Monday, 29 August 2016

EU Ref: What was it good for?

 This piece was originally published by the online magazine New Compass

As most of the world knows, the UK had a referendum on EU membership in June. What the rest of the world probably doesn’t know is how divisive the referendum and its aftermath were. It exposed deep divisions around class and race, revealed that half the country knows nothing about the life experiences of the other half, and holds them in contempt anyway and that a sizeable section of the population would like to repeat the exercise until they get the outcome they want. And towards the end of the campaign, an MP was assassinated by a Fascist.

But despite fomenting such profound fissures in British society, the referendum result (Leave won by 52% to 48%) has resolved nothing. Prominent Leave campaigners seem disappointed they won, the Conservative government is nowhere near triggering Article 50 (which begins the two-year process of Brexit) and calls for a second referendum regularly emanate from businessmen and politicians while others hold that Parliament should simply refuse to implement the result. The referendum has, at best, instituted a shaky truce which won’t last long.

The EU referendum was, in short, a terrible way to arrive at an important decision. It failed miserably to apply three vital principles of effective decision-making. The people making the decision did not have adequate information, were denied the chance for deliberation and critical reflection and lacked the power to implement the decision they arrived at.

The referendum was presented as the epitome of democracy. What could be more democratic than asking the people what they think, after all? But other forms of democracy exist that grant sovereignty to ordinary people while avoiding the ephemeral thrill of choosing which section of the elite you like the best. Experiments, such as citizen juries, participatory budgeting, random selection and assembly democracy devolve genuine power and result in more trusted and better judgements:

Deliberation and critical reflection

The EU referendum was a thoroughly mediated experience which relegated the public to the role of passive onlooker. The jousting of the protagonists was presented daily on TV screens and through the print and online media. For most of the campaign, the mainstream media presented the referendum as largely an internal Conservative party contest and revelled in farcical spectacles such as a confrontation of ‘In’ and ‘Out’ flotillas on the River Thames.

Other forms of democracy, however, rest on enabling conversation and deliberation to happen. Participatory Budgeting, for example, involves the election of recallable delegates by assemblies to determine how all or most of a municipality’s budget is spent. According to one academic, “the key ingredient is deliberation, the quality of the exchange of ideas.” Citizen juries spend days deliberating issues such as obesity, transport, electoral systems or work and as a result their findings are trusted by the public.

Thinkers such as Erich Fromm have pointed to the way the jury system, a democratic way of arriving at life-altering decisions, arrives at generally objective and reliable decisions precisely because it involves prolonged deliberation. The participants know their decision will have an immediate and lasting effect and treat it seriously as a result. The EU referendum, by contrast, resembled a two month long edition of ‘Judge Judy’.


One Leave campaigner, the writer
Dreda Say Mitchell, described the political world which she temporarily gained entry to, as “largely one big boys’ club. And it’s for a very specific type of boy, at that.”

Referenda, like its kin Parliamentary government, merely amplifies the representation of people who have already carved out a media profile. The most vocal protagonists of the EU referendum – David Cameron, Boris Johnson, Nigel Farage and Michael Gove – all male and privately educated, illustrate the unrepresentativeness of representative government. The referendum made it plain to see how the upper middle classes dominate the terms of the debate in British politics.

By contrast, there is a growing use around the world of an ancient principle of democratic government – that of random selection. Aristotle thought democracy was characterised by selection by lot, so that citizens could ‘rule and be ruled in turn’, while elections were a sure sign of oligarchy. The modern form of selection by lot involves the creation of a mini-publics by randomly selecting willing participants with the aim of achieving demographic balance and the representation of all social groups. The new Icelandic Constitution of 2010 and the electoral system in British Colombia were both partly determined by randomly selected groups of citizens.

Aside from its inclusiveness, random selection or sortition has two other important effects. It detaches political influence from personal ambition as participants are not elected and only wield influence for a finite period. And it brings together people with divergent views and backgrounds, compelling them to take into account perspectives other than their own and those of people like them. In these senses, random selection represents the antithesis of the UK’s referendum experience.

