine will by the use of whatever force is necessary. The main lesson from that is that people in a position of power who believe that they have a unique ability to interpret god’s will, and a duty to impose that will on others by whatever means necessary, are inherently dangerous to the world. It’s not a particularly new lesson, sadly.

Trump’s actual motives are as clear as mud, and seem to change every time he opens his mouth. Preventing Iran from developing a nuclear weapon by destroying facilities which Trump told us had already been completely obliterated last year; revenge for terrorist acts (allegedly) carried out by or at the behest of the Iranian government; pre-empting an attack by Iran for which there was no credible evidence; ‘justice’ for the thousands of protestors killed on the streets of Iran and preventing the regime from carrying out further such killings; revenge for Iran being named in some utterly incredible conspiracy theory as being in cahoots with Venezuela to steal the 2020 election. Take your pick – any, all, or none of the above. But, to consider just one of those: killing hundreds of civilians to stop the Iranian authorities from killing civilians is a strange proposition to many of us, although as Stalin may or may not have said, “a single death is a tragedy; a million deaths is a statistic”. As Trump’s rather offhand dismissal of the deaths of US service personnel to date demonstrated, for someone so lacking in human empathy as him even a single death (as long as it isn’t his own) is merely a statistic.

Underlying it all, though, there is a very serious point, which an arbitrary attack on Iran does more to disguise than to reveal. There are regimes in the world which are a danger to their own citizens and the citizens of other (mostly neighbouring) countries, and it is a mark of failure for the international order that humanity has no effective way of dealing with them. Having international laws and rules is the easy part; enforcing them is quite another matter. It’s easy enough to identify Iran, North Korea and Russia as dangerous states, but dealing only with the one which does not currently possess nuclear weapons is about the best incentive I can think of for further nuclear proliferation. And then, there’s the even bigger question – who decides what is or is not a rogue state where regime change is required for the good of humanity? I named three above, because they’re reasonably uncontroversial. But what about Israel, for instance, with its creeping annexation of the West Bank and the tens of thousands of civilians killed in Gaza? What, indeed, about the USA under its current administration? Kidnapping people off the streets, disappearing them, ‘repatriating’ them without due process to places they’ve never visited, interfering in the affairs of other states both politically and militarily, blowing up boats in international waters, threatening to seize territory by force, kidnapping one national leader and assassinating another? Which characteristic of a rogue state has the US failed to meet?

There is no easy or simple solution to the problem; humanity has some way to go before we recognise that we are one species sharing one planet and need to co-operate, share, and live by a common basic set of rules. It’s much easier to say what the solution isn’t than identify what it is – but it definitely isn’t allowing the biggest and most powerful to take whatever arbitrary decisions suit its own selfish interests, or those of its rulers. Trump is taking the world backwards – and the UK’s Labour government now seems set on enabling and supporting him in that endeavour.

Who split which vote?

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When the dust settled, the ‘too-close-to-call’ by-election in Gorton and Denton turned out to be no such thing, and the Green Party gained a very clear victory. That is good news, of course, but even though the margin of victory was solid, the winner only got 41% of the vote. Under a more proportional system of voting, that means that second preference votes would have needed to be counted, and the mathematician and amateur would-be psephologist in me speculated about how the result of that might look.

Of the 11 candidates, eight (accounting for 1892 votes in total) would have been eliminated fairly rapidly and, unless we choose to believe that they would have overwhelmingly (including the 706 Tory votes) gone to Labour, the second choices of those voters would have made no difference to the order of the first three candidates. The final stage of counting would thus have seen the Labour candidate eliminated as well, meaning that there were then 11,256 voters whose second choices would have determined whether the victor was the Green Party or Reform Ltd. With a margin of 4402 between those two parties, those 11,000 votes would have to split something like 2.3:1 in favour of Reform Ltd for their candidate to overtake the Green Party’s candidate and seize the seat. We don’t know, of course, how they would have split in practice. Unless and until someone does some detailed research, it’s all speculation. But the key element of that speculation is a very simple question: of those who voted Labour, despite everything that has happened since the last General Election, would they have tended towards the Green Party or towards Reform Ltd?

Those who cling to the notion that the Labour Party is still a progressive force, and that its supporters are committed to a progressive platform (whatever the word ‘progressive’ means) will be utterly convinced that they would have gone with the Greens, leaving the outcome unchanged. I’m not at all sure that they’re right. Much of the support which Reform Ltd have picked up over the past few years has come from Labour – amongst Labour voters, there is a deeply conservative streak when it comes to issues such as immigration. I don’t think it at all impossible that Reform Ltd would have won the seat in that scenario. (That doesn't make me reconsider supporting Proportional Representation - we need to win the arguments against the likes of Reform Ltd, not rig the voting system to keep them out.)

