Liberal Democracy in Britain — now is the hour

     I spent my life assuming that the Liberal Party (becoming in time the LibDems) was my natural political home. But I was thinking of Gladstone, Asquith, and Lloyd George; thinking of a liberalism that extended the franchise, gave home rule to Ireland, massively taxed the landed magnates, introduced pensions and a heath service, and weakened the privileges of the House of Lords. I was taken with the idea that Liberals commanded the moral high-ground, unique in British politics and perhaps in world politics in that they fought not for their own pockets, but for other people's welfare, people less privileged than themselves. Liberalism was much more than laissez-faire free markets. 

     I trusted that Liberal policies would be well considered, and costed; by philosophers and economists. As I have grown older I have begun to doubt that superior moral and intellectual underpinning, and realise now that I have to do some radical thinking myself. I cannot rely on the Party line, but must shoulder my share of responsibility in forming the Party line. We must not let the LibDem label signify an empty reluctance to hold an opinion.

     I was brought up to the typically British notion that we have little or nothing to learn from other countries. It was a shock to find that, back in the seventies and early eighties, Germany and Scandinavia had already legislated for worker participation (Mitbestimmung, q.v.). More recently I came across the concept of Ordoliberalismus (q.v.), which emphasises the role of the state in actively ensuring that the free market produces results close to its theoretical potential. Germany evolved this vision back in the fifties; we seem not to have fully grasped it yet. 

     We have become mesmerized by the USA. There is the facile and lazy assumption that whatever works in the USA will work here, so we build shopping malls and BurgerKings, and watch Hollywood films, and abandon the adverb. But the USA has as maniacal a fear of socialism and trade unions as it has a love of firearms. Have we not yet grasped that we are different? We (I speak for myself and surely for many millions) are nearer to Europe than to the USA, geographically, climatically, emotionally, historically. 

     I think Capitalism is too rampant, in the UK. Are the current LibDems going to do anything about super-tax, wealth tax, off-shore accounts, money laundering, green energy, worker participation on boards of large and medium companies, curbing director salaries, reviewing student fees, and local government funding? If we stay in Europe have the LibDems got any policies to ameliorate real defects of the Europe project or to improve the way Europe is?
     In the history of the LibDem party this is a crucial 15 days. If we want to vote against the chaos of Brexit, we may have to vote with Labour in certain marginal constituencies. It would be an absurd vanity to expect a labour candidate to stand aside for a LibDem candidate if they are polling far more strongly. (In some few constituencies it should be the labour that steps aside.) 
     There will never be any future for the LibDems, and no proportional representation, till that is grasped. But absurd vanity seems to exist. Oh dear!

--

Ian West, 9 Thenford road, Middleton Cheney, Banbury, 

Why not a Second Referendum?

I suggest something like the following, bearing in mind:

[a]. The question is “What is the best for the country?”,  not “What do I want?”. There is only one “best for the country”.

[b]. This whole exercise needs more spirit of compromise. Think before you cast your vote “What if one option is clearly unpopular? Then why vote for it?"

*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&

We suggest the following as a way forward that might appeal to a majority of MPs and be ‘fair’. Voters are to be encouraged to a spirit of compromise, and to reflect on what is best for the country and fellow citizens rather than the outcome that suits them personally.

[1]   It is widely understood and accepted that Westminster Parliament is sovereign in the United Kingdom, as established in 1649. The Queen and her ministers play an executive role that must ultimately be reversible by Parliament. Parliamentary (i.e. representative) democracy must trump plebiscites or referendums. Referendums are useful as ‘straw-polls to test the weather'.

[2]   It has been argued that the 2016 referendum did not specify sufficiently the terms of exit that would emerge if the country sought to leave the EU. Further, it was not made sufficiently clear to the public that the 2016 referendum was advisory not definitive. Further, there were electoral rules broken. There can be delay and expense but no affront to democracy in asking for another referendum. (The Swiss have frequent advisory referendums; 3 were held in the first 5 months of 2019.) 

[3]   We therefore suggest asking the EU for a 6 month extension (or an indefinite revoking of Article 50), in order to run the following referendum:

[a] UK voters to vote for one only of the following three options:

[i]  Remain in the EU with full existing rights, exemptions, rebates and duties. 

