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Lords reformers need to draw FIFA analogies

By Andy Mayer
May 31st, 2011 at 10:53 pm | 1 Comment | Posted in Lords Reform, Sleaze

What’s wrong with Football’s world governing body Fifa is fairly self-evident from the outside of the organisation. A aging elite, far too satisfied with the prestige and power of their positions, entirely out of touch and unaccountable to the people the organisation serves. As a result it appears corruption has been allowed to thrive. World football is diminished and tainted.

The House of Lords and Parliament by association has been in entirely the same boat, albeit far closer to reform than Fifa.

Although only one peer, Lord Taylor of Warwick has been jailed for expenses fraud, it should be noted that the sole difference between his crime and what was normal ‘approved’ behaviour for many of his colleagues, was a matter of ten days residency.

What this means is that like Warwick many peers acquired second homes or weekend retreats outside London for the sole purpose of claiming a generous overnight subsistence allowance potentially worth near £25,000 a year. These addresses were labelled “main residences” for the purposes of the claims.

Some working in full-time jobs in London did little more than ‘clock-in’ to the Lords each morning, claiming between £40-60k a year from the taxpayer for turning up.

Following the exposure of these practices during the expenses scandal, the Peers committee for closing stable doors, decided that all this was ‘within the rules’ of the Lords if the claimants stayed at the ‘main residence’ for just one day a month, in only ten months of the year.

So what was an honour system designed to support peers in need of additional support rapidly degenerated into a cash cow for the craven and greedy.

The large number of genuinely honourable members, who claimed only sums to which they were entitled, did very little about this. Some like reform campaigner Lord Oakeshott spoke up but were limited by political implications of rocking the boat.

The obvious conclusion of the expenses scandal should be democratic and fiscal reform of the Lords with mechanisms for expelling those convicted of crimes. To make that happen however will either require the Lords to vote for it (fat chance according to the latest polls), or a war of attrition from the Commons and media.

Playing nice and hoping for a consensus is a repeat of the mistake made by the Yes to AV electoral reformers who pulled their punches on the other side.

Making it quietly clear to the ‘almost-Warwicks’ that, following obstruction, they will be treated with all the courtesy and respect due to FIFA Executives, may have a wonderful vice-like effect on hearts and minds. Even some pro-reformers may be unusually motivated to persuade colleagues to seek an early compromise.

Like the absolute last thing the Lords want is proper scrutiny of what it is they do and have done. Unlike the Commons, most of those implicated are still in position.

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The power of advertising

By Simon Goldie
May 29th, 2011 at 6:40 pm | 2 Comments | Posted in Uncategorized

Henry Ford is famously quoted as saying that only 50% of the advertising his company commissioned worked. He just wished he knew which half.

A survey in 2007 reported that only 10% of Americans trusted advertising.

For many years I worked in market research. We regularly ran advertising recall surveys and found that most people could not remember who was advertising what or what the advert was about.

Which begs two questions: why do companies advertise and is it worth government countering adverts that aren’t having much impact?

From my understanding, companies advertise to reinforce brand loyalty and awareness. While you do get product launch campaigns these are not simply done through advertising. Advertisers also know that the messages they communicate must resonate with the public. If they don’t, the public will not believe the proposition and will not buy the product.

Two incredibly successful brands did not advertise for years: Marks & Spencer and Google. Yet without changing behaviour through advertising they built strong and profitable businesses.

Tom Papworth has already discussed whether government should intervene and attempt to reduce the power of advertising.

But if advertising is doing something else: simply reinforcing existing views and not changing behaviour, then there is no point in trying to counter something that no amount of advertising can achieve.

Government brainwashing works – and it’s for your own good

By Tom Papworth
May 29th, 2011 at 1:14 pm | 3 Comments | Posted in Uncategorized

It’s generally not good form to copy somebody else’s title verbatim. But some statements are such perfect self-parodies that it’s too hard to resist.

James Graham has today posted an attack on an article I wrote two years ago on the then-germane topic of Lib Dem policy attacking the enhancement of photographs, particularly in reference to “airbrushing” photographs of models.