Adequate information

The EU referendum excelled in generating a thick fog of misinformation. The Leave side peddled the fiction that Brexit would result in £350 billion in extra funds for the NHS every week and made immigration the centrepiece of their campaign, masking the fact
they weren’t in fact promising to reduce immigration. And, aside from aping Nazi propaganda, the Leave side’s posters deliberately conflated the migrant crisis with EU membership.

The Remain side, meanwhile, predicted economic Armageddon and warned a ‘punishment budget’ comprising spending cuts and tax rises would inexorably follow Brexit. Allegedly neutral economic experts from the Bank of England, OECD and IMF were cited to underline the recklessness of voting Leave and its calamitous effect on GDP. But these experts were anything but neutral. The OECD had advised Britain to
‘press on with austerity’ on the eve of the 2015 General Election, while the Bank of England ensured making rich people richer and inflating share prices were the crucial elements of the way the state responded to economic collapse in 2008.

Both sides in the campaign also indulged in the daily fantasy that the UK was still a manufacturing nation and that the result would either ruin or invigorate the country’s trade. Politicians made endless visits, garbed in high vis vests and hard hats, to whatever manufacturing firms they could locate. In truth, the UK has undergone
rampant deindustrialisation over the last 30 years and the country’s biggest export is financial services.

Other forms of democratic decision-making, however, are predicated upon understanding, not concealing, the issues at hand.
A Citizen’s Jury established in Mali in January 2006 heard evidence for and against the introduction of the GM technology before concluding that GM crops should not be grown in the country. In the US state of Oregon a randomly selected panel of citizens convenes to scrutinise ‘ballot initiatives’, referendum proposals which are then put to the state’s voters at election time. They take evidence from advocates and policy experts before compiling a ‘Citizens’ Statement’ about the proposals, essentially a piece of distilled information which can be used by voters to make their choice.

Both these democratic techniques embody the proper attitude towards experts. Experts are never neutral and should not be treated as such. There is disagreement within every field of expertise and practitioners, whatever their claim to superior knowledge, need to be interrogated by citizens and their viewpoints translated into understandable language. Every branch of specialised authority, especially finance and economics, relies on establishing an air of mystery about its workings and judgements. The task of a genuine democracy is to dispel this.

Taking back control

A natural and justified objection to the examples of alternative democracy presented here is that they are mere adjuncts to the existing system and have no real power. They can advise but little else. So I think we need to establish ways that ‘alt democracy’ can transform society, not just make it appear more consensual. Appropriating the language of the Leave campaign in Britain, here are two ways we can ‘take back control’.

The first is through the public control of information. Beyond the racism and xenophobia, the UK’s referendum result indicated there was something very wrong with status quo despite the official narrative of growing GDP and record levels of employment. But this was an intuitive sense of anxiety and directed at the wrong target.

We need to shine an unflinching light on our economic system and dominant institutions. The writer, Dan Hind, advocates a system of
‘public commissioning’ with the expressed intention of taking the power of forming opinion and social depiction out of the hands of the mainstream media and giving it to the public. Through an annual budget of £80m, thousands of journalists and researchers would be employed to undertake long-term research. The public would vote for the subjects it wanted to see investigated and each round of voting would be preceded by open meetings. “National institutions, the EU and institutions like the International Monetary Fund, the World Bank, and the Bank of International Settlements would all become available to sustained scrutiny,” says Hind. This approach was piloted in Croatia in 2013.

The second way is through the public establishing an influence over private investment and government stimulus. Illustrating how little has changed over the last eight years, the Bank of England responded to the Brexit vote by spending £170 billion on shoring up the wealth of rich people. It revived its Quantitative Easing (QE) programme, bought the debt of companies it liked, and re-embarked on a £100m programme to encourage banks to lend out their money. QE, which buys debt securities from pension funds, insurance companies and ‘high net worth’ individuals, has succeeded in pushing up the prices of assets such as shares and property. But for those without assets it is meaningless.

A real way to ‘to take back control’ or in fact to establish it in the first place, would be for the public to decide how economic stimulus is spent. Through country-wide assemblies the public could determine how many new council homes are built, develop transport projects, found co-operatives or establish medical research laboratories.

