No Celebrations For "Recovery"!

Looking at the limp recovery in UK economic growth I can't help but have a sinking feeling. Its the same sort of sinking feeling I can imagine a powerless wife might feel when her husband finally gets the clapped out, big old family car going again, when she had been hoping he would have to give up and get a new small efficient one. She knows that keeping that old gas guzzler going will leave less for the house keeping and she will have to live on, expecting it to break down again.

The financial systems failure was a grand opportunity to change the way the economy works and over the last few years there have been some interesting ideas going round, together with some excellent analysis of what has been wrong. When it comes to economic management, tinkering with the detail is usually a sign that the folk pulling the leavers are trying to manage macro economics as if they were the finance director of a medium sized business, trying to survive the job by juggling the survival of the business, while directors and shareholders compete to pocket profits or chase pet projects. Macro economics is another skill set. It involves understanding the dynamics of the system, not of its parts. If the system is set up with the right rules, it can be left to run - at least until people start to find the way to manipulate them.

The current macro economic rules have been put in place by the finance industry itself. After the financial collapse of the early 1930's there was an attempt to contain the ability of the finance industry to shape macro economic policy, but because Keynes's vital concept of creating a shared global reserve currency (the Bancor) was shunned in favour of the supremacy of the dollar, the new system unravelled from the mid '50's onwards. The upshot was that governments have increasingly lost control of the creation of money, with money creation being dependent on the willingness of banks to risk lending. Much of the world as we know it is a direct result of this.

Banks prefer investment in assets and government debts and services to anything else. This has driven property price bubbles. It has driven privatisation of services and utilities. It has driven a preference for government debt growth over taxation. Banks also like short term arbitrage investments, where the borrower is making a quick killing by cashing in on differences in value. This has driven the transfer of jobs and industrial production to the far east. The expansion of banking and debts beyond the real levels of risk being incurred has been mediated through the derivatives markets, which have effectively been a means of shifting liability away from the banks that created the debts and towards weaker banks, pension funds, businesses and of course governments (tax payers and benefit recipients).

At the heart of this system has sat the US dollar. It is the international currency, backed by oil and protected by the US military. Most trades between countries are conducted in dollars. This means that there is a vast amount of dollars held around the world by non-Americans. These dollars are the power behind the banks' dominance over macro economic policy. They are the money in the tax havens, used for secret and unregulated purposes, undermining the ability of sovereign states to steer an independent course. The risks this money can afford to take, be it as hedge funds, private equity funds, private investments, sovereign wealth funds, or parked business money, is greater than can be taken by investors in transparent, regulated and taxed jurisdictions. The unfair competitive advantage this money has, means it can make profits from investments others would consider too risky or unprofitable after tax. It can also fund investments that are illegal or immoral, such as arms trades and vulture funds, where debts are bought at massive discounts and recovered through the courts. 

It was these unaccountable dollars that stripped away the viability of the gold standard, by effectively creating new dollars outside the control of the US Federal Reserve. As the US government came to terms with this reality, it allowed the creation of the US as a tax haven, through the secret and low regulation company administration systems in Delaware and other states. This enabled the big US banks to fully benefit from the position of the dollar. With the connivance of the US Treasury and the World Trade Organisation, the ability of countries around the world to regulate banks effectively was undermined in the late 1990's, enabling the large US banks to export risk and accumulate profit and power.

Control of oil is essential to keeping the dollar's supremacy and it is this that has driven US policy in the Middle East. While creating profits for military and oil companies has been an added bonus, the priority has been to ensure that no major oil trades are conducted in currency that is not dollars or, less favourably  gold (which is itself traded in dollars).  For these purposes the Neo-Con agenda has been adapted, with its megalomaniac idea to keep the Middle East unstable rather than let Europe, China or any other emerging economy gain the ability to define any alternative to the dollar for oil trades.

This issue of the control of the trading currency was the cause of the two world wars of the last century. Initially Germany tried to challenge the pound, but was thwarted by the US, who understood that it would be harder for the dollar to unseat a currency backed by German manufacturing and the oil of the Ottoman Empire than to unseat the British Pound. Hitler's second attempt was based on the idea of combining a broader European Economy that included both Middle Eastern and Russian oil. Had his political power base not been the viciousness of the Nazi's, he might have succeeded, at least enough to ensure a more equitable post war settlement. As it was the US was able to gain years of advantage while the rest of the world struggled to recover from devastation, with the pound and the British Empire almost completely unseated.

