The Price of Progress

July 22, 2012

Recent events in Egypt, Tunisia and Libya seem to belie the Arab Spring narrative. The news stories we all saw and read hinted that these revolts would lead to democracy, freedom and justice. The uprising of the millions of brave men and women across the Arab world was merely the latest in a global wave of democratisation, its precedent being the Eastern European uprisings that helped bring down the Iron Curtain.

And yet, subsequent events in these countries appear to border on a parody of liberal values. Egyptian parliamentary elections in September delivered a majority for fundamentalist Islamists. In the latest presidential election, the Egyptian choice was limited to yet another Islamist and, almost laughably, Mubarak’s former Prime Minister. Many fear that the latter candidate, Mr Shafiq, represents a counter revolution by the powerful bedrock of Mubarak’s former regime, the Egyptian Military.

Ben Ali’s Tunisia was one of the most secular and socially liberal Arab societies. Since Ali was ousted, Tunisia has witnessed the election of moderate Islamist party, Ennahda and increasing activism from Tunisian Salafis, who follow a puritanical version of Islam. Last Tuesday, thousands of Salafis reportedly rampaged through the capital Tunis ‘hurling rocks and petrol bombs at police stations’ in protest against an art exhibition deemed insulting to Islam. They’ve also attacked alcohol vendors and the offices of secular parties.

In Libya, the post – Gaddafi government has ensured that sharia is the principle source of legislation in the new constitution, as well as making it illegal to ‘glorify’ Gaddafi or ‘offend’ Islam. There has allegedly been lynchings of Black Libyans accused of being mercenaries for Gaddafi. The country as a whole is said to be on the verge of civil war as armed tribal militias regularly clash.

If one thing appears to be evident, it is that events aren’t following the script. There have been several responses to this. One is to say the region was not ready for democratic change. Indeed Western policymakers traditionally used this self serving justification to maintain their support for secular despots like Mubarak; left to themselves, it was argued, the Arabs would only vote for theocracies. Another is a kind of despair that the uprisings were futile. In Egypt, this is one reason why the turnout was so low in the presidential elections.

However, from a historical perspective, the difficulties since the uprisings are unsurprising. The way these events were reported reflect a widespread idea that secularism, modernity and democracy go hand in hand in one smooth transition. This view is not historical. The ease with which democratic practices became entrenched in many Eastern European countries is historically unique. Even in that region, this process is not ubiquitous, as the case of Ukraine shows. As for the rest of the Western world, secularism, modernisation and democratisation were uneven, messy and bloody processes. The French are currently on their fifth Republic, and they got there via Jacobin revolutionary terror and Napoleon’s absolutism. It took a civil war for the United States to unify and end slavery. The former axis powers, Germany and Japan became pluralist democracies only in the latter half of the twentieth century. Indeed, many European countries industrialised and modernised under dictatorships. As for secularism, most Western nation states were built on a rigid sense of identity, excluding the ‘other’. The source of this fixed identity was religion: Protestantism in England, Catholicism in France, Calvinism in the United States and so forth.

It is important to bear this historical perspective in mind when interpreting events following the Arab Spring. This doesn’t mean denying the very real difficulties these countries have faced. On the contrary these difficulties are in line with history: democratisation and liberalisation are long term tough processes, not overnight smooth ones. It took Turkey, the region’s best democratic model, decades to put its powerful army out of politics and even now, their influence remains great. So the intractability of the army in Egypt is to be expected. If it took fervent religiosity to cement national identity in Europe, then it is unsurprising if the same occurs in the Arab world and if Islamists do well in the ballot box. This naturally raises concerns about secularism in the region. But it also reflects the fact that the Arab Spring set in motion a process of change that includes suffering and difficult trade – offs. That, in the end, may be the price of progress.


The problem with the MAD doctrine

July 22, 2012

It is not immediately obvious why nuclear proliferation is a bad thing. After all, if the United States and the Soviet Union did not face the possibility of mutually assured destruction (MAD), the Cold War may well have turned very hot. Nuclear weapons spared us the countless deaths of a third World War. As prominent American journalist Fareed Zakaria explains: ‘Great powers went to war with brutal regularity for hundreds of years. Then came nuclear weapons, and there has not been a war between great powers since 1945 – the longest period of peace between great powers in history.’