It is of course flattering to see that my back catalogue is still essential reading among the Liberal Socialists. Unless, of course, it’s a slow news day!

Unfortunately, James’s falls into his usual trap of critiquing a straw man. He argues early on that

advertising works… [and]… It is the fact that advertising works that sums up why I am not a libertarian or classical liberal. Brains can be manipulated and even fooled; we aren’t rational beings. The libertarian assertion that if you just took state action out of the equation, people would act rationally simply isn’t backed up by any credible evidence. And of course they end up tying themselves up in knots attempting to prove it.

Actually, to my knowledge no classical liberal or libertarian argues that “if you just took state action out of the equation, people would act rationally”. Firstly, in as much as human action is rational, it remains rational even in the face of state action. One can see this very clearly in the economic sphere: government attempts to stimulate the economy through deficit spending fail because the population saves more to prepare for future tax rises; government attempts to raise more revenue by raising marginal taxes fail as individuals trade income for leisure.

Secondly, many classical liberals would argue that human action is driven by unique knowledge and subjective values. The idea that there is a single, “rational” response to any question (“Shall I smoke? Shall I exercise?”) is nonsense, but more importantly, it is nonsense that serves the interests of those who would be seen as our guardians, protecting us from ourselves.

What is more, there is a contradiction in James’s argument. In James’s view, the actions of consumers are distinctly irrational: an airbrushed body makes them feel insecure about their real body; a cowboy smoking makes them think that it’s manly to smoke. By comparison, the actions of the  advertisers are utterly rational: advertisers are happy to manipulate consumers and damage bystanders for their own selfish benefit. But (and here’s the kicker!) the actions of government are completely benign and altruistic: they want only to save us from harm, and are not in any way promoting their own selfish interests, say by reinforcing the image of government and benign and altruistic, or by seeking to appear sympathetic to a large group of current and soon-to-be voters who suffer from low self esteem.

Sadly, it is that latter attitude that represents the blind-spot in the paternalist’s mindset. Conservatives and socialists, no matter how liberal they consider themselves, seem reluctant to accept both the lessons of Public Choice Theory, that politicians pursue their own self interest rather than the public good, and the clear evidence that Government Failure is at least as harmful as market failure.

Thus for James it is perfectly reasonable to posit the question:

When the government produces an advert designed to encourage you to give up smoking, it is explicitly attempting to manipulate you. That doesn’t sit terribly well with classical liberals, yet why is it such a dreadful thing for a democratically elected and ultimately accountable government to be doing it but not a commercial company which is only accountable to its shareholders?

Frankly, (and I would have thought that this was one litmus test that all liberals would share) the onus should be on advocates of manipulation to justify their actions; the burden of proof should not lie with the defender of liberty. Indeed, it’s not just a question of the burden of proof. As John Meadowcroft notes:

individual liberty can be saved from the crushing weight of a multitude of well-intentioned government interventions only if there is a general presumption in favour of laissez-faire – that is, an assumption that government will not intervene, even if a good case for intervention can be made, other than as an absolute last resort. If such an approach is not adopted, freedom may be gradually eroded in the name of many seemingly worthwhile interventions until it has completely disappeared.

But even accepting James’s challenge, there is a significant difference between a government seeking to manipulate the public and a private firm or individual seeking to do so. The former does so with public money and coercive force: it taxes the smoker to demonise the smoker; it threatens those who breach its diktats with fines or prison. You can’t say that about Omnicom.

James’s statement that “It isn’t that the principles at the heart of liberalism are flawed, just that their real world application are inadequate” has been at the heart of the anti-liberal critique for well over a century. It is, I think, the closest I have ever heard him come to criticising liberalism as a whole. Liberalism is a broad church, but I doubt it stretches as far as allowing a third party – no matter how democratically elected – to manipulate people on the grounds that the third party believes it knows better than the individual does herself.

In 1937 Douglas Jay, who would later go on to become a Labour Minister, wrote The Socialist Case, in which he argued that ‘in the case of nutrition and health, just as in the case of education, the gentleman in Whitehall really does know better what is good for people than the people know themselves.’ I had hoped that we’d put that socialist nonsense to bed decades ago.