The effective castration of the British finance system after the war was resisted by the Bank of England through the development of the off-shore banking system to use the dollars circulating outside the US to rebuild the City of London's position as a finance centre. With a web of tax havens around the old empire, London was able to suck in dollars, using its expertise in finance and investment to extend the use of the dollar beyond the imaginings or intentions of the US government. Progressively, after the end of the link between gold and the dollar, the US adapted to this reality, with the current model for a global economy emerging as a result and with the lead US banks in a dominant position. 

In the years since the 2008 financial crisis, these US banks have consolidated their position, vastly expanding their investments to include utilities and other secure assets. They were able to do this by exploiting the need of governments, particularly in the US, to stimulate economic activity even as the money supply was contracting as banks restricted lending. As governments created money through quantitative easing, the money was used by banks to buy assets, rather than to directly secure lending into the wider economy. Working closely with unregulated funds, the US banks were able to create further opportunities for asset acquisition, particularly in Europe, where the weaknesses of the Euro system was putting countries such as Ireland, Greece, Portugal and Italy into a debt stranglehold. 

One of the effects of this has been that countries like the UK and France, although not targeted for their vulnerability by the US banks, have had their sovereignty compromised and have to concede to the US trade and international policy agenda. It is no coincidence that it is these two countries that have been most willing to support the US government's drive to increase chaos in Syria. 

Meanwhile of course, around the world, ordinary people are suffering the consequences. The expansion of US power is describing the future of food production in much of the world, with the resulting threat to small farmers everywhere. North Africa and the Middle East are being kept in turmoil. Austerity grips the developed countries that had worked so hard to develop as social democracies. Throughout the democratic world, politicians are corrupted by those who have become super rich through the processes described. The dystopia of Jack London's Iron Heel appears to be becoming reality. Ruthless oligarchs rule with the support of mercenaries and minor oligarchs while society is divided into the oppressed and the crushed underclass.

Meanwhile the carbon clock ticks on ever faster toward midnight. The callous arrogance of the greedy and powerful excludes a change of direction and the sorry boasts of higher house prices and a nudge in the GDP figures occlude the prospect of a public clamour for real change. However all the recent events have given us a much better idea of the revolution needed. It is not so much a political revolution, but a revolution of ideas to overturn the tyranny of fractional reserve banking and all its fraudulent evolutions. It maybe that a change to 100% reserve banking and the creation of new money by a committee, combined with an international trading currency that is not any nations money, is all we need to gain our new smaller energy efficient car. First however we have to get rid of the clapped out old banger. That sadly, is looking a bit of a way off!

INDIVIDUALISM: OUR VOLUNTARY VULNERABILITY TO OPPRESSION

Although our main political parties cluster around the same policy chest, there are few who would consider that our political, social and economic systems are ideal or truly appropriate for the future challenges we face. The UK has an enormous dependence on imports of food, energy, raw materials and manufactured goods which it pays for, in large part, from precarious earnings from finance, weapons and medical drugs. It's economic model is driven in large measure by the need to generate turnover with doubtful added value in order to meet the demands of finance. This results in vast numbers of people being employed, often for low wages to create a delusion of added value that conceals wasteful consumption. The wasted resources and the wasted lives involved in sustaining this illusory system should under any circumstances be a concern, but when faced, as we are, with both the vulnerability of our economic model and all the challenges of sharing a resource finite world with a vast and growing population, it is madness.

Almost everyone is in a position to see some part of this madness. They can see it in the absurdity of their work systems. They can see it in the impulse ebay purchase flown in from Hong Kong and delivered by courier. They can see it in their supermarket packaging. They can see it in the quantity of cloths they buy and throw out. They can see it in the pointless gifts they feel guilt obliged to share at Christmas. They can see it in the courses they study to half gain unwanted skills. They can see it in the over priced coffee from Starbucks. It goes on and on.