Even the one time use of nuclear weapons in World War 2 can be seen as – in a very qualified sense of course – desirable, in so far as President Truman’s decision resulted in fewer deaths then had the United States invaded Japan. In Asia, Pakistan and India used to have periodic military skirmishes. They haven’t since both went nuclear. Following this quite reasonable line of thought, Zakaria argues that a nuclear Iran is not as threatening to international security as many have assumed. He points out that Iran’s clerical leaders value staying in power and wouldn’t irrationally launch a nuclear missile. The US could ‘live’ with a nuclear Iran as it did with the Soviet Union.

Now Zakaria may be right that the particularthreat from Iran has been exaggerated; but he ignores the cataclysmic downside risk of a nuclear world, in general. Yes nuclear weapons reduce to almost nil the possibility of conflict but the outcome of any war that does occur is potentially apocalyptic. This risk is inescapable. Deterrence is only effective if you think the other party are prepared to use their weapons. Nuclear states then get naturally caught up in a form of high stakes brinksmanship with their rivals: they have to pretend they’re always willing to press that red button. And as the Cuban missile crisis showed, there is always a chance – however small – that this brinkmanship can push us all off the edge. So yes nuclear proliferation is a very effective peace strategy but also a very risky one.

The argument made here is very similar to that made about exotic financial securities by Nassim Taleb in his highly renowned book, the Black Swan. Before the financial crisis, financial securitisation appeared to reduce the risk of financial losses greatly. Yet inherent in the adoption of these instruments was the small possibility of huge financial loss. It is not for nothing that the great American investor Warren Buffet has referred to financial derivates as ‘weapons of mass destruction’.

The argument in favour of nuclear deterrence only makes sense in a world where we have successfully rode our luck. It would not if the West had experienced even a small scale nuclear war in the twentieth century. (Arguably neither would I be able to write, or you read, this article if there had been a large scale nuclear war) It’s time to try less risky modes of securing world peace. This means that the long – term goal for the Middle East, as in all other regions, should be nuclear disarmament or non proliferation. The caveat of course is that this should eventually apply to all states in the region: Iran, India, Pakistan and Israel included.


Why Secularists should be wary of disestablishment

July 22, 2012

The activists at the National Secular Society (NSS) may well have cheered when hearing of the Anglican Church’s recent warning that legalising gay marriage may lead to its eventual disestablishment. After all, the NSS supports marriage equality and sees the strict separation of church and state as one of its primary goals. Furthermore, others have started to call for disestablishment, frustrated by the Church’s bizarre objections to the gay marriage bill. These include former the editor of The Times Simon Jenkins and Observer columnist Nick Cohen.  The logic here is perfectly valid: the church’s objections to gay marriage constitutes religious interference in politics, especially given that no one is proposing to force them to recognise gay marriage. They are claiming an unjustified monopoly on the right to define what marriage is. Secularist principles dictate that we should kick the church out of politics. Religion belongs in the private sphere, not something to be imposed upon others.

This debate however is often simplified. There are good reasons for a secularist to be wary of disestablishment. The secularist case against disestablishment is made – somewhat unwittingly – by free market fundamentalist and Tory MP Douglas Carswell. He actually supports disestablishment but his reasons are instructive. Like all libertarians, Carswell idealises American society; comparing the Church of England to a 1970s nationalised monopoly, he argues that disestablishment amounts to Thatcherite privatisation. This would make our religious ‘market’ as ‘efficient’ as the United States, where the churches are much better at ‘winning customers’ because they ‘compete for their congregations’. Carswell, like the NSS, idealise the American constitution with its strict separation of church and state. Yet, while the American constitution may be strictly secular, its politics are anything but. We may be frustrated at the church’s anachronistic attitude towards women priests, but at least they believe in evolution. Lord Carey’s comment that gay marriage would be ‘cultural abomination’ is absurd but at least, unlike the late American preacher Jerry Fallwell, he doesn’t believe terrorist attacks are God’s vengeance on a society that allows ‘abortionists, feminists and Gays’. If the American example represents a cowboy free market in religious ‘services’, then perhaps the Church of England is a very welcome form of state regulation.