All Watched Over by Machines of Loving Grace – A review

By Tom Papworth
May 26th, 2011 at 8:30 am | 12 Comments | Posted in Uncategorized

Adam Curtis’s return to the documentary scene is always welcome. No matter whether one agrees with his dark conspiracy theories or finds the complex narratives implausible and unconvincing, his programmes are always well made, challenging and enjoyable to watch.

I have therefore been looking forward to All Watched Over by Machines of Loving Grace, “A story about the rise of the machines and how they made us believe we could create a stable world that would last forever”. Appropriately, the title – and it’s abbreviation – immediately trended on Twitter, with @cherryhiltonblu observing wryly that “In a sinister new machine-dominated world, all hastags will look like #AWOBMOLOG”.

Of course, the film was not really about machines, but about people, and specifically about Curtis’s ongoing themes of power, society the threat of liberty.

Curtis attributes the rise of the machines to Silicon Valley entrepreneurs influenced by Ayn Rand, the Russian-American creator of Objectivism. Rand argued that the moral purpose of human existence was the pursuit of happiness through enlightened self-interest, and that consequently the only ethical basis for society was individual liberty and free market capitalism. Indeed, Curtis focuses heavily on Rand throughout the programme, creating – as one comment on Twitter suggested – “an Ayn Rand shaped straw man” that he proceeded to beat like a child going at a piñata. It was particularly notable that Curtis dwelt on Rand’s personal failings – on her affair (which she rationalised in Objectivist terms, naturally) and on the fact that she died a lonely old spinster – which left the viewer with the feeling that Curtis felt Rand had somehow deserved her sad fate.

Rand’s influence led Silicon Valley entrepreneurs to commence a mission to “turn everyone into heroic individuals” through the liberating power of the communications revolution:

A vision of society where the old forms of political control would be unnecessary because computer networks could create order in society without central control. This had never happened before, because at the heart of Western political thought there had always been a fear that if you gave individuals too much freedom you would get anarchy.

The fear that “too much freedom” leads to anarchy (and that anarchy is inherently unpleasant and dangerous) is one of Curtis’s running themes, expressed most vehemently in his March 2007 docu-series The Trap: Whatever Happened to our Dreams of Freedom. As I summarised it at the time,

Curits argued that a narrow view of freedom and a distrust of public authorities had led us into a dead-end, a morally vacuous society prey to the positive promises of tyrants and demagogues. Curtis instead proposed a return to the values of positive liberty, which he claimed offered us a hopeful vision of a brighter and better future … The [alternative] was [a world] without purpose. This narrow and limiting vision was [Curtis claimed] a dangerous trap, offering nothing to counter the reactionary forces that would seek to sweep liberty aside by offering order and equality in place of freedom. A world of negative [liberty] was not inevitable, however, and Curtis ended with a paean for a rediscovery of a progressive politics, because positive freedom does not have to lead to tyranny.
(You can read a full and detailed critique of The Trap in my now-archived blog Liberal Polemic)

His aim in Machines of Loving Grace is clearly to reprise that argument, despite being presented as a discussion of the effects of the communications revolution on society (and despite a tokenistic and rather tacked-on foray into the Commodification of the Self, a subject beloved of critical theorists and other acolytes of the neo-Marxist branches academia). The idea that society might create a spontaneous order, one where “nation states were irrelevant and politicians should not try to control the system”, is one that he finds deeply disturbing. However, Curtis chooses not to challenge the theory of spontaneous order head on, or tackle its greatest proponents: the mutualist and socialist Pierre-Joseph Proudhon or the liberal philosophers Adam Smith and Friedrich Hayek. Rather, he picks as his target Ayn Rand who, as well as being more easily objectified and demonised than Proudhon, Smith, Hayek or other liberal thinkers, enables Curtis to target another of his pet hates: Alan Greenspan and the Clinton Presidency.

One might imagine that “Progressives” would be sympathetic to and supportive of the Clinton presidency, representing as it did the first time a Democrat had won two terms in office since Harry Truman, forty years before. But for many progressives, Clinton sold out “The Left”. Greenspan persuaded Clinton not to further expand the deficit to fund the expensive social programmes that he had promised during the 1992 election campaign; instead, he should cut public spending, reduce the deficit and “allow the markets to transform America; not politics.”