Even though people can see that they are part of a madness, much of the madness is dressed up as cultural necessity. Through adverts and the media we learn how to express ourselves as social beings through our consumption. We learn what our homes should look like. What our cars say about us. What our holidays and interests say about us. We become unable to separate our passion to engage with the world in a particular way from the development and management of our self image. This is not a confusion that has evolved, so much as been constructed by a market economy that needs consumption in order to finance itself. This is not something that could have happened if the merchants had to negotiate with people with clear and strong cultural identity. It has required that the merchants have had the power to define cultural identity as a product that we consume. It has required that the merchants have the freedom to negotiate with each of us as vulnerable individuals, rather than as communities. This is the true meaning of individualism. Sold as a state of freedom and strength, individualism is in fact the means by which we become complicit in our own powerlessness.

Alongside the emergence of consumerism and individualism, we have seen the vast increase in the power of the centralised state and major corporations. This is not coincidental. It is part of the same process. The underlying drive has been to create the systems of production and distribution of goods and services needed to provide for a large population, while exploiting the advances in knowledge and technology. How to determine what constitutes need and the best way it can be satisfied has been one of the key idealogical battles between command economy communists and capitalists. Communists have argued that to allow the private profit motive to drive a supply and demand market for goods and services creates a society that is socially unjust and wasteful. Capitalists have argued that the complexity of competing needs and possible ways they can be satisfied requires a dynamic and fluid system and that government can intervene to manage social inequality.

The capitalist model has certainly proven itself capable of creating a complex dynamic system to meet the demand for goods and services, however, it has also undermined governments ability to effectively manage social inequality issues or address needs and priorities that are not marketable. While this may just reflect the low calibre of political leaders, it also reflects the powerlessness of individuals, be they consumers, workers or voters. The decline of trades unions has reduced the pressure for wages to keep up with living costs. The withdrawal of government from the productive economy has made maintaining full employment an impossibility, so creating a body of people effectively excluded from the jobs market and the cultural engagement that goes with it. The capitalist system has extended its potential for short term gains to the extent that it is in a state of perpetual instability, meaning that government has few policy options if it does not want to risk some degree of collapse. It therefore is not possible for individuals to exercise their vote to push for systemic change. And finally, as consumers, there is almost no infrastructure for collective action to challenge the corporate supply systems. As a consequence, the rational behaviour of individuals is to take the best paid job they can get, regardless of how boring or pointless the work is, not to vote and to develop a consumption pattern that follows the crowd.

This is what the majority of people have opted for and it is around this pattern that the capitalist system has shaped itself and taken itself to the point of instability. The government therefore has to see its role as being to keep people on this powerless treadmill so as not to add to the instability of the system. To this end it is increasing the fear of the consequences of unemployment by lowering benefits and increasing the needs for ever greater compliance. Instead of a political discourse to address the systemic problems, the discourse that is open to public debate is almost exclusively focused on creating social division, with benefit dependence and immigration topping the bill. Protest demanding systemic reform is increasingly dangerous and demanding if it is to go beyond ineffective ritual, with government armed with the legal and police infrastructure for selective oppression of dissent.

It would be easy to conclude that as citizens we are powerless, but this is not the case. Our powerlessness is derived from our willingness to comply with the expectation that we negotiate as individuals, not as large groups or as communities. It is derived from our acceptance that we need to manage our money through financial institutions. It is derived from our complicity. If instead we were to form buying groups to negotiate bulk purchases of the goods and services we all need and used our savings to invest in co-operatives that meet our shared needs, our dependence on both corporations and the state would begin to decline. If we used local currencies to decrease the amount of our wages that pass out of our local economy, we can create local jobs. If we use the autonomy that these steps could give us to define our own cultural identity, we can undermine the roots of our vulnerability. It is in the end our own lack of faith that we can work constructively together in a spirit of cooperation that makes us vulnerable and powerless, not just to the oppressive constraints of a capitalist market economy, but powerless to shape the kind of society that might survive the challenges the world faces in the years ahead.