There is a wider issue here and that is the basis on which groups like the NSS support a strict separation of church and state. The NSS cite their support for disestablishment on the ‘massive and continuing reduction’ in belief. The notion is that faith will ultimately become a small minority interest or even disappear.  The problem with this secularisation theory is that it’s only really prevalent here in Europe. So it’s far from obvious that religion is going to disappear in the modern age. Furthermore, even in Britain, and this is according to a poll commissioned by the Dawkins foundation, 54% of British people still profess Christianity. If we take a different approach to the NSS and assume religion is not going to disappear and become completely irrelevant anytime soon, even in a country as secular as ours, then the pertinent question becomes what sort of religion the state should be encouraging.

In considering this new question, two key points become relevant. Firstly, institutionalised religion with an official orthodoxy can be a moderating factor on faith. It is not a coincidence that fundamentalism is rife in parts of the Muslim world and the United States where there is no overarching religious institution, such as the Anglican Church, and anyone can become a preacher or imam. In the absence of an official orthodoxy, the tendency is to towards literalist fundamentalist readings of scripture.  If we disestablish the church and throw it open to competition, religion in Britain may lose this overarching institutional buffer from fundamentalism. It’s worth noting that while France’s constitution is robustly secular, 51% of its population are Catholic. In this regard, the French state effectively free rides on the institutionalisation provided by the Vatican.

Secondly, in a magisterial study of religion and state in over 175 countries, Jonathon Fox found that state religious monopolies actually reduce religious participation. This could be because states that monopolise religion then incorporate religious symbols and dialogue in their activities – on state occasions for example. In other words, when religion is embedded in the state and in public life, people have less of a need to look for it in their private life. The implication here for disestablishment is clear.

There is no better summary of this article then the following graph, showing the relationship between a country’s wealth and its religiosity. As secularists would predict, religiosity falls as wealth gets higher. The only exception to this rule is the US, which is to the author’s knowledge, the only state with a strictly secular constitution that isn’t majority catholic. Religion is completely free from the state and any other source of institutionalisation or regulation. And paradoxically, the outcome is precisely what groups like the NSS are trying to avoid.

The Great Transformation by Karl Polanyi: A Review

January 5, 2012

Karl Polanyi’s magnum opus The Great Transformation is complicated, hard to read and quite frankly, badly written. The author assumes a great deal of pre – existing knowledge on the reader’s part and his prose is often unclear and clunky.  However, the persevering reader is rewarded with an understanding of Polanyi’s incisive critique of free market economics – or as he calls it, the doctrine of self – regulating markets.  

The Market as Utopia

The core contention is that self – regulating market system are utopian theoretical constructs and cannot be imposed on society for long because they create huge social costs; so society ‘fights’ back by demanding market regulation.

The problem with the notion of a self – regulating market is that it’s based on incorrect assumptions about human nature. It assumes that we all instinctively seek to maximise material gains through economic exchange – to ‘buck, barter and trade’ as Adam Smith put it. This greedy rational Economic Man is the building block from which Classical Economics is constructed. Furthermore, since Classical (and Neo – Classical) Economic theory focus purely on the behaviour of this abstract Economic Man, it considers irrelevant the wider social context within which economic exchange occurs.

Such a view is profoundly ahistorical. Before the Commercial Revolution, markets played at most a minor part in economic systems. Instead, economic systems were based on three different principles: Reciprocation (Gift giving), Distributionism (Command economy) and Householdism (Autarchy). None of these systems were based on the principle of economic gain. Also the economic system was embedded into the social politic. One cannot understand the gift – giving economy of the Kula Ring without understanding the social rituals and customs that underlie the gift exchange. Likewise, the distribution economy of ancientEgypt cannot be analysed separately from the related centralised political structure.

Thus, the Economic Man and the self regulating market are abstract myths. They are not natural to human behaviour. For most of human history, the economic system was embedded into the social system and was not based on markets.

The market revolution represented a radical experiment, of both political economic type and form. The type was of a market economy but the form was to make society subservient to the mode of economic organisation rather than the reverse. A market economy needs the creation of a market society.

The imposition of market ideology created social problems precisely because its abstract assumptions are not empirically correct. The self – regulating market assumes that all factors of production can be commoditised. Polanyi disputes this, citing the fictitious commodities of Land, Labour and Money. These are fictitious commodities because they are more than merely items created to be bought and sold. Yet they are treated only as such on the self – regulating market. Labour for example, is an act performed by human beings, who are not commodities. Treating labour as a pure commodity led to the severe working conditions and abuses of the Victorian workforce.