[ii] Leave the EU on Theresa May terms (*One-off divorce bill of 39B£, respect EU-citizen rights reciprocally, transition period, UK leaves Single Market, and Customs Union, and EU institutions, but Northern Ireland stays in the Customs Union if Britain diverges.)

[iii] Great Britain leaves the EU without a deal in place, without a transition period, but presumably with the ability to make deals in the future without prejudice. A hard border is created in Ireland with immediate effect. 

[b] In the event that no single one of the three options exceeds any other by at least 1% of the votes cast the default position is that we retain our present EU membership with full existing rights, exemptions, rebates and duties, as there being insufficient justification for massive upheaval.

. 

[4]   Parliament will be expected, but is not bound, to endorse and enact the result of this referendum.

(*I have not found it easy to find a clear statement of Theresa May’s deal. Something like this would need to be on the ballot-paper)

---

Ian West
9 Thenford Road, Middleton Cheney,
BANBURY, OX17 2NB,

Bank Capitalization

“If the banks relinquish risk to the state, they must also relinquish interest in the same proportion.” [1]

Following the banking crisis of 2007 – 9 I read avidly into the question of Debt, Credit and Money Supply. I am particularly indebted to Tony Weekes & Sue Holden [2], Michael Rowbotham [3], and Richard Werner [4] for their clear expositions of the manner in which a very large fraction of our ‘money’ is generated as credit, and its corresponding debt. Their clarity triggered a train of thought in which I re-designed the whole banking system on a more logical and less pernicious basis. Let me explain.

When the owner of a business accumulates more capital than he can usefully employ, he is willing to lend it to friends to enable them to build or acquire plant and the means of producing goods and wealth. The borrower is willing to offer, and (depending on his religion) the lender is willing to accept, a small and regular fee proportional to the outstanding value of the loan, i.e. 'interest'. In a free market where there are numerous independent lenders and borrowers, the level of interest should indicate the real value of the loaned capital. Banks arise as clearing houses to link depositors and borrowers.

Banks are keen to lend at interest, for that is the way they make much of their profit. It soon became clear to banks that (in times of peace and stability) they could lend more money than they strictly owned, for the chance of all the depositors demanding repayment simultaneously was very small. As long as their borrowers eventually paid back all the borrowed money (or forfeited equivalent collateral) they could lend out their capital 5 times over, or 10 or 100 times. Lord Turner suggests [5] that banks should be allowed to lend 5 times as much money as they own, the Swiss bankers suggest 14 times; the risk-takers of Wall Street and the City of London may have dared to go to 30 times, but that seems to have been too far. (I am talking of ratios of capital to total lending of 20%, 7% and 3.3% respectively.) It does seem crazy that there is as yet no agreed ratio of total bank assets to capital held, and no mechanism of insisting that it is adhered to. The old mechanism was to let the over-extended banks fail, and then lock up the board of directors for debt [6]. That worked well enough to inculcate a generation or two of prudent bankers; but it created hardship for thousands of innocent depositors, and governments now-a-days step in and supply the missing money, with the consequence that bankers have become progressively less prudent.

It could be argued that the money that banks lend over and above their own capital, the debt-based money (or credit-based money), is not in any sense the banks’ money, and the interest on it should therefore not be their interest. I am going to argue that it could instead be regarded as a state asset. This is especially reasonable when it is ultimately the state that underwrites the bad debts. Under the present system it can be argued that when a bank makes a loan it takes a risk, and that risk gives it a right to the profit which is the interest; the bigger the risk the higher the interest. But it is the state that ultimately takes the risk. If the banks relinquish the risk to the state, they must also relinquish the interest. On this principle, banks would only keep the interest they earn on the capital they hold; interest they earn on their lending of debt-money must be handed to the treasury. On this basis there would be much less incentive for the banks to over-extend. They would still earn fees on the contracts they draw up; their income would consist of fee income plus interest on their lent capital, but it would not include interest on money they do not own –– which is the current anomalous position.

This rationalization effectively takes from banks the power of generating money and passes it to the government. The banks would be the brokers by which the treasurer generates debt. Fee income suffices for doctors and lawyers, so why not bankers?