Daily Mail Blaming Welfare State for Philpott Fire is Symptom of Real Problem

Today the Daily Mail has outraged people on the left by linking the tragic case of a fire that killed six children with the ills of the welfare state. The court found that the fire had been started by the children's father so that he could be the hero who saved them. Except he didn't. Was this a situation created indirectly by government policy, and if so which government policy.

It is certainly true that across the UK there are to be found thousands of households where mothers have large numbers of children by numerous fathers who don't take much responsibility and for which the state meets the costs. Households like these have always existed and are the product of poverty and powerlessness as much as wilful irresponsibility. The main difference that the welfare state has made is that the children can be reasonably dressed, reasonably fed and have access to the education that offers them some chance of living differently from their parents. In another time many of the children in such families would have died as infants and those that survived would have had no choice but to start earning a living at an early age by being exploited as child labour, criminals or prostitutes. The failure of the welfare state lies not in the support it has provided, but rather in the failure of other policies to ensure that there has been the quality of education and opportunity needed to encourage and enable people to avoid poverty in the first place.

As the country that pioneered industrialisation and global empire, the UK suffered in the longer term from out dated infrastructure and an economy that was designed to serve an empire that no longer existed. The country's history since the second world war has been about the adjustments it has had to make. It has also been a time when it has tried to progress from the brutality that characterised the previous two hundred years, during which people endured horrendous exploitation and hardship while the country developed from a primarily agrarian base to become a diverse industrial and knowledge based economy. Through this period of development people could see the progress and change and even those experiencing extreme poverty believed that in due course that people like themselves would benefit. Much of this was an act of faith and Christian faith played a large part in helping people to retain hope and dignity in the face of horrendous hardship. Some of this faith was transferred to unions and the political process and there was a steady improvement in work conditions, education and opportunities that reached into the poorest communities.

The depression in the 1930's came as a massive blow to undermine all faith. In particular though it reminded working people that, when faced with a threat to their own prosperity that the elite and the secure middle class would turn on the poor and deny them the basics needed to hold their households together with dignity. Faced with government officials snooping around their homes for saleable items before qualifying for a form of welfare that involved queuing up with pillow case for food handouts, many men lost faith and hope to charity. Brought up to believe that their role was to provide for their families, the depression and its welfare system made them failures as humans. Many who had been solid church goers became drinkers and gamblers with the little they had, adding to their families hardship. The war allowed a fresh start, building not only on a more powerful state committed to improving the lives of working people, but on a pride for having fought and won a terrible war.

There was though the very real problem of an economy that was in poor shape. Much of the productive capacity of the economy was in need of massive investment to reach competitive productivity levels and many of its products were designed for an empire that no longer existed. Similarly, the systems of management and finance were designed for a passing world and the state did not know what to do with its powers to intervene. Faced with change and uncertainty vested interests dug their heels in, making change all the more difficult. The result was the opportunity, exploited by the neo-liberals, to allow short term profit seeking in a weakly regulated economy with a global reach. Again the working poor were sacrificed, but not without a gentler welfare system that was never the less abusive in its effects. As money flowed in from overseas investments, finance, arms sales and the sales of pharmaceuticals, the working poor moved into service industries, including a bloated retail sector as consumption of anything and everything was encouraged to churn profits. Investment from pensions and other savings was used to finance asset value bubbles to enable a massive expansion of asset backed debt, with commercial banks being given the freedom to expand the money supply as debt so long as inflation was contained.

When the bubble burst and banks went bust, again it was the poor who were seen by the elite and the middle class as the constraint on resolving the economic prospects of the country. What is not gaining proper consideration is what economy we actually need. The elite, the middle class and the other powerful vested interests are trying to avoid change by holding on to what they have, while hoping that there will be a return to a 'normal' of wasteful and exploitive investments and get rich bubbles. As always the working people of the country are waiting and willing to work for a better future and as always, those with the power and control of wealth are looking for the next chance to line their pockets, without any sense of vision.

