Where is the economic legacy from the London Olympics?
What firms cannot do
* Say they have worked on the Games on their website homepage, or create a web page which relates only to work on the Games
* Give job titles and group names referring to the Games within their company – eg, "Olympic manager" or "2012 Unit"
* Publish news stories or press releases saying they have worked on the Games
* Allow staff to mention they have worked on the Games on Twitter, Facebook or blogs
* Run advertising or marketing campaigns mentioning that they have worked on the Games
* Respond to media inquiries about whether they are involved in the Games, and must refer all inquiries to Locog or the ODA
* Put their own branding on equipment, eg, seating, in any of the Olympic stadia and Village
What they can do
* Mention in small print on their websites and in pitch/tender documents that they have worked on the Olympics, but only if it isin a client list that includes nine other clients, and the Olympic Delivery Authority is not the first client on the list
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* Say they have worked on the Games on their website homepage, or create a web page which relates only to work on the Games
* Give job titles and group names referring to the Games within their company – eg, "Olympic manager" or "2012 Unit"
* Publish news stories or press releases saying they have worked on the Games
* Allow staff to mention they have worked on the Games on Twitter, Facebook or blogs
* Run advertising or marketing campaigns mentioning that they have worked on the Games
* Respond to media inquiries about whether they are involved in the Games, and must refer all inquiries to Locog or the ODA
* Put their own branding on equipment, eg, seating, in any of the Olympic stadia and Village
What they can do
* Mention in small print on their websites and in pitch/tender documents that they have worked on the Olympics, but only if it isin a client list that includes nine other clients, and the Olympic Delivery Authority is not the first client on the list
Read more...
A (dis)United Kingdom
But how united is the United Kingdom? The past 60 years have brought a blistering pace of change including globalisation, mass immigration, European integration, devolution and a dramatic increase in incomes that has allowed people to live freer, more individual lives but opened new social divisions. It is a nation still grappling with what these changes mean.
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Pride in being British was palpable in the optimistic but poorer days when Elizabeth acceded. Britain had been on the winning side in the second world war, one of the most unifying events in its history, and showed signs of emerging from postwar austerity. Rationing of tea, the nation’s favourite drink, was lifted.
“There was some sense of a new world being created,” says David Kynaston, author of Family Britain: 1951-1957. “The National Health Service was very powerful, new buildings were going up, things like new schools, and there was a great move . . . from inner cities to new towns and estates with new mod cons.”
There was also a common bond, despite divisions among classes, regions and nations. This was a deferential, conservative society in which 35 per cent of people thought the Queen had been directly chosen by God, according to an opinion poll in 1956.
People had no inhibitions in talking about British “native genius” and took their idea of history from books such as H.E. Marshall’s Our Island Story. India had left the empire, but Elizabeth could travel the world without leaving lands she ruled.
Today, the empire has crumbled – to be replaced by the Commonwealth – and even Scotland is discussing a breakaway. The devolved nationalist government proposes to hold a referendum on independence in 2014. Polls suggest the Scots will not vote Yes, and no other part of the UK is threatening to pull out – but Scotland may back a second option of deeper devolution. The union is loosening.
Meanwhile, the divide between the UK’s wealthiest corner, London and south-east England, and poorer parts such as northern England and Wales has widened faster since the 1970s than in any other big country.
London’s rise has been a global success – a magnet for foreign wealth and ambitious people of all nationalities – but it is now widely felt that Britain grew too dependent on illusory financial growth engineered in the City.
In 1952, it was Scotland that brought the only blemish on the Queen’s dazzling debut. Prime minister Winston Churchill decided her title would be Elizabeth II – causing offence north of the border, where she was the first monarch of that name, the crowns having been united only after England’s first Elizabeth died 350 years earlier. Scots were so angry that, when post boxes bearing the royal cipher “E II R” appeared, some people removed the “II” and a few put explosives through the slot.
In 1953, when the Queen came to Edinburgh to receive the honours of Scotland after her coronation, she wore a coat rather than sovereign robes, which was criticised as an insult to the dignity of the occasion.