Pursuing the argument further we can consider bad debts of two types: [a] when the debt is totally written off, and [b] when there is collateral. For clarity let us suppose that the bank that issued the loan is operating a ratio of capital to total assets of 10%. In case [a] the bank would lose its 10% portion of the loan, while the state loses its 90% portion. The bank would also lose its brokerage fee, as a punitive incentive towards prudent lending. In the case where there is collateral (type [b]), the collateral would revert to bank and government in the ratio 10:90; but the bank would again lose their brokerage fee as a punishment for arranging a ‘bad’ debt. (Or the collateral could revert wholly to the government with the bank being paid its lost capital minus its forfeited brokerage fee).

Note that a ‘bad’ debt with collateral is hardly a bad debt, for the lending bank can end with a more valuable real asset than the virtual debt they created in the first place. They lend money of which they own as little as 10% or even 3%, in exchange for the title-deeds of a real property worth 100%; so of course they are perfectly content to foreclose! This situation can lead to what is called ‘predatory lending’ whereby banks deliberately lend to someone who cannot easily pay back the loan, and where the object is to acquire the collateral; for example, the selling of ‘sub-prime mortgages’. This destructive practice is possible under the present laissez faire system; and indeed it is encouraged by the system, in so far as banks are encouraged to make profit. The cynical onlooker can shrug and say “We cannot stop stupid people signing stupid contacts”. But it is repugnant to the average citizen to see clever people taking money off simpler people in this way; or in any other of the manifold ways currently permitted, practiced, and encouraged by our corrosive financial system. The argument developed above would largely eliminate the problem of predatory lending.

How might this reform of the financial sector be implemented? It would be as simple as the Inland Revenue taxing all lending institution on their interest-income at a rate of not 20% nor 40% nor 50% but in proportion to their capitalization ratio; so at 97% if they are capitalized at 3%, and at 99% if they operate at 1% capitalization. This might seem a very high tax rate, but as argued above, the portion of the interest that I propose to tax in no way belongs to the banks, and letting them keep it seems even more anomalous than claiming it for the Inland Revenue.

References:
[1]  This idea stems from my post of 2011/11/ Debt-and-banks; it was also deployed (2014/8/12) on my IanWest2 blog: "Debt-Money, and the Banking system".
[2]  The Friend, 27 May & 3 June, 2011.
[3] http://www.freewebs.com/whosemoney/gripofdeathchapter1.htm.
[4] http://www.youtube.com/watch?v=wDHSUgA29L
[5]  https://www.theguardian.com/business/blog/2011/oct/12/financial-policy-committee-bankofenglandgovernor
[6]  Overend, Gurney and Co. crashed in 1866, City of Glasgow in 1878.

Brexit conciliation

The question of Brexit has proved very divisive and damaging to that feeling of unity and common purpose that carries a country towards progress. There seem to be two 'nations' living in one country, drawing apart in order to vilify each other. Most of the comment on social media is distastefully vituperative, scoffing, and exaggerated. Few participants seem to be aware that they will eventually have to settle down next to their fuming and mud-bespattered targets, to resume normal life; buying, selling, helping and being helped.

I am myself a natural Europhile, looking a little into the workings of the Union, at the Court, Council, Commission, Parliament, and Bank; wondering who was trying to improve its weaknesses; but generally pleased with its success in transforming and strengthening the Europe of which we are geographically and inevitably a part.

I noted two of today's tweets. Ash Sarkar (@AyoCaesar) bemoaned the lack of conversation and compromise, and asked whether Remainers had a plan for winning over people who voted Leave. Guy Dorrell (@guydorrell1), however, thought that the UK was now #Remain, what with the exploding of the £350m lie, and the introduction of 3-years' worth of fresh young voters since the 2016 referendum, not to mention unease about #darkmoney. No need, he thought, to change the minds of the ideologues. For Guy Dorrell, it would be enough to swing the opinion in the country to 51% remain:49% leave. It seems he would happily ignore the disappointed 16 million, but of course that would leave the country just as riven as at present, but heading in the opposite direction. Ash Sarkar (and I) would prefer a route that could be chosen by most or all of our 46 million electorate.