We live on a small, densely populated island and rely on food, goods, materials and energy from around the world to maintain our way of life. As the rest of the world struggles with its own challenges, it is becoming less and less dependent on the little we can offer in return for what we want. We need to be able to offer more that is of real value. We need to want less. We need to develop the social, economic and cultural systems that are compatible with living sustainably on a finite planet carrying billions of people who, if they had any sense at all, would be working out how to avoid the awful consequences of a collapse of the ecological systems that support us and the depletion of the natural resources on which we rely. This is the context for our economic direction and has been for years. The failure of our policy makers to engage with this bigger picture has much to do with continued existence of poor irresponsible households. If the elite and the middle class want to cling on to the structures of power and wealth distribution that have failed to enable us to come to grips with our real challenges they can not blame the poor and powerless for being left in a limbo land where most of the time it doesn't really matter what they do.


The days where exploitative capitalism is the right strategy for creating wealth are over. We need to consolidate our gains. We need to get on with ensuring that everyone lives in a decent home that is easy to maintain and requires the minimum of energy. We need to take a good hard look at our food and ensure that everyone has access to a sustainable supply of healthy food and is not being sold toxic industrial food that is undermining their health. We need to ensure that everyone has the opportunity to develop the skills for cultural and social inclusion, including how to prepare food, play music and other creative expression. We need to redesign our spaces to minimise the need for transport, while making our public spaces enriching. We need to make our energy supplies sustainable. The list goes on and we know what needs doing. The challenge is to create the structures and systems for this to happen and to liberate ourselves from absurd economic notions that we must first pile our energy, time and resources into competing for the profits from exploitation of people and planet. Our aim should not to be endlessly rich, but to be prosperously poor. When we see headlines like today's Daily Mail we should see them for what they are: blame culture distractions to conceal the very fundamental failure of our leaders to even face in the right direction, let alone get to grips how we can be liberated to get on with the work that needs doing.

The New World Order is Here... Or is it there?

The stability of modern societies rests on the principal that the state can be broadly trusted. It needs to be trusted not to have people dipping their mitts in the public purse. It needs to be trusted that it is being run in the interests of its own people. It needs to be trusted to help deliver the rule of law. It needs to be trusted that its officers are not colluding with people who can profit from its decisions against the public interest. This trust has been brought into question in recent years as evidence of wrong doing by both parts of the finance industry and the government come to light in the wake of the financial crisis. However, the underlying process may be the emergence of a new world order based on a harsh, greedy and manipulative oligarchy without loyalty to nation states.

The story that is emerging is that globalisation and deregulation of finance created an environment in which very large banks, corporations and financial funds have been able to systematically rob the countries they operate in, evading taxation, stripping assets and creating dangerous bubbles of debt for households, businesses and governments. The root of the problem lies in the difficulty of policing globalisation when the only effective institutions for doing so are competing nation states.

Britain was the first global super power, but with the loss of its empire faced the prospect of losing its role in international trade and finance. It responded by developing facilities for financiers and traders to operate supra-nationally using a network of offshore finance centres linked to the city of London that provide secrecy, low regulation and low taxation. These enabled the wealthy to land the profits from trade outside of any real nation state as well as to park wealth beyond the reach of national authorities, while benefiting from the investment expertise and special instruments available in London. As the dollar became increasingly used as the world's reserve currency this created a pressure on the United States to lower taxation and regulation in order to compete. When subsequently there was an expansion of international trade due to the work of the World Trade Organisation and other agencies to reduce barriers to trade, the stage was set for a competition for market share in which each nation wanted to have companies big enough to be global players. In this climate all the lessons learnt from the 1930's depression were forgotten.

Neo-classical economists revised Keynesian ideas until there was no reason to fear monopolies or the the expansion of non-government debt. This created the smokescreen needed to ignore what was happening.  Take overs and mergers in the finance sector were seen as building world players, but they turned out to be "too big to fail" banks that bloated themselves by creating every opportunity they could imagine to expand the money supply as debts. While households were being encouraged to take on debt to keep up demand, the businesses that benefited were competing aggressively and finding that their best advantages lay in avoiding taxation using the tax haven system and shifting manufacturing to low labour cost countries. The people of the developed world were getting themselves in debt to finance the export of their jobs and the destruction of their tax base.