Then, though, there were only hints of the later nationalist surge. The Unionists, as Conservatives were known there, reached a peak of more than half the popular vote at the 1955 general election. In 2010, they won 16.7 per cent and one seat out of 59.
Mr Kynaston says Britain has “moved from class-based politics to a more identity-based politics, which has to do with nationalism or nationhood, or gender or ethnicity”. The monocultural society of the 1950s has become “dispersed” as the era of the mass political party has ended. That fits today’s “much more privatised, individualistic society – and technology has played a big part in that”.
We should not exaggerate these centrifugal forces. While many now identify more with their core country, 81 per cent of people still felt “very” or “somewhat” proud to be British in 2007, according to the British Social Attitudes Survey. National identity is adapting to changing circumstances.
In 1952, there was full employment and hyperbole about a “new Elizabethan age”. Leaders were more wary, knowing the economy was war-weakened and its influence waning. The Queen gently punctured expectations, saying: “I do not feel at all like my great Tudor forebear, who was blessed with neither husband nor children, who ruled as a despot and was never able to leave her native shores.”
Today, people earn on average three times as much in real terms but are apprehensive about the future as Britain struggles to emerge from its longest depression in more than a century. According to the Chartered Institute of Personnel and Development, the nation is “more productive, more prosperous, more unequal, more stressed, more workless”. John Philpott, the CIPD’s chief economist, says: “Even during good times, people do not seem much happier about their working lives and many exhibit the symptoms of work-related stress.”
Britain was emerging from austerity in 1952 and is desperate to do so in 2012. Today’s “austerity”, however, hardly matches earlier privations. And, short of another world war, “dispersed” Britain seems unlikely to return to 1950s togetherness.
Through it all – the strife of the 1970s, the Thatcherite revolution of the 1980s – Queen Elizabeth has been a steady, calming figure. There is nervousness, though, about what follows. In one poll, only 39 per cent thought the crown should pass to her son, Charles, while 48 per cent wanted it to go to her grandson, William.
Within 40 years of the reign of Elizabeth I, England had plunged into a civil war that led to the execution of the king. That would be an extreme outcome to repeat. More likely, the country will muddle through, reshaping Britishness for the 21st century.
Read more...
Important data
More
Pride in being British was palpable in the optimistic but poorer days when Elizabeth acceded. Britain had been on the winning side in the second world war, one of the most unifying events in its history, and showed signs of emerging from postwar austerity. Rationing of tea, the nation’s favourite drink, was lifted.
“There was some sense of a new world being created,” says David Kynaston, author of Family Britain: 1951-1957. “The National Health Service was very powerful, new buildings were going up, things like new schools, and there was a great move . . . from inner cities to new towns and estates with new mod cons.”
There was also a common bond, despite divisions among classes, regions and nations. This was a deferential, conservative society in which 35 per cent of people thought the Queen had been directly chosen by God, according to an opinion poll in 1956.
People had no inhibitions in talking about British “native genius” and took their idea of history from books such as H.E. Marshall’s Our Island Story. India had left the empire, but Elizabeth could travel the world without leaving lands she ruled.
Today, the empire has crumbled – to be replaced by the Commonwealth – and even Scotland is discussing a breakaway. The devolved nationalist government proposes to hold a referendum on independence in 2014. Polls suggest the Scots will not vote Yes, and no other part of the UK is threatening to pull out – but Scotland may back a second option of deeper devolution. The union is loosening.
Meanwhile, the divide between the UK’s wealthiest corner, London and south-east England, and poorer parts such as northern England and Wales has widened faster since the 1970s than in any other big country.
London’s rise has been a global success – a magnet for foreign wealth and ambitious people of all nationalities – but it is now widely felt that Britain grew too dependent on illusory financial growth engineered in the City.
In 1952, it was Scotland that brought the only blemish on the Queen’s dazzling debut. Prime minister Winston Churchill decided her title would be Elizabeth II – causing offence north of the border, where she was the first monarch of that name, the crowns having been united only after England’s first Elizabeth died 350 years earlier. Scots were so angry that, when post boxes bearing the royal cipher “E II R” appeared, some people removed the “II” and a few put explosives through the slot.