In the spirit of compromise and conciliation I tried to draft a few 'tweets' that might bridge the divide.
1. The idea that leaving the EU would save us £350m a week turns out to have been a deliberate lie; the truth is complex, what with Thatcher-rebates, EU-funded projects, grants, and collaborative research. Britain does make a small net contribution as Britain is of above-average wealth, but the intangible benefit is in bringing Europe towards a common standard; it is a laudable objective and it applies as much to Cornwall and the Scottish Highlands as it does to Romania.
2. We want the UK to benefit financially from the Common Market, buying and selling across frictionless borders. So, why choose to leave the EU table and lose the moderate degree of control that we are accorded by being a moderately large and moderately wealthy component of the EU?
3. We democratically elect members to the European Parliament, and this country elects its own representatives to Council and Commission. In terms of 'democratic control', the EU is not greatly different from our own government.
4. How could abandoning the regulations imposed by the EU benefit our citizens? That would likely lead to lowered standards of quality, and worker-welfare. It might enrich businesses, but impoverish our citizens.
5. UK retains sovereignty as long as, in the last resort, it can leave the EU. It has become clear that negotiating a sensible and orderly Brexit will require far longer that 2 years, even if we were all pulling in the same direction, and with enthusiasm. Nor is there a need for desperate haste, except in the minds of parliamentarians elected for 4-years.
6. Which of us realised that Brexit would mean severing Northern Ireland from the United Kingdom (leading maybe to a united Ireland)? It might be good for some and bad for others; but it was completely unforeseen.

Would it not be a sensible compromise to delay Brexit for 2 - 5 years, to let Parliament and the Civil Service think more about these complex issues, work out the costs and the benefits, and a plan of action?

George Monbiot and Re-Wilding

Dear George Monbiot,

    I am a great admirer of your tweets and Guardian pieces. However, I agree with your suggestion that you still have some thinking to do on those novel and stimulating ideas about “Inter-generational Theft”, “Re-Wilding”, and “Commons”. I see now that you were addressing yourself to an undergraduate audience, and though the vice-principle sitting next to me said she welcomed the ‘mixed’ audience (meaning the greybeards like me), it may have been wrong of me to put my oar in. But that was my enthusiastic response to your provocative remarks. 

    Inter-generational theft: were you just pandering to a presumed younger audience? I find that concerned older people are quite as engaged as the concerned younger ones, and my bet is that the greediness of my generation will be well matched by the greediness of their descendants. Though I agree that we (current citizens of all generations) are polluting the planet that future citizens will inherit. 

    The idea of re-wilding Britain makes me think of Marie Antoinette playing Bo-Peep in the garden at Versailles. I am all for letting ecosystems evolve on their own without human interference. But where? There are too many humans; in England particularly. You asked, “Where are the Elephants that once roamed these English oak-woods?" Where indeed! They are endangered even in Africa where there are 42 humans per km^2; what chance in England where there are a hundred times as many humans per km^2? You mentioned wolves in Oxford. Well, there were plenty of wolves in England at the time of the Norman conquest (human population 2 million), but they were hunted vigorously, and as the population of humans grew English wolves were exterminated; circa 1500 (human population 3 million). There was no longer room for wolves and men. Since then the population of England has grown 20-fold to 55.3 millions. 

    In 1973, when I got married, the 'good causes' around Cambridge were Greenpeace and Population Countdown. Where-ever has the latter gone? No! One does not need to kill people; merely educate and reward them. The fertility rate in Britain fell from 3.5 babies/woman in the early-modern period to under 2.0 in 1930 and is now 1.79. That of Nigeria today is 5.4, but is falling slowly. (Nevertheless, I think in vitro fertilization need not be offered free on the National Health Service.)

    You advocate “commons". In that case we should understand the processes by which the commons of early-modern England were enclosed and privatised, in order to know and neutralize the forces that will oppose you. Public and communal land is still passing inexorably into private hands; even nominally ‘unalienable’ allotments. 