As  the money flowed around the world, more and more of it landed in the offshore system, creating the opportunity  to be assembled into massive single management funds with the power to exploit opportunities in a wide range of markets. The profits to be made by these power funds were sufficiently large that they didn't need to take on high risks. Hedge funds are so cash rich that they can operate in a market, shaping its direction without substantial borrowing. The private equity companies became giant parasites, preying on businesses that carried assets that were not being used as security for debts and using this potential to carry debt to finance their take overs. They use their money to buy political connections and preferred status in obtaining government contracts. Always the profits are channelled offshore. These monsters could not have come into being without a chase to the bottom competition to deregulate finance and remove effective oversight that coincided with a vast expansion of the banks' ability to create money as debt, due to control systems that were not designed for an age of electronic money. Provided debt was increasing with sufficient speed, banks were able to increase the money supply by lending money they didn't have and using the profit from lending to expand their reserves.

The cold light of dawn came when it was realised that much of the debt was not repayable. What followed was a scandal that may never be fully revealed. The major US banks saw what was going to happen and obtained, in early 2007, the consent of the US government to enact a grand fraud. Trillions of dollars were leant by J P Morgan Chase to Lehman Brothers, creating a flush of liquidity that concealed the imminent crash. This bought time in which the leading US banks went on a selling spree, spreading the risk in the US housing market to London and Europe, while using financial instruments to effectively bet that the debts they were selling would not be repaid. When the crash came, J P Morgan Chase took on the part of Lehman Brothers that held its debt and quietly closed the position while across the world the banking system went into spasm. With the end of the expansion of debt the banks now required massive injections of money to replace the money they had been creating. Faced with the prospect of a collapse of financial services, governments threw themselves into debt  in order to maintain functioning economies.

Four years on the analysis of the crisis is still in process. In Europe the shared currency of the Euro Zone has been found vulnerable to the interests of individual states and this vulnerability has been exploited ruthlessly by the United States and the hedge funds. Was there malice-afore-thought in the work of Goldman Sachs in rigging Greece's entry to the Euro? Was the US government party to it? Certainly the US government set off the Greek crisis, lighting a fuse that may yet explode the Euro and with it the whole EU project. In 2009, the US government came under pressure from the Chinese for their careless attitude to the value of the dollar while they printed money to stimulate the economy. As one of the biggest buyers of US Treasury bonds, the Chinese did not want to continue investing in the US if they were devaluing the dollar and could see that they might need to invest more in Euros. The US responded by putting pressure on Greece to admit that they had been using a scam set up by Goldman Sachs to hide their true level of government debt. Hedge funds were tipped off to bet against Greek bonds and when the US based ratings agencies downgraded Greek government debt to junk, pension funds that held these bonds were obliged by their risk control rules to sell their bonds. The hedge funds walked off with the money the pension funds lost and the Euro crisis was born.

With the transfer of vast amounts of financial sector debt to governments through bail out programs and quantitative easing (what it is now called when governments create money from nothing), the public is being sold the idea of austerity. This is a grand dishonesty.  It assumes that there is a way out of the crisis if everyone shuts up suffers and works hard. This is not the case. Most of the debts that household's carry are owed to banks that are being sustained by money being given to them by governments. As public service jobs are decreased, private sector jobs are increasing at lower wages. Many of these jobs are for companies that use their international trading to both avoid tax and to channel profits outside of nation state controls. Even quite small companies have deliberately put themselves in debt, where the money they have borrowed is through their own interests in offshore based shadow banking vehicles or is to repay leveraged buy out loans where the buyers of the company are the same people as the sellers, but in different names and where the seller is offshore. The result is that large numbers of people are working for low wages so that profits can be sent out of the country with no corporate tax. With a high risk of unemployment and a shrinking safety net, there are plenty of willing workers for these jobs.

It is however the private equity companies that are the leaders in this form of exploitative employment, but as the UK government drives to contract out government services, it is these companies that have the expertise and the financial strength to become the winning bidders. Through their connections they are also major political donors and donors to the political think tanks that create the façade of intellectual respectability to corrupt policies. The same organisations that are actively working to decrease the national tax base are the ones that are now profiting from the privatisation of government services. Not only are they not contributing to the nations investment in its people, its society and its infrastructure, they are using their power and status to rob the state with the complicity of those put in place to defend the interests of the people. The trust of the people in the nation state has been betrayed by a class of people in business and government who identify their interests as being beyond the nation state.

