The democratic deficit: The removal of democratically elected leaders and their replacement by technocrats

in Greece and Italy, this week has seen the removal of democratically elected leaders who have been replaced by unelected technocrats. To me there are issues around this, in no particular order:
Firstly – these governments are representative governments. There are the result of indirect democracy, not direct i.e. they are elected to represent those who elected them. Therefore, they should have the power to take even the most significant decisions without having to refer back to their electors.
Secondly: something as huge as what's been going on with regards to the austerity measures should have democratic backing. It might even get the people on side
Third: if they hadn't screwed up their economy in the first place they wouldn't be in this situation at all.
Fourthly: elections take time, decisions are needed now.
Fifthly: the needs of the financial markets and ratings agencies are being put above the democratic desires of the populations of these countries. But, at the end of the day the reason for this is that their economy is up the creek and they need to borrow money on someone else's terms.

supermarkets

raise prices or squeeze vested interests, or leave things as they are.
sadly, looks like things will stay the same
http://www.guardian.co.uk/environment/2011/jul/02/supermarkets-derail-bill-protect-suppliers

it's long been a problem that boring geeks like me have had an eye on, and there is talk of doing something.
what will come of it all? it looks like nothing is the most likely outcome.

it's possible that it will come down to a choice between raising prices or tackling vested interests.

raising prices could have the result of people being unable to afford food if the minimum standards are compulsory or a two-tier system developing of protected and unprotected food produce, which could well result in a race to the bottom and the top tier going under pressure from business which then outweighs pressure from the bleeding hearts






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Innovation: Britain's other deficit | James Dyson

http://www.guardian.co.uk/commentisfree/2011/jan/31/invention-deficit-engineering-exports-growth

I certainly agree that innovation, R&D etc. are important. When my lot were in office they invested too much time, effort and money in the city to the detriment of a balanced economy.
It comes down to investment. Investment in education, skills, graduates, engineers. Even the author Mr Dyson acknowledges that, even while saying government should be cut back. He means cut back in the other areas. At the end of the day we need to be investing in education all the way through, and incentivising areas such as engineering. But that costs money, as do the tax cuts he's calling for.

And one last thing: it's all very well and good having an export-orientated economy, as everyone now wants to, but in order to export, someone has to buy it. Who will that be? USA, China, India, EU?
Upon that may rest a great deal


http://www.guardian.co.uk/technology/2011/feb/03/investment-the-mother-of-invention/print

Interestingly, the first letter is pure protectionism. Is that the path our government wants to take? I have no doubt there would be tit-for-tat reprisals if it did but it's always worth considering

" James Dyson calls for "patentable exports" in his piece. Is this the same James Dyson who closed the Dyson factory in Malmesbury, Wiltshire, in 2002 to move production to Malaysia, resulting in the loss of 560 jobs? Sack British workers, move production abroad, still made £190m profit last year – no wonder he is one of Cameron's advisers.

Alan Quinn

Manchester"

Very interesting that. ouch

Does the government need a 'Plan B'?‏

A lot of this is clearly speculative, but I did tell (everyone) so.
Taking demand out of the economy has seen a slowing of the economy. The stimulus package kept the economy going reasonably but the cuts have begun to hit it, and hard. Another problem is confidence as if people think there will be a recession then it is far more likely to happen.
Aside from my gloating, there are some pretty serious issues here. I feel the economic problems with my inability to get a decent job or even security in the shitty one I have.
The political bits of this really are not as important to me as the effects on my life and prospects, but this would be hugely damaging to both coalition parties if the economy tanks. If that's the case Labour will have an open goal for 5/10 years. And given Ed miliband's performances I think we might need it. Ed Balls is a heavy weight so might add something there but has the potential to fuck everything up and piss everyone off.
What matters to me is my job and lively hood, my prospects in the short, medium and long term. The inside of the Westminster bubble does not greatly concern me at the moment

http://www.bbc.co.uk/blogs/nickrobinson/2011/02/does_the_govern.html

Pat McFadden

I thought Pat McFadden has just been very good on Pienaar's Politics. He made some very good points without being off-putting, good work.

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Inflation hits 3.7% after record monthly increase

I find this interesting because as a working man I am feeling the effects of this on my day to day living rather than just from an academic point of view. My monthly travel card is up by 5%, and with food costs rising too my wages are coming under greater pressure. The thing is that my wages have not increased to compensate for the rising costs of living. I hope that the Bank and government get a handle on this because it's a worry. As a saver I am also concerned about the low interest rates which would have some small compensatory pressure by helping my savings. There is clearly a moral hazard issue here, but I am far more concerned about the money in my bank account than the moralities, but when the actions of some well rewarded financial services types adversely impact my living standards it's not abstract

"I'm sure we'll be advised that holding wages down while the cost of living rises is the highest form of social responsibility. But with CEOs' salaries rising at record rates, with the Forbes Rich List collective value rising by a record 40% last year, it doesn't sound as if this advice is being applied universally.