In 1953, when the Queen came to Edinburgh to receive the honours of Scotland after her coronation, she wore a coat rather than sovereign robes, which was criticised as an insult to the dignity of the occasion.
Then, though, there were only hints of the later nationalist surge. The Unionists, as Conservatives were known there, reached a peak of more than half the popular vote at the 1955 general election. In 2010, they won 16.7 per cent and one seat out of 59.
Mr Kynaston says Britain has “moved from class-based politics to a more identity-based politics, which has to do with nationalism or nationhood, or gender or ethnicity”. The monocultural society of the 1950s has become “dispersed” as the era of the mass political party has ended. That fits today’s “much more privatised, individualistic society – and technology has played a big part in that”.
We should not exaggerate these centrifugal forces. While many now identify more with their core country, 81 per cent of people still felt “very” or “somewhat” proud to be British in 2007, according to the British Social Attitudes Survey. National identity is adapting to changing circumstances.
In 1952, there was full employment and hyperbole about a “new Elizabethan age”. Leaders were more wary, knowing the economy was war-weakened and its influence waning. The Queen gently punctured expectations, saying: “I do not feel at all like my great Tudor forebear, who was blessed with neither husband nor children, who ruled as a despot and was never able to leave her native shores.”
Today, people earn on average three times as much in real terms but are apprehensive about the future as Britain struggles to emerge from its longest depression in more than a century. According to the Chartered Institute of Personnel and Development, the nation is “more productive, more prosperous, more unequal, more stressed, more workless”. John Philpott, the CIPD’s chief economist, says: “Even during good times, people do not seem much happier about their working lives and many exhibit the symptoms of work-related stress.”
Britain was emerging from austerity in 1952 and is desperate to do so in 2012. Today’s “austerity”, however, hardly matches earlier privations. And, short of another world war, “dispersed” Britain seems unlikely to return to 1950s togetherness.
Through it all – the strife of the 1970s, the Thatcherite revolution of the 1980s – Queen Elizabeth has been a steady, calming figure. There is nervousness, though, about what follows. In one poll, only 39 per cent thought the crown should pass to her son, Charles, while 48 per cent wanted it to go to her grandson, William.
Within 40 years of the reign of Elizabeth I, England had plunged into a civil war that led to the execution of the king. That would be an extreme outcome to repeat. More likely, the country will muddle through, reshaping Britishness for the 21st century.
Read more...
Important data
Ethics panel sexism!
Fifa will not allow women to sit on a key ethics committee to investigate allegations of wrongdoing within football’s governing body, independent advisers on reform have claimed.
Two officials are alleged to have informed the advisers of this policy during a lunch at Fifa’s annual Congress in Budapest last month barely an hour after members voted to set up the two-chamber committee with powers to investigate allegations of wrongdoing and adjudicate on them.
More
The sex discrimination allegations will plunge Fifa into a new controversy at a time when the scandal-riddled body is seeking to persuade critics of its commitment to reform.
The Independent Governance Committee, set up by Fifa president Sepp Blatter to combat accusations of inertia over dealing with investigating corruption allegations, recommended the reform and nominated four women for the eight seats on the investigatory and adjudicatory chambers.
But Alexandra Wrage, an IGC member, said she was told at the lunch the nomination of any female candidates was “entirely unacceptable”.
Ms Wrage told the Financial Times: “They sat down next to me, two senior Fifa executives. They said, ‘you are pushing too hard, leave this for another time. You’ve made a lot of progress, you should be content.’ It was so clear-cut, it was expressly stated.”
Ms Wrage, who advises companies on anti-bribery compliance, declined to reveal the identity of the officials who, she said, had created an atmosphere of “unapologetic chauvinism”.
She added: “I was gobsmacked. We were making progress in this environment. I guess you have to admire their candour.”
Her account was corroborated by Guillermo Jorge, another IGC member, in an email to the FT.
Mark Pieth, IGC chairman, said: “What this demonstrates is that this is an organisation which has a really long way to go. Gender issues are part of the governance issue, and they don’t seem to understand that.
