Incompetence versus Malice

The London Financial Times reported yesterday that the UK has finally recovered to its pre-crisis level of GDP — the country is finally producing as many goods and services today as it was just before the financial crisis hit.  This is significant for politicians, because by this measure the recent depression has been the longest ever, meaning that the current government has been more incompetent in managing its recovery than any other in history.  Including the Great Depression of the 1930s, which began before we’d developed an economic theory that explained how to fix recessions.

So until now, one bit of the political class has been able to use the charge of “incompetence” against another bit, which is the debate both sides are most comfortable with.  As long as we’re squabbling over who is least able to run a country, we can avoid mention of what either wants to use that power to achieve.

Unfortunately, GDP statistics don’t mean very much to ordinary people.  Whether or not they understand technically what GDP and GDP growth are, they do understand that GDP has a fairly weak effect on their lives and well-being.  Has anything changed for most people now that GDP has recovered to its pre-crisis level?  No.

The Financial Times correctly point out that there are two other criteria we can use to judge the recession that have more visceral meaning to most people.  These are unemployment and average wages.  Moreover, the different impact that the depression has had on these three variables tells us a bit more about the politics of the depression.

The FT find it “puzzling” that, in terms of unemployment, the depression hasn’t actually been that bad:

Employment in UK recessions and recoveries


This graph shows that, compared to the recessions in 1980-86 and 1990-96, employment has bounced back more quickly (the light blue line in the graph).  However, in contrast, the fall in average wages has been staggering:

Growth in real wages after UK recessions

In every other recession since the seventies, wages have continued to rise even during the recession, though at less than the normal rate.  After the financial crisis, they have fallen almost 8 per cent.

So we have three basic facts:

  1. The recent depression was the longest on record, with the biggest impact on lost output (the FT believe the country has lost more than £1 trillion, i.e. £1,000 billion),
  2. Surprisingly, not that many jobs have been lost, but
  3. Unlike in any other post-war depression, wages have fallen, and not slightly but by a shocking amount.

This tells us that working people have absorbed the impact of the depression through lower wages, which has prevented the need for mass unemployment.  This tells us something important about the psychology of the depression.  Normally, when bosses try to force down wages, workers resist.  Extremely hard.  They organise, they fight back, they strike, they point-blank refuse to accept wage cuts.  This is accepted by economists across the political spectrum.  Their secret code for this phenomenon is that “wages are downward-sticky”.  What they are saying is that when they think wages “should” be falling, they get stuck.  Directly and indirectly, through a variety of routes, this results in unemployment.

For the first time in the UK, this is not what happened.  Workers haven’t fought tooth and nail to maintain their wages, they’ve accepted massive cuts — the longest period of decline since records began.  Why?  I believe this is because of the political narrative that has dominated the media since the crisis.  Anti-immigrants, against benefit scroungers, anti-unions, against public services of all kinds, against “chavs” (or, to decipher the code, against the poor).  Since the Liberal Democrats have been co-opted into the coalition (voluntarily silencing themselves as an opposition) and Labour have chosen to compete with the Conservatives on right-wing turf, these messages have been perfectly consistent across parties (with the honourable exception of the SNP in Scotland, a fact that may lead to the break-up of the UK).  This narrative has been so powerful as to destroy one of the strongest natural instincts of working class people — to fight wage cuts.  That’s why we are still so poor, and why it feels like the depression still has its hands on the country’s throat.

The coalition government has managed the least successful recovery to a depression in British history.  But that doesn’t mean that it is the most incompetent government we have ever had, despite the superficial evidence.  To the coalition, the financial crisis was an opportunity: a chance to take money and power away from the poor, away from working people, away from all of us.  They have succeeded.



[A footnote for the more economically inclined: interestingly, this evidence is a kick in the shin for right-wing economics.  It’s a well established pillar of right-wing thought that the poor are to blame for everything.  The application of this rule to depressions gives us this theory: depressions are the fault of workers who won’t accept lower wages.  Depressions only continue because the economy needs to “adjust” after a shock, but can’t because selfish workers refuse to accept wage cuts.  Here we have the first example of workers taking massive wage cuts during a depression, and the depression continuing for longer than ever before.  Oops.]

UN Adopts Internet Privacy Resolution

Softpedia: The United Nations’ human rights committee passed a “right to privacy” resolution that was sponsored by Germany and Brazil. The new document protects the right to privacy against illegal surveillance even in the online world. 

The resolution was built by the two countries, with contributions from other nations, in the fallout of the NSA scandal, stating specifically that governments and companies who deal with surveillance or data interception “may violate or abuse human rights.”

Read more at Softpedia or read the resolution itself (GA/SHC/4094).


Dismantling mass surveillance

Amidst reporting of the Edward Snowden leaks, I think that Bruce Schneier makes a particularly sobering point in his Guardian article, The US government has betrayed the internet. We need to take it back:

Has any country that engaged in mass surveillance of its own citizens voluntarily given up that capability?  Has any mass surveillance country avoided becoming totalitarian?


Global Government 4: The UN Security Council


The United Nations Security Council (UNSC, not to be confused with the US National Security Council or NSC) has been one of the most important parts of the United Nations system since the creation of the UN in 1945.  The UNSC’s purpose is to oversee international conflict and war.  It is a delicate mission.  On the one hand, it is born out of the idealism of the end of World War II and the desire to prevent a similar conflict from ever happening again.  On the other, its setup and the law on which it operates (part of the UN Charter) very clearly recognise nations’ military power and the inevitability of further war.  It has the ability to authorise peacekeeping missions, trade sanctions or military actions by its own members or other countries.

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Adam Curtis on the history of MI5

Maybe the real state secret is that spies aren’t very good at their jobs and don’t know very much about the world.

In my opinion, Adam Curtis is the best British documentary maker active today.  Amongst other things, he is interested in conspiracy theories, but his perspective is quite different from the usual two “sides” of debate — ie that conspiracies are or aren’t influential in modern political life.  He has studied various historical attempts at conspiracy, which are old enough for a rich historical record to be readily available.  His main finding is consistent incompetence — attempts to construct elaborate conspiracies invariably fail to take into account the complex interactions between the people involved, and lead to a soup of bizarre consequences that had never been envisaged by the original conspirators:

Where people do set out to have conspiracies, they don’t ever end up like they’re supposed to.  History is a series of unintended consequences resulting from confused actions, some of which are committed by people who may think they’re taking part in a conspiracy, but it never works out the way they intended.

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Global Government 3: the International Monetary Fund

Over the years since its inception, the IMF has changed markedly.  Founded on the belief that markets often worked badly, it now champions market supremacy with ideological fervour… Keynes would be rolling over in his grave were he to see what has happened to his child.

Joseph Stiglitz, former Chief Economist of the World Bank

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Global Government 2: the World Trade Organisation

Origins of the WTO

The World Trade Organisation (WTO) began life as the rather less glamorous “General Agreement on Tariffs and Trade” (GATT) in 1948.  (There’s a general point here: a lot of international institutions have names that reflect the political messes that created them rather than anything they actually do.  For instance, the “Office for the United Nations High Commissioner for Refugees” sounds like a guy in a suit, his secretary and a dog in some out-of-town office space in Ethiopia.  Actually it’s a global organisation with a $4.3 billion budget that has started using the byline “The UN Refugee Agency” so that people have some idea of what it does.  Similarly, although the WTO began life as an “Agreement”, the GATT  had a secretariat (a permanent organisation that administered the agreement) in a large building in Geneva.  When the WTO was “created”, it continued to function in the same way, with the same staff, in the same old GATT building in Switzerland.)

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