If this democratic method of assigning state stimulus money was established, we could become more ambitious. The American mathematician and author of After Capitalism, David Schweickart, has proposed ‘social control of investment’:  a tax on the capital assets of all enterprises to be dispersed throughout the country on a per person basis, enabling assemblies to decide how a proportion of investment is spent. Apart from establishing a breach in the divine right of central and private banks and corporations to decide where and how investment takes place, such a new democratic initiative would impede the inexorable growth of mega-cities, such as London. Mega-cities are ecological nightmares, sucking in people and capital, while starving other regions of investment. If GDP is calculated per capita, London and the South East are the only regions of the UK to have recovered at all from the crash of 2008. This is one form of inequality, highlighted by the referendum, which needs urgent rectification.

But instead of these democratic alternatives, the UK has indulged in the illusory freedom of plebiscite democracy, which assiduously stokes dissatisfaction while failing to deliver anything more than the chimera of empowerment. Real democracy looks very different.

Saturday, 13 August 2016

Is the world getting richer?

There’s a Twitter hashtag called #firstworldproblems. Your WiFi packs up, a fat person sits next to you on the train and talks into their phone for the entire journey, Waitrose runs out of Italian Prosciutto slices forcing you to buy ordinary ham. Mildly irritating events that appear all-consuming, prompting you to take to social media to vent your frustration and simultaneously display a mature self-awareness that your petty grievances are as nothing in the scheme of things.

For accuracy although not brevity, #firstworldproblems should be rebranded #firstworldproblemsofthereasonablyprivilegedindevelopedcountries. A tweet complaining, ‘Had to wait 1 ½ hours for baked beans & noodles at the food bank today! #firstworldproblems’, doesn’t sound right.

Is, though, economic stagnation and decline a ‘first world problem™’? The 2008 Global Financial Crisis had, as its name suggests, a world-wide impact but has been felt most severely in developed economies. The UK’s economic ‘recovery’ disappears into thin air when GDP is calculated per capita – ie per person, taking into account the increase in population over the last six years. Europe has suffered two recessions since 2008. The near zero interest rates in evidence throughout the developed world betray the fact that no real economic recovery has taken place. If it had, borrowing by companies to invest would have pushed the price of money – the interest rate – upwards. This hasn’t happened.

By contrast, consider China. The Chinese economy has slowed to a growth rate not seen since the last year of the 20th century. But, at 6.8%, it still stands at a level that makes developed economies green with envy and represents a record of economic growth they have rarely equalled at any time in history. Per capita income in China grew fivefold between 1990 and 2010. In advanced economies, the story is the opposite. Between 2005 and 2014, real incomes were flat or declined for two-thirds of households in 25 rich economies.

Elsewhere, India, now the world’s seventh largest economy, has achieved an average of 7% annual GDP growth for the last two decades. The Turkish economy has grown by nearly 4% a year since 1999.  So is the malaise of weak economic growth, halting business investment and dwindling wealth limited to developed economies? Is it a first world problem?

Paul Mason, in his book Postcapitalism, marshals the evidence to suggest it is. According to him, the era of globalisation (the late 1980s onwards) has witnessed a palpable growth in the incomes of two-thirds of the world’s population. In terms of GDP per person, the developing world, he says, has grown by 404% since 1989, a spurt of economic expansion that outpaces even the post-Second World War boom, which was centred in Europe and the US.

In contrast, the people who have decidedly not benefited from globalisation live in the developed world. “They gained almost nothing from capitalism in the past twenty years,” Mason writes. “In fact some of them lost out.” The losers of globalisation include “black America, poor white Britain and much of the workforce of southern Europe”.

Branko Milanovic, a World Bank economist, argues that while the global 1% and the middle classes of so-called ‘emerging market’ economies have been the main beneficiaries of globalisation, they are not, by far, the only ones. The poor have also got decidedly less poor. “The surprise is that those at the bottom third of the global income distribution have also made significant gains, with real incomes rising between more than 40% and almost 70%,” he says. It is this rise in wealth at the bottom of the ‘global pyramid’, claims Milanovic, which is responsible for the startling fall in the ranks of the world’s ‘absolute poor’ over the last 20 years.

Milanovic does not spare the hype, calling this change, ‘probably the profoundest global reshuffle of people’s economic positions since the industrial revolution’.

Have the poor inherited a bit more of the earth?