Though the first episode made no clear reference to events 15 years later, it is obvious that Curtis is drawing parallels with our own time. The greatest debate of the last few years has been the extent to which government intervention – be it by expanding the money supply or by borrowing and spending – is necessary to bring blighted economies out of recession, and indeed whether such policies in fact cause greater harm.

As Curtis noted, Clinton’s economic policies are followed by a recovery in the 1990s, but with it came the hubris that “this time the boom would be different”; that it might last forever. Curtis attributes this to an increased reliance on supposedly-infallible computer modelling: “In the chaos of the markets the computers had, for the first time ever, created stability”. In fact the cause of the long boom was far more human. Greenspan kept the markets rising by responding to every jolt in the financial markets with a flood of cheap money: every time a bubble burst, interest rates would be dropped to stimulate borrowing and investment. The Asian Financial Crisis; the Dot-Com bubble; 9-11 and finally the Great Recession are just the most prominent examples.

This should have been massively inflationary – and thus the error should have been exposed relatively quickly – but as Curtis goes on to explain, the deflationary effect of hundreds of millions of Chinese and other labourers entering the global economy masked the inflationary effect of Greenspan’s monetary manipulations. Meanwhile, the insatiable appetite of American (and British) politicians for cheap money meant that an unhealthy relationship formed whereby Western governments connived with their Eastern counterparts to create a system where the West could run vast budget deficits while the East exported Trillions of dollars worth of goods. The result, as we now see, is public debts in Europe and America at levels not seen in a generation – in some cases, not since the War. The result was that massive bubbles and huge amounts of malinvestment went uncorrected for over a decade, leading eventually to the greatest financial crisis and recession in 70 years.

Curtis is right to present this as an ominous conspiracy, but he draws from it the wrong conclusions. The problem was not that markets had been allowed free rein, but that they were being manipulated by central bankers and Treasury ministers. Low interest rates create the illusion that long-term investments (in, say, skyscrapers or houses) are safe. If market interest rates prevail, these investments look more risky. It is only because central banks kept interest rates low that the investors piled in. This was a matter of deliberate public policy on behalf of politicians.

Furthermore, the recessions that result from the eventual bursting of these bubbles are not terrible disasters to be avoided; they are the inevitable and necessary exposure of the malinvestments that have been made by entrepreneurs fooled by artificially-low interest rates. The recession is painful, but it is also necessary. The result is a reallocation of resources to where they are genuinely productive. That reallocation is painful (I have been made redundant twice in as many years, and I have known people out of work for more than a year) but it is also necessary. In theory it should also create a more stable economy founded on more realistic assessments of value, but this positive outcome of recessions is undermined because politicians cannot resist the urge to serve up more of the low-interest, high government-spending medicine that created the problem in the first place. Recessions are rarely left to do their work of purging the system.

Another error is to blame and seek to restrict speculative flows of capital. Despite Joseph Stiglitz’s concern that South Korea’s openness to flows of foreign capital provides small short-term benefits and large long-term costs – and indeed despite the clear anxiety and suffering of Korean citizens that was showed in Curtis’s film – one need only observe that South Korea is now the twelfth largest economy in the world to appreciate that Korea’s openness has in fact done wonders for this once-poor country.

Curtis rightly observes that the IMF bailouts of the East Asian “Tigers” created merely a temporary pause in the inevitable collapse. The reason for this is that the IMF treated the Asian Financial Crisis as a series of liquidity crises – a lack of cash in each country’s banking system as a result of the Western withdrawal of investment – whereas the problem was in fact one of solvency: the investments were fundamentally flawed; the banks bankrupt. The irony, therefore, is that Curtis is right to blame the IMF, but he does so for the wrong reasons: it was not the structural adjustment packages (i.e. the economic reforms) that were at fault - countries have shown a remarkable willingness to take the IMF’s money and then ignore the conditions, with little sanction from the IMF. The problem was the IMF loans in the first place. These could never solve the problem because they were treating the wrong disease: instead, as Curtis and Stiglitz rightly note, they merely bailed out western investors and Asian borrowers at the expense of western taxpayers.