“If you were to defend that attitude, you would say they are a boys’ club and they are in a transition phase.”
The IGC is expected to hold a conference call in the next few days to discuss how to respond. Ms Wrage said she was uncertain whether she could continue serving on the IGC.
Mr Pieth added: “What doesn’t surprise me is that this organisation has a problem with women in their ranks. That is typical. Obviously I’m saddened that we have to deal with this issue as well, but it just means more work.
“They need a kick from outside. I think it’s serious.”
Mr Blatter said at the end of the Budapest gathering that Fifa, which has been the subject of numerous bribery and vote-rigging allegations, was “firmly committed” to reform. He lauded Fifa’s decision to appoint its first woman to its all-male executive committee.
A meeting of the executive committee scheduled for next month is set to approve chairmen for the ethics committee chambers. Luis Moreno Ocampo, prosecutor at the International Criminal Court, is tipped to take up the chairmanship of the investigations unit.
In a report published in March, the IGC criticised Fifa’s handling of past allegations and said the new ethics committee should review them.
Fifa said in an emailed statement: “Fifa has no comment to make on such allegations. The decision regarding the chairman of each of the two ethics committee chambers will be taken at the next executive committee meeting on July 17 and Fifa will not speculate on the candidates before that date.”
Read more...
Two officials are alleged to have informed the advisers of this policy during a lunch at Fifa’s annual Congress in Budapest last month barely an hour after members voted to set up the two-chamber committee with powers to investigate allegations of wrongdoing and adjudicate on them.
More
The sex discrimination allegations will plunge Fifa into a new controversy at a time when the scandal-riddled body is seeking to persuade critics of its commitment to reform.
The Independent Governance Committee, set up by Fifa president Sepp Blatter to combat accusations of inertia over dealing with investigating corruption allegations, recommended the reform and nominated four women for the eight seats on the investigatory and adjudicatory chambers.
But Alexandra Wrage, an IGC member, said she was told at the lunch the nomination of any female candidates was “entirely unacceptable”.
Ms Wrage told the Financial Times: “They sat down next to me, two senior Fifa executives. They said, ‘you are pushing too hard, leave this for another time. You’ve made a lot of progress, you should be content.’ It was so clear-cut, it was expressly stated.”
Ms Wrage, who advises companies on anti-bribery compliance, declined to reveal the identity of the officials who, she said, had created an atmosphere of “unapologetic chauvinism”.
She added: “I was gobsmacked. We were making progress in this environment. I guess you have to admire their candour.”
Her account was corroborated by Guillermo Jorge, another IGC member, in an email to the FT.
Mark Pieth, IGC chairman, said: “What this demonstrates is that this is an organisation which has a really long way to go. Gender issues are part of the governance issue, and they don’t seem to understand that.
“If you were to defend that attitude, you would say they are a boys’ club and they are in a transition phase.”
The IGC is expected to hold a conference call in the next few days to discuss how to respond. Ms Wrage said she was uncertain whether she could continue serving on the IGC.
Mr Pieth added: “What doesn’t surprise me is that this organisation has a problem with women in their ranks. That is typical. Obviously I’m saddened that we have to deal with this issue as well, but it just means more work.
“They need a kick from outside. I think it’s serious.”
Mr Blatter said at the end of the Budapest gathering that Fifa, which has been the subject of numerous bribery and vote-rigging allegations, was “firmly committed” to reform. He lauded Fifa’s decision to appoint its first woman to its all-male executive committee.
A meeting of the executive committee scheduled for next month is set to approve chairmen for the ethics committee chambers. Luis Moreno Ocampo, prosecutor at the International Criminal Court, is tipped to take up the chairmanship of the investigations unit.
In a report published in March, the IGC criticised Fifa’s handling of past allegations and said the new ethics committee should review them.
Fifa said in an emailed statement: “Fifa has no comment to make on such allegations. The decision regarding the chairman of each of the two ethics committee chambers will be taken at the next executive committee meeting on July 17 and Fifa will not speculate on the candidates before that date.”
Read more...
Politics and religion...