In fact, it sounds like outright economic class war: senior posts in all institutions now are being paid top-rate salaries in return for reducing costs and salaries among the lower-paid. I work in a university and the above applies there in spades"

Excellent point
http://www.guardian.co.uk/business/2011/jan/18/inflation-december-2010-record-monthly-increase

UK unemployment inches below 2.5m

I now believe unemployment to be an issue of the highest importance. It's a personal tragedy to be unemployed and government, for me, should do all it can to try to ensure people are in jobs.
It is by having people in work that the economy will be strong, in addition to any things about personal development or stuff like that. money in the pocket, stability and security flow from having a job and for that it is vital.

Also, it shows how badly the Tories botched up our economy in the 80s with 3 million out of work. The population is higher now yet we have less people out of work than we did then
http://www.guardian.co.uk/business/2011/jan/19/uk-unemployment-claimant-count-drops-ons

Inflation: Up, up and away | Editorial

My personal worry is the bit at the bottom, about the squeeze on my money from the price rises. With my own travel costs having gone up 5% January to December I can see problems unless it stays still for a year at least
http://www.guardian.co.uk/commentisfree/2011/jan/19/inflation-up-and-away-editorial/print

US elections: Meet the Simpsons from Springfield‏

"You cannot spend yourself out of a recession. It just don't work.""
Actually, that's exactly what you do. From what I know, every time the opposite is tried it makes things worse

Martin Wolf

Isn't it strange when people you used to think were mental turn their theories around and end up supporting what you said all along?
When I read Martin Wolf stuff like Why Globalisation Works, i though the bloke was a real dogmatic so n so, blindly wedded to right-ist ideology I could not at all see working. Now almost everything he says I agree with. I have changed my views, and so has he. That in itself is impressive pragmatism. Fair play to the lad

some thoughts on economics

right, i oppose the Tories' economic policy.
how would i fund my alternatives, is what it comes down to.
1) windfall tax on banks and financial services
2) NI cut
3) income tax rise at the top

people must be in work, the deficit will go down if the economy grows. the structural deficit needs to go, but a huge part of the whole is due to bailing out the banks who should really pay it back.

i'd like some thoughts on this, but i won't hold my breath

when is a marxist a marxist?

With the talk recently flying around about "Red Ed" Miliband and Marxist Vince Cable, the Economist brings some sense to the debate.
"One of the issues Mr Cable is referring to is the "agency problem" - that managers do not act in the best interest of shareholders. From the figures quoted in the Deutsche Bank long-term asset return study, that is a valid criticism. Earnings per share growth have lagged GDP growth over the long term. Companies have reduced the payout ratio without growing earnings sufficiently to compensate. Since the overall remuneration of executives has grown dramatically faster than GDP over the last forty years, it is not difficult to see where the money has gone.

Or as that well-known Marxist Warren Buffett remarked

"Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won't change, moreover, because the deck is stacked against investors when it comes to the CEO's pay.""

yeah, i'd go with that. free markets rarely work out, and the economist would go along with that to a lesser extent than me, but we broadly agree on the need for regulation:
As for markets being occasionally irrational, we have surely had adequate evidence of that over the last 10 years. Even the renowned free market advocate Alan Greenspan confessed in 2008 that

This modern risk-management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year.

The Economist is in favour of free markets, but both words are important. If banks are too big to fail, then their cost of capital is implicitly subsidised. This creates barriers to entry and encourages risk-taking at the taxpayers' expense; the market is thus not truly free. In an ideal world, we ought to be able to let banks fail in the same way that we let widget manufacturers fail. But since bank failures have a devastating economic impact, we need to have some approach to regulating them. Markets also have externalities, a concept long established in academia; a chemical company cannot be free to pollute a river, for example.

To say that any further regulation is socialism, or that any consideration of inequality is misguided, seems wilfully blind. If banks earn huge profits, and their traders huge bonuses, only because of an implicit state subsidy, that seems a legitimate matter of public concern."


and that's the thing - moral hazard. if banks are unwritten by the tax payer then the taxpayer must have a say in how the money is used. if there's a better way to do that than government involvement, maybe a civil servant or two sitting on the board, i'd certainly be open to it. but for the moment, that will have to do

Balls on Blair on the deficit

I agree with Ed Balls that reducing spending too quickly could spell disaster, but i disagree that the deficit was not too big previously.
When Brown came in he started tackling a hugh deficit left to us by the Tories, but he abandoned that.
I also disagree on tax as i would prefer to see a rise in direct tax and cuts where possible in indirect tax

the economy

from reading Larry Elliot and others it seems there is a real and significant risk of the world economy folding like a crap chair. one that's made of paper, in the rain.
a double dip is a worry, and what with the looming cuts too, it looks like Keynesianism is our best bet.
but our chancellor, Clueless George, has other ideas.