The final error Curtis makes is to suggest that “the reason that so few bankers and politicians questioned” the new economy was because of their faith in computers. Sadly, the bankers and politicians are not so naive. The source of their faith is far more venal: politicians and bankers personally benefit from the system they have created. The cheap Chinese money enabled the Labour government to run budget deficits in every year from 2001 (putting the lie to their claim that debt and deficit were functions of a crisis that came six years later); it funded George Bush’s wars in Afghanistan and Iraq; and it made the leading bankers billionaires.

This is of vital importance, because implicit throughout this first episode of Machines of Loving Grace, and explicit in The Trap four years earlier, is Curtis’s belief that the West needs a more active, more interventionist politics; that politicians should again be trusted with control of the economy and of society. In fact, rather than “create a new type of market democracy”, politicians have continued to manipulate the economy for their own ends: mainly, to allow them to lavish money on popular social welfare programmes knowing that responsibility for paying for those programmes would fall on future politicians and through them on future voters and taxpayers.

That the politicians agreed to bail out investors is not a sign that the market is at fault: Adam Smith himself observed that businessmen are the greatest enemies of free markets, as they seek constantly to collude with one another and with politicians to fleece consumers and taxpayers. Rather, the bailouts show that politicians cannot be trusted with the economy, and that only a system that prevents politicians from intervening in the economy will be safe from corruption.

Contra Curtis, therefore, the idea of market stability has not failed, and we can envisage an alternative.  Market stability has been exposed as a lie masking massive and de-stabilising political interference. But there is an alternative: one where politicians are unable to intervene in markets and cannot use their power to bail-out their fellow elites. What we need is not positive liberty and progressive politics, but rather negative liberty and laissez-faire.

The YES campaign: there is a Lib Dem inquiry

By Angela Harbutt
May 26th, 2011 at 12:29 am | 5 Comments | Posted in AV referendum, Liberal Democrats

You may recall that a couple of weeks ago (May 8th) we posted an article examining the disastrous YES campaign. We were inundated with readers, and even we grizzly old souls at LV were quite taken aback by the level of support we received from all quarters of the party (and the wider YES campaign) both publicly and privately. We had certainly hit a nerve and there was (and still is) a lot of anger out there about the whole sorry venture.

So when Simon Mcgrath called for an independent inquiry into the whole debacle, I silenced the cynic in me that said any investigation, if it did happen, would be done by “the usual suspects” who are themselves mates of those responsible for the campaign and would be conducted behind closed doors ……….and allowed the optimistic (some might say naive) Angela to believe that Tim Farron was a different kind of President and that under his leadership we would see some real action. 

I duly sent an email to Party President Tim Farron stating the reasons why I believed a public, independent inquiry into the YES to AV campaign was necessary.

Imagine my dismay to receive this reply from Tim:

 Dear Angela,

Thank you very much for emailing me.

I can confirm that there is currently an internal investigation going on – but as I’m sure you’ll understand, I can’t give out any more details than that.

Funnily enough, I don’t understand why no details can be given out.

At the very least, right now, some basic information regarding the inquiry should be in the public domain :  WHO is conducting the investigation?  WHAT is their remit? and WHEN are they due to report? Why this information cannot be given out is totally beyond me.

It is conceivable that the eventual findings are so embarrassing, the levels of incompetence so appalling, the errors made so huge, that Tim may decide that he can’t possibly put the full unexpurgated review into the public domain. But to be very clear  - the very least we expect is to be told what ACTION the review has recommended (and presumably will be taken by the party).

If the entire inquiry is to be shrouded  in secrecy as currently seems to be the case, I am afraid we can probably expect little more than a very long silence, followed, if pushed, by a short note stating that it wasn’t really any one’s fault and a promise to try better next time. That is simply not good enough.

I have today written to Tim ( tim.farron@libdems.org.uk ) asking him to reconsider his position on this matter.

Hat tip: Check out Simon McGraths brillliant “WHY WE LOST AV” website here.

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