The current investigation into Lady Warsi is being carried out by Sir Alex Allan, the Prime Minister’s adviser on the ministerial code, into the disclosure that company documents showed she was the majority shareholder in Rupert’s Recipes, a spice company whose other shareholder was Mr Hussain.
She had not registered the holding with the House of Lords, whose rules say peers should declare any majority shareholdings.
“These further revelations about the conduct of Baroness Warsi are extremely worrying,” Mr Dugher said.
“Yet again, there seems to be a blurring of the lines between what constitutes proper official business and what is, in fact, party political activity with private associates.
"Labour will be asking urgent questions next week in Parliament, including of the Foreign Office.
"What the baroness was doing with someone who has admitted his involvement with the extremist Islamist group Hizb ut-Tahrir also calls into question her judgment.”
Hizb ut-Tahrir has been accused of promoting racism and anti-Semitism, praising suicide bombers and urging Muslims to kill Jews.
Before coming to power, Mr Cameron pledged to ban it but the plan was shelved after a Coalition review.
The nature of Mr Hussain’s involvement in the radical party has already prompted questions over the extent of security vetting.
He has twice accompanied Lady Warsi on trips to Pakistan, and has also been pictured in the House of Lords at a reception for her.
In the early 1990s, sources say, Mr Hussain joined Hizb ut-Tahrir and was nicknamed “Strapper” by other students because of his bulky frame.
He lived for a time in one of its London houses, studying the radical form of Islam taught by its then leader Omar Bakri Mohammed, who is now banned from Britain.
In 1995, Mr Hussain attended a party rally filmed in a BBC a documentary and was seen laughing and joking with others.
Mr Hussain issued a statement through a lawyer last night which said he “has never been a member of Hizb ut-Tahrir”.
“In his mid-20s, which is to say more than 20 years ago, Mr Hussain attended Hizb ut-Tahrir meetings,” the statement said. “However, he often debated against their views and never became a member.”
A former Hizb ut-Tahrir member, Ghaffar Hussain, who now works for the Quilliam Foundation, the anti-radicalisation organisation, said: “He [Mr Hussain ]acted as a key recruiter and propagandist for the groups in the late 90s.
Read more...
She had not registered the holding with the House of Lords, whose rules say peers should declare any majority shareholdings.
“These further revelations about the conduct of Baroness Warsi are extremely worrying,” Mr Dugher said.
“Yet again, there seems to be a blurring of the lines between what constitutes proper official business and what is, in fact, party political activity with private associates.
"Labour will be asking urgent questions next week in Parliament, including of the Foreign Office.
"What the baroness was doing with someone who has admitted his involvement with the extremist Islamist group Hizb ut-Tahrir also calls into question her judgment.”
Hizb ut-Tahrir has been accused of promoting racism and anti-Semitism, praising suicide bombers and urging Muslims to kill Jews.
Before coming to power, Mr Cameron pledged to ban it but the plan was shelved after a Coalition review.
The nature of Mr Hussain’s involvement in the radical party has already prompted questions over the extent of security vetting.
He has twice accompanied Lady Warsi on trips to Pakistan, and has also been pictured in the House of Lords at a reception for her.
In the early 1990s, sources say, Mr Hussain joined Hizb ut-Tahrir and was nicknamed “Strapper” by other students because of his bulky frame.
He lived for a time in one of its London houses, studying the radical form of Islam taught by its then leader Omar Bakri Mohammed, who is now banned from Britain.
In 1995, Mr Hussain attended a party rally filmed in a BBC a documentary and was seen laughing and joking with others.
Mr Hussain issued a statement through a lawyer last night which said he “has never been a member of Hizb ut-Tahrir”.
“In his mid-20s, which is to say more than 20 years ago, Mr Hussain attended Hizb ut-Tahrir meetings,” the statement said. “However, he often debated against their views and never became a member.”
A former Hizb ut-Tahrir member, Ghaffar Hussain, who now works for the Quilliam Foundation, the anti-radicalisation organisation, said: “He [Mr Hussain ]acted as a key recruiter and propagandist for the groups in the late 90s.
Read more...
Racism?