Moreover, self – regulating markets were deliberately imposed by the state precisely because classical economics is an ahistorical ideology. For example, there was a stream of complex provision for the state enforcement of land enclosure, measures designed to privatise common land. This created a reserve of landless peasants forced to sell their labour on the market. Thus the creation of two key factors of production, Land and Labour, required concerted state intervention in the UK.

The social dislocation and crisis caused by marketisation creates a spontaneous resistance in society; ‘laissez faire was planned, planning was not’ Polanyi provocatively writes.

Pragmatically and on a case by case basis, various social actors demanded protection from the market. The workforce demanded social legislation and unionisation while business interests demanded market restrictions and currency interventions to create stability.

Imperialism, the tensions leading to the First World War and the subsequent rise of totalitarian ideologies should be viewed in the light of this dialectic tension between the imposition of the self – regulating market and society’s instinctive tendency to resist it.

Imperialism became a prominent only in the late 19th century and was a response to the problems created by free trade policy. Increasing economic integration created massive social dislocation, primarily of rural workers. Continental states responded with tariffs and other trade protections. Such measures meant other European states, themselves in the midst of a market revolution, had to search abroad for new markets to sell their produce, encouraging imperialism.

Such mercantilism and imperialistic competition – themselves the result of resistance to market forces – led to World War 1. Subsequently, policy makers, still wedded to liberal ideology, attempted to re-install the Gold Standard as a global currency. The Gold Standard was the currency of the self – regulating market; liberals argued that in a self – regulating market, a commodity such as Gold, would be the currency rather then paper money printed by the state.

However, the Gold Standard led to periodic deflation. This meant forced austerity as prices were kept low. As a result many economies struggled to grow their economies. It was in this environment that societies and governments turned to radical alternatives. Polanyi claims that even the Soviet Government initially tried to re-integrate with the World Economy in the 1920s but was unable to do so, and only afterwards turned towards autarchy and central planning.Germany was able to arm so effectively because it was off the Gold Standard, and Polanyi goes as far as to say that had the US and the United Kingdom left it earlier, freed from its straightjackets, they may have avoided World War 2.

Were the ancients really that different?

Polanyi makes a sweeping assertion that a market economy based on gain and commercial exchange is entirely new to the industrial revolution. He insists that markets were previously always incidental to economic activity. His primary evidence for this claim is anthropological studies of ancient tribes. However, this evidence seems threadbare compared to the scale of the claim he is making, a question that would warrant a book in itself. Can one extrapolate the evidence from small isolated tribal context to more industrialised countries?

Nevertheless, his historical example of radically different form of economic organisation does pose a challenge to Liberalism. The Father of Liberalism John Locke argued that in a state of nature, human society is essentially bourgeois, with private property and markets and demarcated individuals engaging in contractual relationships. To this day economic liberals assume that market relationships are essentially more natural to human behaviour than other sorts of economic arrangements e.g. communitarian ones. Polanyi’s anthropology references suggest there is no reason to believe a state of nature – existing before the state – is Lockean in nature. Furthermore, even if Polanyi’s claim about the irrelevance of markets is exaggerated, his point that previous societies were based on radically different economic principles appears reasonable.  Thus Liberals cannot argue that a free – market is somehow a natural state of affairs, it is only one configuration of running society among a variety, and should be justified on its own merits rather than appeals to human nature.   

How relevant is he to now?

It quickly becomes clear to the reader that the subject of Polanyi’s intellectual attack is not the mixed market economy that we know of today. The doctrine of self – regulating markets, with radically free – markets in labour, land and currency is now only supported by extreme libertarians. No right wing political party in the Western World – with the possible exception of the Tea Party element in the US Republican party – holds such a position now.

Polanyi was a very prescient thinker of his time. He was not necessary against economic progress and market exchange. He says the enclosure movement was necessary. He concedes that self – regulating markets created unprecedented material wealth – his objection is limited to the social dislocation it causes. He called himself a Socialist but his idiosyncratic definition of Socialism left room for at least some private enterprise: ‘Socialism, is essentially the tendency inherent in an industrial civilisation to transcend the self – regulating market by consciously subordinating it to a democratic society.’ Polanyi’s main objection appears to the social costs of a rapid pace of marketisation and the imposition of market forces where they do not apply e.g. money. In this sense, writing in 1944, he was making a powerful intellectual case for the Social democratic system that would be prevalent in the latter half of the twentieth century.