There is a danger of confusing effect with intent and those that struggle to believe the scale of theft and betrayal would no doubt want to dispute the facts as presented and to argue that these were things that happened, but that there was not intent. The evidence however points to a class of people who conspired to undermine nation states in the belief that they had become parasites on wealth creation that were using welfare to create a dependent population. They saw the offshore banking system and  the globalisation agenda as a means to mobilise forces that would make the welfare state non-viable. Their strategy was to deliberately build up the amount of wealth outside the nation state systems such that nation states would be unable to act independently. They were aided in this by the development of Sovereign Wealth Funds as vehicles for money accumulated by trade imbalances. This money was added to the other large offshore funds to enable non-bank lending, or shadow banking, to exert a pressure for high risk lending on the regulated banks.

The Austrian economist Hayek and the Russian American pseudo philosopher Ayne Rand both advocated forms of capitalism in which the market rather than the state provided social services, accepting that this would create a highly competitive society in which losers would suffer in the short term. but would in the long term benefit from the increased wealth creation that was only possible if capitalism was free of the burdens and manipulations of the state. These are the views of a form of right wing extremism that is now ascending. Its power and interests should not be underestimated. They exert significant control over major media organisations. Through the kitchen economics of austerity and movements such as the Tea Party in America they are obtaining significant popular support. As they force down wages to generate the profits to pay off commercial debts owed to entities in the offshore system, and as they use speculation to drive up the cost of food and energy, they are effectively able to raise a vast tax on ordinary people that further diminishes the power of nation states.

The UK exemplifies the duality of purpose that this creates for nation states complicit in this process. On the one hand they have to conceal their betrayal with jingoistic parties to celebrate the Queen and the Olympics, while on the other they have to recognise the subservience of the British state to the offshore and supra-national entities that it has over the last sixty years done so much to create. In the United States the government has been trapped into a policy of using military power to ensure that the spread of the countries wealth creation capacity around the world does not result in its own demise. The central plank of this strategy is to ensure that oil is traded in dollars, creating a perpetual global demand for dollars that enables the US government to print money to keep its ransacked economy afloat. So far Iraq, Afghanistan, Libya, Syria, Sudan and Somalia have been the main victims of this strategy, with Iran now being being prepared as the next. However the US role in exposing the weakness of the Euro system has also been part of the same strategy.

When the history of this period is told with the benefit of hindsight and with at least some access to the documentary evidence, it is likely that the nation state and the rule of law as we know it will have passed into history. The robber barons that are creating the supra-national power will in due course become known and will have to face responsibility for the processes they have started. At Bretton Woods Keynes argued that enabling the dollar to replace the pound as the global reserve currency would be to commit the world's poor to a struggle they couldn't win. In effect the supra-national funds have been involved in a grand arbitrage, delivering jobs to people who ask the lowest wages and reducing the wages of those who have benefited most from the unjust trade advantages that the US and Europe afforded themselves. An arbitrage though, even on this scale is not a political and economic system that can enable humanity to address its challenges.

The steep climb in our numbers is a challenge for all peoples and survival will depend on our ability to collaborate rather than compete. We do not have the infrastructure for effective collaboration, but in the supra-national financial entities we have the seeds of a new global empire. The money and power of the hedge funds, the private equity companies, the major transnational corporations and the sovereign wealth funds will eventually be either dispersed as an aberration or will become the power to address global challenges. It is a power that will most certainly be exercised ruthlessly and with a cruel disregard for the suffering it causes. It will destroy cultures and languages and traditions. It will encourage ignorance and faith. It will sacrifice whole populations and only if it succeeds in creating a stable planet that meets human needs within a viable culture will we again see the expression of the enlightened compassion represented by the welfare state.

Should we in the UK be glad that our country is at the forefront of this change, or should we be hoisting our leaders from the nearest tree as traitors? Is the reason the left is unable to mount an effective challenge simply that the process has gone too far and there is now no realistic power capable of stopping the demise of the nation state with a democratic system rooted in the shared wealth of its people? The wealth has been stolen by the oligarchs and they are the as yet uncrowned rulers of the world. Unless we are ready to rise in revolution, we had better start getting used to it.