Nine white men are found guilty of grooming young Asian girls, aged between 13 and 15, whom they picked up on the streets of London. The girls were lured with free fish and chips before being raped or pimped as prostitutes. One Asian girl from a children’s home was used for sex by 20 white men in one night. Police insist the crimes were not “racially motivated”.
Imagine if that story were true. Would you really believe that race was not a factor in those hateful crimes? Do you think that, despite conclusive DNA evidence from a girl raped by two men, the police would have hesitated to press charges because the suspects were white and it could make things a bit sensitive in the white community? Would the Crown Prosecution Service have refused to prosecute, allowing the child-sex ring to flourish for three more anguished years?
OK, now let’s try switching the ethnic identities round. Change the fish and chips to kebabs, London to Rochdale, white to Asian and vice versa and you have the case that ended yesterday at Liverpool Crown Court. Nine British Muslim men were jailed for a total of 77 years for rape and trafficking within the UK for sexual exploitation. The whole case made for disturbing reading, but somehow it was the tiny, paralysing details that made it real. Like the fact that one of the convicted men, father-of-five Abdul Rauf, was a religious studies teacher at a local mosque. Rauf asked his 15-year-old victim if she had any younger friends, and drove some of the girls to meet other men, who had sex with them despite knowing they were under-age.
Read more...
Imagine if that story were true. Would you really believe that race was not a factor in those hateful crimes? Do you think that, despite conclusive DNA evidence from a girl raped by two men, the police would have hesitated to press charges because the suspects were white and it could make things a bit sensitive in the white community? Would the Crown Prosecution Service have refused to prosecute, allowing the child-sex ring to flourish for three more anguished years?
OK, now let’s try switching the ethnic identities round. Change the fish and chips to kebabs, London to Rochdale, white to Asian and vice versa and you have the case that ended yesterday at Liverpool Crown Court. Nine British Muslim men were jailed for a total of 77 years for rape and trafficking within the UK for sexual exploitation. The whole case made for disturbing reading, but somehow it was the tiny, paralysing details that made it real. Like the fact that one of the convicted men, father-of-five Abdul Rauf, was a religious studies teacher at a local mosque. Rauf asked his 15-year-old victim if she had any younger friends, and drove some of the girls to meet other men, who had sex with them despite knowing they were under-age.
Read more...
Escaping the financial crisis
Deregulation of financial services was supposed to have made us all better off, so why did most of us have to live off credit to keep up? Now that it has all gone wrong, and everyone agrees we're in the worst crisis since the Great Depression, why aren't we following the lessons we learned in the 1930s?
President Obama is the only world leader who has attempted a Keynesian stimulus programme. Why has it been only minimally effective? Why do most other western leaders still insist the only way out is to tighten our belts and pay off our debts, when that clearly isn't working either? And how come the bankers, credit agencies and bond traders are still treated with cowed reverence – don't frighten the markets! – when they got us into this mess?
These mysteries were beginning to make me feel as if I must be going mad – but since reading Paul Krugman's new book, I fear I'm in danger instead of becoming a bore. It's the sort of book you wish were compulsory reading, and want to quote to anyone who'll listen, because End This Depression Now! provides a comprehensive narrative of how we have ended up doing the opposite of what logic and history tell us we must do to get out of this crisis.
Its author is a Nobel prize-winning economist who writes a column in the New York Times and teaches economics at Princeton University. An authority on John Maynard Keynes, Krugman wrote a book in 1999 called The Return of Depression Economics, largely about the Japanese slump, which drew ominous parallels between Japan's economic strategy and the pre-New Deal policies of the early 30s that turned a recession into catastrophic depression. At the time, unsurprisingly, most western economists weren't bowled over; in thrall to the seemingly endless boom, the Great Depression looked to them to be more or less irrelevant. Krugman's latest book will be much harder to ignore.
He doesn't expect it will be an easy message to sell, though. "As far as I can make out, the serious opposition to the coalition's policy is basically a half-dozen economists, and it looks as if I'm one of them – which is really weird," he laughs, "since I'm not even here." Visiting London last week, he met lots of what he calls Very Serious People: "And there are lots of things these people say that sound very wise and sensible. But it's all upside-down; it's all wrong. Yet the power of their orthodoxy – even when it's failing – is quite awesome."