But is the hype justified? Are we in the West largely blind to the material progress that has been made in other parts of the world? One reason, however, to remain sceptical of claims of mass global enrichment is that it rests heavily on poverty reduction in one country alone – China. Home to 1/5th of the world’s population, China has been responsible for more than three quarters of global poverty reduction. Without China, whose internal political economy is configured very differently to the market triumphalism dominant in most of the world, the World Bank’s poverty figures would look markedly less impressive.

Another reason for distrust is that world GDP statistics don’t bear out the world-bestriding optimism. “The relative stagnation of the economy since the mid-1970s is a global phenomenon,” insists US Marxist economist Andrew Kliman. He argues that slowdown in economic growth that has taken place in the US since the 1970s is “somewhat less drastic” than that of the rest of the world (advanced and developing countries alike). After 1973, says Kliman, the growth rate collapsed by more than half in Africa, Latin America and the Caribbean, as well as in Europe and Japan. Remove China and India from the mix and the Asian growth rate shows a similarly sharp contraction.

But the claim that globalisation represents ‘the greatest economic event in human history’ does not rest on development since the 1970s but since the late 1980s and, in particular, the early 2000s - when Mason’s figures show growth as particularly marked. But even here Kliman dissents, arguing that “for the period since 2000, World Bank figures indicate that growth of real GDP per capita accelerated only minimally.” According to Kliman, world GDP per capita stood at 1.3% between 1990 and 2000 and at 1.6% between 2000 and 2008. Far from earth shattering and nothing like the 3.2% global growth that occurred in the decade between 1960 and 1970.

You can balk at the notion of using GDP growth as a surrogate for people’s average incomes. GDP growth per capita (per person) does reflect the reality better than bare GDP figures, as the UK’s experience shows, but it is far from perfect. If GDP represents national income, it offers no clue as to who, within the nation, receives that income. So a country with modest GDP, could be internally egalitarian and effective at reducing poverty. Left-leaning Latin American countries such as Uruguay, Bolivia, Venezuela and Ecuador may fall into this category. But GDP still gives a broad indication of how rich a country’s inhabitants are.

You might also have suspicions about the insights of an avowed anti-capitalist like Kliman. Consider then those of Ha-Joon Chang, an ‘institutional economist’ who believes capitalism to be the “best economic system humanity has invented”. According to Chang per capita income growth in the developing world stood at 3% in the 1960s and ‘70s. But it fell by nearly half, to 1.7%, for the two decades from 1980. Income growth did rise in the 2000s, says Chang, bringing the growth rate up to 2.6% for the entire 1980 to 2009 period. This is still, though, below the pre-1980s record, and much of that growth has depended on the commodity boom which Chinese economic growth hugely stimulated. With the Chinese slowdown, the commodity boom has ebbed as well. The South African economy, the 2nd largest in Africa, is ‘in crisis’, the government there admits.

The growth rate for particular regions illustrates a downward trend, hardly commensurate with the greatest spurt of development in human history. Latin America, notes Chang, grew 3.1% in per capita terms in the 1960s and ‘70s. But between 1980 and 2009 at a rate of barely one-third that level – 1.1%. Per capita income growth in Sub-Saharan Africa was 1.6% in the 1960s and ‘70s but only reached 0.2% between 1980 and 2009. For many years in the 1980s and ‘90s African growth, under the tutelage of destructive Structural Adjustment Programmes, was actually negative. According to the NGO, Global Justice Now, in 2008 there were 562 million people living on less than $2 a day in Sub-Saharan Africa, a figure almost double 1981’s 288 million. The overall population of Africa has also increased since the early ‘80s, “but even proportionally, there has been almost no improvement in poverty rates in sub-Saharan Africa since 1981,” the NGO says.

Paul Mason claims that during the post-war boom capitalism suppressed the development of the global south and that “unequal trade relationships forced much of Latin America, all of Africa and most of Asia to adopt development models that led to super-profits for Western companies and poverty at home.” The coming of globalisation “changed all that”.

This is only partly true. Exploitation by the West intensified in the 1980s and ‘90s, and globalisation, for most countries, has not really remedied that disadvantage. So while some large non-western countries, specifically China and India, have grown spectacularly (although poverty reduction is much more marked in China), the great ‘global reshuffle’ is much less profound for most of the world’s population.