However, in an age where most on the Right accept a whole variety of state interventions, his critique does not bare such force.

Moreover, in analysing the double movement – the market and society’s resistance to it – Polanyi pays little attention to the problems caused by interventions to regulate the market. To be fair to him, he was writing in 1944, before the perils of Communism were so widely seen and the welfare states that we know today had been established. Were he alive now, Polanyi might well say that he didn’t focus on the perils of regulating the market because the priority was the direct opposite at the time.




The anti EDL rally: A view

September 11, 2011

Sometimes, our Great Leader is capable of making a cutting remark. In his February speech on the ‘Failure of Multiculturalism’, David Cameron said:

‘when a white person holds objectionable views – racism, for example – we rightly condemn them.

But when equally unacceptable views or practices have come from someone who isn’t white, we’ve been too cautious, frankly even fearful, to stand up to them’

Cameron’s words were ringing in my ears as I attended Unite Against Fascism’s (UAF) rally against the English Defence League in East London’s Whitechapel last Sunday. The rally was in response to a same day demonstration by the far right group, led by convicted football hooligan Tommy Robinson, in the predominantly Muslim area.

Gathered opposite the East London mosque (ELM), we were witness to several speakers making stirring speeches denouncing the EDL, and celebrating tolerance and diversity – All to the good, one might say, and the best response to the ‘modern day blackshirts’ – Indeed, so forthright were the speakers in denouncing Racism and Islamophobia that you would assume the only source of intolerance in Whitechapel was the English Defence League. Yet, strangely enough, one of the speakers was Dilowar Khan of the ELM, an institution with a record on promoting tolerance and diversity that appears to be, at best, inconsistent.

Google search “East London Mosque” and “homophobia”, and witness the number of relevant results. The first few links will be to the blog of Daily Telegraph journalist Andrew Gilligan, who has become somewhat of anti – ELM activist. Gilligan has a plethora of posts on the mosque. He accuses them, among other things, of hosting racist and homophobic speakers and having close links to the Islamic Forum of Europe, a group that has been condemned by other local Muslim and community groups as ‘fascistic’. Of 22 IFE trustees Gilligan says, only 5 have not also been trustees or officeholders of the mosque.

More striking criticism of the ELM comes from local gay rights campaigners in this open letter – written after a recorded 21% increase in homophobic hate crime in Tower Hamlets – accusing the mosque of ‘creating an atmosphere in which hate is socially acceptable’. The letter lists numerous homophobic preachers who have spoken at the mosque and their colourful statements on homosexuality. See this video for an example of the atmosphere the ELM promotes for homosexuals.

Predictably, all of this was overlooked in the UAF counter protest; there apparently being a stern line taken against whites peddling prejudice and a very lax one against prejudice inside the East London Mosque.

Nevertheless, I feel a certain hesitation writing this piece. Muslims are an easy target for the media, and in attacking a Muslim institution for being intolerant, there’s a danger of perpetuating an intolerance of British Muslims in general. As the open letter points out, there are 80,000 Muslims in Tower Hamlets; only 4,000 of them, or 5%, attend the ELM.  Moreover, the protest organisers may say the point was to focus on the danger posed by the EDL, and not on failings of the mosque.

But if we are to fight the EDL with demands for tolerance and respect for diversity, but apply them only selectively, then such calls ring very hollow. London’s largest mosque is quick to use the language of tolerance against external Islamophobia but is apparently tongue tied in response to prejudice closer to home; which only tars the reputation of the community it serves and amplifies the mistrust that is ammunition for Tommy Robinson and his ilk. That’s something Unite Against Fascism should bear in mind the next time they are in Whitechapel.

Should the public be angrier at the bail outs?

September 9, 2011

The financial world is dull. It is also complicated. Before the financial crisis, that was the justification the Masters of the Universe gave for their sky high salaries, that they were performing financial rocket science that others were unable or unwilling to do.

After the crisis that justification appeared to be filled with crater shaped holes, especially after we learned that many bank chiefs didn’t understand the billion pound bets their firms were making. It was as if the bankers were paid handsomely for pretending to play golf blindfolded; only to be exposed aimlessly swinging sticks blindfolded, hitting only each other and requiring urgent medical attention. While, still being paid handsomely.