These Very Serious People present economics as a morality play, in which debt is a sin, and we have all sinned, so now we must all pay the price by tightening our belts together. They tell us the crisis will take a long time to resolve, and must inevitably be painful. All of this, according to Krugman, is the opposite of the truth. Austerity is a self-imposed collective punishment that is not just unnecessary, but won't work. We know what would work – but for complex political and historical reasons that his book explores, we have chosen to forget. "Ending this depression," he writes, "should be, could be, almost incredibly easy. So why aren't we doing it?"
Krugman offers the example of a babysitting co-op, or circle, in which parents are issued with vouchers they can exchange for babysitting hours. If all of the parents simultaneously decide to save their vouchers, the system will grind to a halt. "My spending is your income, and your spending is my income. If both of us try to slash our spending at the same time, then we are also slashing our incomes, so we don't actually end up saving more." We could issue more vouchers to everyone, to make them feel "richer" and encourage them to spend – which would be the circle's equivalent of quantitative easing. But if everyone is determined to save, the parents will hold on to the extra vouchers, and the circle still won't work. This is what's called a liquidity trap, "and it's essentially where we are now".
The same principles apply to the "paradox of deleverage". Debt in itself is not a terrible thing, he says. "Debt is one person's liability, but another person's asset. So it doesn't impoverish us necessarily. The real danger with debt is what happens if lots of people decide, or are forced, to pay it off at the same time. High debt levels make us vulnerable to a crisis – and this is when you get the self-destructive spiral of debt deflation. If both of us are trying to pay down our debt at the same time, we end up with lower incomes, so the ratio of our debt to our income goes up."
Crucially, Krugman continues, "what's true for an individual is not true for society as a whole". The analogy between a household budget and a national economy is "seductive, because it's very easy for people to relate to", and it makes some sense when we're not in the grip of a macro-economic crisis. "But when we are, then individually rational behaviour adds up to a collectively disastrous result. It ends up that each individual trying to improve his or her position has the collective effect of making everybody worse off. And that's the story of our times."
At these moments someone has to start spending – and, Krugman argues, it is the government. But we're endlessly being told by the coalition that it has to pay off its debts because servicing the interest is ruinous, and the bond markets will destroy us unless we're seen to be tackling the deficit.
"Well, now. We know that advanced economies with stable governments that borrow in their own currency are capable of running up very high levels of debt without crisis. And we know it, actually, best of all from the history of the UK – which spent much of the 20th century, including the 30s, with debt levels much higher than it has now."
But what about bond markets? Invoked as global bogeymen, we're warned that they punish governments who fail to cut spending – even if cuts don't reduce the deficit. I've never understood why the markets should care how and when we reduce the deficit, as long as we can pay our way. According to Krugman, they don't.
"That's the interesting thing. The actual verdict of the markets, for countries that have their own currencies, has been that they don't really care at all in terms of what you're doing in short-run policy." Likewise, the danger of being downgraded by a credit rating agency has been wildly overstated. "We saw it in Japan in 2002; they had the downgrade, and nothing happened. Which led us to predict that would happen for the US," whose credit rating was downgraded by one agency last year. "And it was exactly right. Nothing happened."
Read more
President Obama is the only world leader who has attempted a Keynesian stimulus programme. Why has it been only minimally effective? Why do most other western leaders still insist the only way out is to tighten our belts and pay off our debts, when that clearly isn't working either? And how come the bankers, credit agencies and bond traders are still treated with cowed reverence – don't frighten the markets! – when they got us into this mess?
These mysteries were beginning to make me feel as if I must be going mad – but since reading Paul Krugman's new book, I fear I'm in danger instead of becoming a bore. It's the sort of book you wish were compulsory reading, and want to quote to anyone who'll listen, because End This Depression Now! provides a comprehensive narrative of how we have ended up doing the opposite of what logic and history tell us we must do to get out of this crisis.