    Your first questioner seemed to be asking if the same forces that got us into this mess could not be used to get us out of it, which concept I applaud in the sense that we have to work with humans as they are — inherently greedy and increasingly desperate to survive. You wittily rebutted by quoting Einstein, that the thinking that produces a problem is not likely to get you out of it. But look at the Carbon Tax success in British Columbia where it has been shown greatly to reduce CO2 emissions, and even to boost GDP [https://en.wikipedia.org/wiki/British_Columbia_carbon_tax].

    I am all for limiting CO2 emissions. I travel by public transport, and heat myself with renewables, wherever possible. I am not so worried in the longer run, as I understand that the Earth has been round this cycle several times before. Atmospheric CO2 levels varied cyclically from 0.02 - 0.04% (v/v) over the last million years, falling during each interglacial. Plants consume CO2 and do so faster when the climate is warm, and the CO2 levels high. But before that, levels were 10 times higher in the Cambrian period, till the laying down of the chalk in the Cretaceous, 100 million years ago. Before that, during the Carboniferous period (350 million years ago), temperatures (and CO2 levels) oscillated up and down a number of times, laying down a sequence of coal measures. I presume things will revert to ‘normal' once we get the human population back down to 1% of its present level. Is that the Lovelockian view.

Yours, Cawstein

==================

Monarchy and despotism

Round a Mexican dinner-table, recently, a young economist was maintaining that the monarchy in Britain serves no purpose and is therefore a big waste of public money.  I found myself retorting as follows.

"Do you not think President Trump has too much power?" I asked. "Yes", she replied.

"And do you think President Putin has too much power?" I asked. "Yes", she replied again.

"What about Maduro in Venezuela, al-Bashir in Sudan, Lopez Obrador in Mexico?". "Same thing", she agreed, "and in many other places".

"Well then, perhaps we British are inclined to underestimate the benefit of our monarchy. The role might be a passive one, in that it obviates the need for a president."

I had a feeling that I had at least scored a point. 

A few days later I read a chilling article [1] by Seymour Hersh in the London Review of Books claiming that George HW Bush, as vice president to Reagan, organized a private task force bypassing the CIA and Congress, which engaged in 35 covert operations aimed at curtailing the power of the Soviet Union. 'Covert' here means 'illegal', The organizers knew that the public would cry "foul". President Reagan was kept largely in the dark (we were told) from fear that he would blurt something out that gave the game away, but nevertheless took some criticism over the 'Iran-Contra Affair' [2], the operation that did leak out.)  Hersh, who relies on contacts and 'smell', made a convincing story, but a shocking one. We caught a glimpse of how easy it would be for the levers of power to fall into the hands of one man. 

No one can visualise the present Queen, or the Prince of Wales, playing such a role. 

References:

[1] https://www.lrb.co.uk/v41/n02/seymour-m-hersh/the-vice-presidents-men

[2] Ruled to be in breach of International Law by the International Court of Justice.

Is Parliament Confused or Ossified?

 Ed Wilson, in a recent tweet (@eddwilson) asked if Parliament was too weak to stop this agonising stasis that sees us drifting (with what feels like gathering speed) towards a 'no deal Brexit'.

I suppose Parliament has the power it thinks it has, or believes it has, or can persuade us that it has; "Possunt, quia posse videntur".  So what is the problem?  

° Are MPs too polite? Are they deferring to the high office of the Queen's first minister? Of course it is a very difficult job, and perhaps we should let her have another shot? But no! This is too serious.

° Or perhaps parliamentary procedure has got ossified in its own tradition, and there is no-one to grab the mace (so to say). No-one dares to put forward a motion that could command a majority, because "it is the governments job to initiate legislation"? And the Government is waiting on the Prime Minister. 

° Or is Parliament simply confused, like the rest of us? The Prime Minister spent 2 years negotiating a deal, presented it to Parliament, which duly rejected it. Then the following Vote of Confidence was passed! But..... But surely.....? 

Was this craven? MPs voting simply to keep their seats, rather than on the issue of the deal, and the confidence of the House in that deal. Not quite! Because, of course, some MPs probably thought the deal too 'Brexity', while others thought it not 'Brexity' enough. 

I hope someone, before the 29th March, has the courage to propose that Article 50 be revoked, or delayed for a good long time, to give the country a chance to see where it is heading. 

--

Cawstein