So in order to save us from themselves, the bankers asked for a bail – out of £1.2 trillion, a number so stratospheric that we can’t really make sense of it. It is apparently 2/3 our annual GDP. No, I’m not fully sure what that means either but yes, we can all agree we’ve given the banks a hell of a lot of money.

Quite where this money has gone we don’t really know. We keep hearing the banks refuse to lend to small businesses and bonuses keep being paid. Some say the cuts are this severe in order to save money for the next bail out. Yet, we are not that angry. Course, Bankers are not winning popularity contests. – but we’ve moved on. That Vickers report, the one on firewalls and the like, will sort it out we guess. And there’s other news: cuts, riots, phone hacking, the Arab spring; these things we can understand. Finance, well, it’s just quite dull and complicated.

It is time for the Right to make Peace with the State

September 8, 2011

To paraphrase John Maynard Keynes: Practical men, who believe themselves to be exempt from any intellectual influence, are usually the slaves of some defunct ideology.

For many ‘practical’ policymakers on the Right, that defunct ideology is pure free market economics, or ‘Neoliberalism’, and has been since the Thatcher/ Reagan revolutions of the 1980’s.

The neoliberal attitude to progress is that state intervention is a hindrance to private initiative, which if left alone, will lead to economic and social progress.

Or in the words of the influential neoliberal economist Milton Friedman:

The greatest advances of civilization, whether in architecture or painting, in science and literature, in industry or agriculture, have never come from centralized government. 

Therefore economic policy should be focused on reducing the scope of the state. This reasoning explains why no one can criticise free market think tanks, the Tea Party or centre right newspapers for proposing complicated economic policies. Usually 5 words can summarise their position on any economic issue whatsoever: Less Spending. Less Taxes. Deregulation.

There is a problem with this approach to economic policy; historical evidence suggests it is deficient. Ironically, two of these examples, outlined below, are to be found in The Ascent of Money: A financial History of the world by self proclaimed Thatcherite, Niall Ferguson. To his credit, Ferguson is a better historian then he is ideologue.

The world’s first Public Company

Tesco, Google, Apple and BP are examples of the large public companies that are essential to modern society. They are essential because they can raise large funds to operate on a large scale, without which a company like BP couldn’t invest billions into oil refineries to fill petrol stations.

Public companies attract large funds because they offer shareholders two assurances: Limited liability, that shareholders can lose no more money than they invest, and the option to exit an investment by selling on a stock market. These assurances make public company stock attractive to large numbers of potential investors.

Thus, the innovation of a public company with limited liability that is traded on a stock market was one of the ‘great advance[s] of civilization’. But one that – contrary to Milton Friedman’s claims – was a direct result of ‘centralised government’ action:

As Ferguson explains, the story of the Public Company originated in Dutch efforts to wrest control of the lucrative Asian Spice trade from the Portuguese and Spanish.

The great difficulty merchants faced was that voyages were very long – a fourteen month round trip being well below average – and hazardous, with many ships not returning.

By 1600 there were six fledgling East India companies operating out of Dutch Ports. In each case the entities had a limited term – usually the expected duration of a voyage – after which funds were repaid to investors.

Ferguson explains that this business model was insufficient to build the permanent bases and fortifications necessary to supplant the Portuguese and the Spanish.

That’s why the State intervened,

‘Actuated as much by strategic calculation’ as the profit motive, The Dutch parliament proposed to merge the existing companies into a single entity (United Dutch Chartered East India Company, or VOC for short) which was given a trade monopoly on all Dutch trade east of the Cape of Good and west of the Straits of Magellan  

It is worth spending a moment reflecting on how poorly received any equivalent policy would be in the current UK climate – were the government to propose that all firms in an industry merge into a monopoly to serve the national strategic interest. The centre right press would be up in arms. It would simply not be politically feasible.

Unimpeded by the constraints of 21st century Britain, the 17th century Dutch government could engage in innovative institution building. The new VOC structure contained several novel elements that made it a forerunner to the modern public company:

-The principle of limited liability was implied.

-Subscription to the company’s capital was open to all residents. Even servants were among those who rushed to hire shares – anticipating the present age of mass stock ownership.

It lasted for 21 years, a longer period than its predecessors – anticipating the infinite life of modern corporations.

The new company raised 6.45 million Dutch guilders, making VOC the biggest corporation of the era (its English rival only had 820k guilders).