Its author is a Nobel prize-winning economist who writes a column in the New York Times and teaches economics at Princeton University. An authority on John Maynard Keynes, Krugman wrote a book in 1999 called The Return of Depression Economics, largely about the Japanese slump, which drew ominous parallels between Japan's economic strategy and the pre-New Deal policies of the early 30s that turned a recession into catastrophic depression. At the time, unsurprisingly, most western economists weren't bowled over; in thrall to the seemingly endless boom, the Great Depression looked to them to be more or less irrelevant. Krugman's latest book will be much harder to ignore.
He doesn't expect it will be an easy message to sell, though. "As far as I can make out, the serious opposition to the coalition's policy is basically a half-dozen economists, and it looks as if I'm one of them – which is really weird," he laughs, "since I'm not even here." Visiting London last week, he met lots of what he calls Very Serious People: "And there are lots of things these people say that sound very wise and sensible. But it's all upside-down; it's all wrong. Yet the power of their orthodoxy – even when it's failing – is quite awesome."
These Very Serious People present economics as a morality play, in which debt is a sin, and we have all sinned, so now we must all pay the price by tightening our belts together. They tell us the crisis will take a long time to resolve, and must inevitably be painful. All of this, according to Krugman, is the opposite of the truth. Austerity is a self-imposed collective punishment that is not just unnecessary, but won't work. We know what would work – but for complex political and historical reasons that his book explores, we have chosen to forget. "Ending this depression," he writes, "should be, could be, almost incredibly easy. So why aren't we doing it?"
Krugman offers the example of a babysitting co-op, or circle, in which parents are issued with vouchers they can exchange for babysitting hours. If all of the parents simultaneously decide to save their vouchers, the system will grind to a halt. "My spending is your income, and your spending is my income. If both of us try to slash our spending at the same time, then we are also slashing our incomes, so we don't actually end up saving more." We could issue more vouchers to everyone, to make them feel "richer" and encourage them to spend – which would be the circle's equivalent of quantitative easing. But if everyone is determined to save, the parents will hold on to the extra vouchers, and the circle still won't work. This is what's called a liquidity trap, "and it's essentially where we are now".
The same principles apply to the "paradox of deleverage". Debt in itself is not a terrible thing, he says. "Debt is one person's liability, but another person's asset. So it doesn't impoverish us necessarily. The real danger with debt is what happens if lots of people decide, or are forced, to pay it off at the same time. High debt levels make us vulnerable to a crisis – and this is when you get the self-destructive spiral of debt deflation. If both of us are trying to pay down our debt at the same time, we end up with lower incomes, so the ratio of our debt to our income goes up."
Crucially, Krugman continues, "what's true for an individual is not true for society as a whole". The analogy between a household budget and a national economy is "seductive, because it's very easy for people to relate to", and it makes some sense when we're not in the grip of a macro-economic crisis. "But when we are, then individually rational behaviour adds up to a collectively disastrous result. It ends up that each individual trying to improve his or her position has the collective effect of making everybody worse off. And that's the story of our times."
At these moments someone has to start spending – and, Krugman argues, it is the government. But we're endlessly being told by the coalition that it has to pay off its debts because servicing the interest is ruinous, and the bond markets will destroy us unless we're seen to be tackling the deficit.
"Well, now. We know that advanced economies with stable governments that borrow in their own currency are capable of running up very high levels of debt without crisis. And we know it, actually, best of all from the history of the UK – which spent much of the 20th century, including the 30s, with debt levels much higher than it has now."
But what about bond markets? Invoked as global bogeymen, we're warned that they punish governments who fail to cut spending – even if cuts don't reduce the deficit. I've never understood why the markets should care how and when we reduce the deficit, as long as we can pay our way. According to Krugman, they don't.
"That's the interesting thing. The actual verdict of the markets, for countries that have their own currencies, has been that they don't really care at all in terms of what you're doing in short-run policy." Likewise, the danger of being downgraded by a credit rating agency has been wildly overstated. "We saw it in Japan in 2002; they had the downgrade, and nothing happened. Which led us to predict that would happen for the US," whose credit rating was downgraded by one agency last year. "And it was exactly right. Nothing happened."
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