That brings us to an interesting alternative view of the ‘vote-splitting’ concept. The worry of some before the election was that the Greens and Labour would split the ‘progressive’ vote and allow Reform Ltd to win. What if the real story here is that Labour and Reform split the reactionary, neoliberal, authoritarian, anti-immigrant vote and thus allowed the progressive candidate to win? Those who are still clinging to the idea that Labour is somehow on the side of the good guys might be blinding themselves to the true extent of the danger.

Cutting wages is no solution

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As a simple fact of mathematics, any organisation which can cut the salaries it pays to its employees will ‘save’ money. Whether it’s a sensible thing to do, whether it’s the right thing to do, whether the employees will calmly accept the reduction without resorting to industrial action – none of those things affect the simple mathematical truth that reducing salaries means the employer spends less to achieve the same result. For those of us lucky enough to be part of an occupational pension scheme (which is most people by now, even if some of the schemes aren’t particularly good), the employers’ contribution to those schemes is part of the overall remuneration package: it’s a form of deferred salary. Cutting the amount employers pay for pensions is, therefore, a wage cut by another name – it’s just that the impact won’t be felt immediately.

One of Reform Ltd’s latest wheezes to ‘save’ money involves doing just that – cutting back on the benefits paid out in pension schemes, and thus reducing the amount of the deferred salary due to employees. It’s a not very well disguised salary cut. Whether it’s quite the pain-free saving as which it appears in the short term is another question, however. Reducing the incomes of future pensioners will reduce their retirement standard of living. By how much depends on the circumstances of the individuals, but we can be certain that at least some will end up applying for extra benefits as a result, and it will also reduce the amount of income tax collected from pensioners – it’s not a ‘no-cost’ proposal. Looking at the wider economic impact, people with less money spend less as a result, and that in turn reduces demand in the economy.

The fact that none of this is immediately obvious to many is down to the fact that the real impact won’t happen for years – or even decades – when those with a reduced pension reach retirement age. Maybe those proposing it believe that it will be so effective in deterring people from retiring at all that the impact will be insignificant. In a world which increasingly treats only ‘working people’ as having any validity whilst all others are to be regarded as a ‘burden’, that’s a perfectly possible interpretation. It’s a view of the world which isn’t restricted to Reform Ltd – it will probably be mainstream Labour-Tory policy in a year or two. It highlights a feature of politics – and indeed, the capitalist economic system – which is the increasingly short term views which prevail. A society which works for all people throughout their lives has to take a long term view, considering the first 18 years of life, as well as the last 20-30, when people are likely to be ‘unproductive’ in economic terms, but are still part of the society in which they live. Squeezing out costs in the short term might be good micro-economics, but it’s lousy macro-economics, quite apart from being a lousy way of treating individual members of society. It’s a distinction which those who benefit directly from the short term gains are unable – or, more likely, unwilling – to understand.

It's not true that 'all votes count'

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The new electoral system coming into effect for this year’s Senedd elections is a step forward from first-past-the-post, but is still less than perfect. The main criticism levelled at it by many is that it means that electors cannot choose individuals, only parties. Personally, I’m relaxed about that aspect – decades of door-to-door campaigning taught me that (other than in local council elections, where they may know the individuals) most people vote on party lines anyway, and pay little attention to the candidates. For me, the bigger criticism has always been that there is no opportunity for people to express a second or third choice, so that anyone voting for a party which wins no seats has effectively had no say in the outcome. It was, though, the best outcome that was possible given Labour opposition to STV, and it would be churlish not to recognise that.

As campaigning ramps up, however, the failings of the selected system are becoming more obvious, with Labour and – if anything, even more so – Plaid suggesting repeatedly that a vote for anyone else will split the anti-Reform vote and hand seats to Reform. Leaving aside the essentially negative message of that proposition, encouraging people to vote against one party rather than for another, it isn’t the sort of behaviour a properly proportional system should be encouraging. It’s an admission, in effect, that the chosen system is sub-optimal, giving the lie to the oft-repeated claim that 'all votes count'.

It opens the question, though – will the new Senedd change the decision and opt for a proper STV system? Officially, Plaid support STV (although they haven’t always looked exactly enthusiastic about doing so in the councils they control), as do the Lib Dems and the Greens. The last time he opined on the matter, I’m sure that Farage also supported STV (although all Reform Ltd polices have to carry the caveat that they are subject to sudden and arbitrary change). The only parties dead set against it are Labour and the Tories. The opinion polls could all be wrong, of course, but if the general trend of the polls were to be true, current projections would give supporters of STV a clear super-majority in the Senedd, enough to push through such a change if they wished to do so. If they can summon the courage to act, it might even become the most lasting legacy of a change of government in Cardiff.