Crucially, a secondary market came into existence allowing shares to be bought and sold. Initially such transactions were done in open air markets but so ‘lively’ was the market that a specialised building – the world’s first stock exchange – was built to house the trading.Ferguson writes: ‘what went on there before noon and 2 o clock each workday was recognizably revolutionary’.

Or, to put it another way, the ‘revolution’ of the world’s first stock exchange came about as a by-product of a state sponsored monopoly.

The capital rich company now had the resources to succeed. By the 1650’s, VOC had established an effective and highly lucrative monopoly on export of cloves, mace and nutmeg.

The World’s first stock market and large scale corporation did not arise out of spontaneous free market action but out of robust state design. Ferguson shows a similar process driving the expansion of home ownership in post war America.

The great American Suburb

Before the 1930’s, Ferguson reveals, little more than two fifths of American households were owner occupiers. Mortgages were short – term, usually for three to five years and the principal was not repaid until the end of the loan term, leading to a ‘balloon sized’ final payment.

Enter the State: As part of Franklin Roosevelt’s New Deal, the American government encouraged mass property ownership as a bulwark against socialism, stepping in where the ‘market had failed’.

Several measures were adopted but what ‘really made the difference for American homebuyers’ was the Federal Housing Administration (FHA) – which did the following:

– Provided federal backed insurance for mortgage lenders to encourage large (up to 80% of purchase price), long (twenty year) and low interest loans.

– Standardised the long – term mortgage and creating a national system of valuation and official inspection, laying the foundation for the national housing market,

‘This market came to life’ Ferguson explains , when a new Federal National Mortgage Association – Fannie Mae – was authorised to issue bonds and use proceeds to buy mortgages from the savings and loan associations (US version of mutual societies).

‘Because these changes reduced the average monthly payment on a mortgage, the FHA made home ownership viable for many more Americans than ever before’ Ferguson writes. ‘Indeed it is not too much to say that the modern United States, with its seductively samey suburbs, was born here’

The influence of the tea party probably makes any repeat of New Deal style planning impossible in the US today. George Osborne hopes and prays for a ‘private sector led’ recovery as he cuts the deficit, but it is proving slow in coming. As both countries struggle with the after-affects of the financial crisis, ideological straitjackets on the right hinder the way forward.

The Thatcher and Reagan movements were products of a bygone era. The notion that an activist State or (whisper it) ‘economic planning’ is always wrong has historical counter examples. After the Soviet Union fell, the Left had to make its peace with markets and capitalism. Maybe in the midst of the biggest recession in a generation, it’s time for the Right to make its peace with the State.

Enter the world of open mic comedy at Pear Shaped

September 7, 2011

London based paper Fitzrovia News has posted online my profile of Fitzrovia based comedy club, Pear Shaped:

Is the focus on News International now disproportionate?

July 16, 2011

See the table on p9 of this report on the trade in confidential information by the Information Commissioner’s Office.

The table ranks publications by the number of [illegal] transactions positively identified.

The top four publications are not owned by News International. Presumably there will be similar exposes of these newspapers?

“Outstanding” comprehensive rejects academy status

June 29, 2011

Headmaster pans “punitive” Ofsted

The headmaster of Southgate Secondary school, an Enfield-based comprehensive rated as “outstanding” by schools watchdog Ofsted, has said Academy status would “shut us off from other schools“.

The government is encouraging schools to adopt academy status, which, according to the government, frees them from local authority and national government control.

But during an interview on education policy, Headmaster Anthony Wilde said collaborating with other schools would be harder if Southgate left local authority control. Southgate helps local schools by supporting headmasters and seconding teachers.

“We want to collaborate [with other schools] as well as compete,” said Wilde.

The government has also introduced the ‘English Baccalaureate’ (EB) – a special certificate for pupils obtaining grade C or above in English and maths, one each from science and humanities, as well as a foreign language. Mr Wilde said while they would support students in obtaining the EB certificate, it was important not to discourage pupils who preferred other subjects, such as Art.

Deprived neighbourhoods

He described Ofsted’s inspection regime as “punitive”, because while praising good schools, it punishes schools in deprived neighbourhoods, sometimes threatening them with closure.

Asked about the Free School Policy allowing parents to set up new schools, Wilde said it was “a good idea” because it “encourages smaller, more focused schools”. But in reality, “only middle class parents” applied to set them up. He also said that comprehensives could become more focused themselves by creating smaller school units.