"Osborne's belief is that hacking away at public spending will create space for the private sector to flourish. Britain will cease to be so dependent on consumer spending and the state for its growth; instead, resources will shift to manufacturing and exports, thus reducing both household debt and the size of the UK's current account deficit.

Such an outcome is much to be desired but, as today's trade figures show, it remains a long way off. Far from benefiting from the 20% drop in sterling over the past three years, the trade gap in the three months to July was the worst on record. Only the efforts of the City, which boosted the UK's surplus in service sector trade, prevented an even worse outcome. Not much sign of rebalancing there."

i personally think his belief in crowding out is based more on ideological conviction than any fact. the private sector is weak, confidence is fragile. like a 16 year old virgin boy with acne trying to chat up a girl. that fragile. so pulling masses of money out of the economy in order to go on an ideological crusade is madness, utter madness. the deficit is too big, and that is Labour's fault. but ranting at the past won't solve the present, and making things worse is a hell of a risk in the hope of a better future, to say nothing of the consequenes (see Mr G. Howe in the 1980s)

goverment cuts

Cameron has outlined what he thinks needs to be reduced: massive welfare bills", public sector pay and "the bureaucracy .
no change there then

i recently lost my job due to the recruitment freeze, and judging by the above the Tories are still the same old Tories so i'm not too hopeful for much help

where's the money coming from?

“Deficit reduction and continuing to ensure economic recovery is the most urgent issue facing Britain,” states the coalition agreement between the Conservative party and the Liberal Democrats. If so, the rest of the document does not live up to the billing.

Compared with budget plans the government has inherited from its Labour predecessor, the agreement included no specific new spending cuts, lots of public spending pledges, copious tax cuts and a commitment to faster deficit reduction.

Unless there are huge spending cuts or tax increases planned but not yet announced, far from contracting, the deficit is about to deepen

from the FT.


Robert Barrie of Credit Suisse has been crunching the numbers and he reckons the fiscal measures so far announced imply a loosening of fiscal policy:

If they were all fully implemented, they would add close to £10bn per year to the deficit. That contrasts with the coalition agreement’s assertion that there will need to be “a significantly accelerated reduction in the structural deficit”, with the new Office of Budget Responsibility ensuring that the numbers add up.

Rating agencies: Who made them so powerful?‏

"Perhaps I am being over-squeamish, but it doesn't feel democratic or sustainable that the fiscal fate of nations and currency zones - and indeed the perceived strength of the financial system - rests on the analytical verdict of three private-sector research firms, the financial record of which has in recent years not been unblemished. "

Indeed. I'm not convinced by the need for greater competition. It may well be the best answer, and maybe the Bank of England, European Central Bank etc. may need to take over this role. The conflict of interest is staggering, and their awful record with regards to the recent financial crisis means they did their jobs far worse than national governments, yet the governments pick up the bill while S&P etc. carry on stuffing themselves with the good shit. It's an excellent example of where the power really lies in the world because there's not a damn thing most people can do about it, but we are the ones who pay. And who will take them on? no-one I fear

George Osborne: Tories can cut deficit without increasing VAT - Telegraph‏

It took some fair digging, but I finally found Ozzy making an arse out of his figures. By praising Labour's handling of the economy when he meant to condemn it, he should have opened himself up to some scrutiny. Luckily for him, Gordy's called the election so his mind-bending mathematics hasn't seen too much light.
That bloke is a real liability and should be reason enough for anyone to vote Labour in the election, though there are plenty more reasons.

'George Osborne's tax cut is a gimmick and a sad joke' - mirror.co.uk‏

I have to say I was surprised to find Danny Blanchflower writing in the mirror.
I was also pretty surprised to see him write :'George Osborne's tax cut is a gimmick and a sad joke' - By David Blanchflower".
Can't say I disagree

BBC - Nick Robinson's New slog: A political three-card trick‏

Very interesting. Sounds like a trick indeed. One that the Tories have been trying to pull for years, and probably something every opposition does.
Talk of 'efficiency savings' is largely waft, and Ozzy's turn around is quite remarkable. Last week he denounced the savings as fiction, this week he's based his budget on them. That's one hell of a difference in a week.
And the reason is that the words are very politically alluring to voters. Want the services you get now but with tax cuts too? Vote for us and we'll give you the same service as lower cost.
If only it was as easy as all that.
Sure, there are areas where less money could be spend with negligible damage to services, but these are largely fantasies drawn up by politicians around elections to fund their impossible promises.
I preferred his narrative from the last conference: 'it's all shit and we're all fucked' is a lot more honest