BIG MONEY NEEDS ETHICAL RATINGS AGENCIES TO STOP IT DOING HARM

Anyone who has large amounts of money under their control is in a position to shape the course of change and yet fund managers understand their responsibility to be only that they should maximise returns while staying within the law. Is this amorality immoral? Is it real or is it a convenient lie that hides an extreme right wing agenda?

People who run businesses that make and do things often have a vision that goes far beyond simply maximising profits. Often they want their work to help make the world a better place as they see it. This 'soft' motivation is not something they can ever dare to admit to unless they are either going for an ethical sales pitch or are just extremely successful. If they do they are likely to find they are cut off from finance. The money always wants a clean clear focus on profit and lets the law deal with the moral issues. Never mind that the money also lobbies the law makers not to take away profitable opportunities even if they kill people or endanger life on earth. It is against this background that we have food and drug companies poisoning people, arms and security companies creating the tools for mass murder and torture and mineral extraction companies trampling on both people and planet with near impunity. However, none of these horror enterprises could operate if they did not have access to the finance steered their way by fund managers. Their code of amorality within the law is not neutral. It is biased in favour of people and corporations that will put profit before the common good and yet these fund managers are the people we entrust with our savings.

This has been going on so long that many developed countries and sadly the UK in particular, have economies that would collapse if any meaningful moral standard were applied to investment. Governments are highly aware of this and have become increasingly complicit. Fiscal policy, regulations and enforcement as well as government expenditure are all distorted by the 'keep the cash cows alive' agenda. Tax on corporate profits and the very rich is increasingly voluntary. Big companies may be fined, but are not taken to court. The public purse is for bail-outs and creating corporate investment opportunities to protect immoral sectors that have become bloated in an environment of collusion and complicity with governments. The intellectual deceits to justify all of this have become the banal dogma of the established political parties, university academics, mainstream media and the corporate world itself.

For ordinary people living in this environment there is hardly an opportunity to gain a realistic perspective when this web of constructed meanings forms the language of everyday life. Only the key symptoms tell people that things are not as they should be: they are getting poorer while the rich get richer, the world is increasingly in conflict, freedoms are being taken away, debts are piling up and nothing effective is being done to address climate change or our dependence on the depleting fossil fuels that cause it. The idea that their problems are being fuelled by the money they invest in pensions and ISAs does not often cross people's minds. Nor does it often cross their minds that each time they borrow money, for homes, for student loans or on their credit card that they expand the mountain of private debt that is too big to be ever repaid, but which can be used to enslave them by depriving them of any choice but to always take any job regardless of how badly paid or how mindless or immoral the work is. What good does it do anyone to even think of these things, or to consider the vast funds that are created from the profits on oil and gas that sweep across the globe with the morality of pirates in search of booty? Each of us is dependent on this web of corruption and exploitation to keep us housed, fed and safe from the chaos that would ensue from its collapse. Never mind that in some respects our system is as full of lies and corruption as that of the Soviet Union.

If investment without moral consideration of the consequences of investment is a key component of the problem, is there a realistic way that fund managers could be held responsible for the damage that the companies they invest in do in the course of maximising profits? Just as we have ratings agencies for the credit worthiness of businesses, could we not also have ethical rating agencies?  Could fund managers be obliged to subscribe to a code of practice where their portfolios needed to have a calculated ethical mean score above a certain level. If such a system were in place, we would have seen a collapse in the share price of Barclays once they were found guilty of the Libor fix. GSK's shares would have collapsed after the company was found guilty of miss-selling drugs. Companies, particularly large ones, found guilty of bad practice would not just be able to pay a fine and carry on. They would become subject to a takeover by companies with a better ethical scores. The transition to higher ethical standards could be taken slow enough that the economy is reformed, not destroyed, with the score required rising year on year. Obviously, such a system would require enforced transparency and the ratings agencies would need a high degree of independence and moral authority, but if they were to be able to assure savers, investors and consumers that their transactions were not undermining their wider best interests, it might be a way forward.

BANKS, FALSE PROMISES AND THE ROAD TO TYRANNY

What is a bank but an agent. It will guarantee my promise to pay for goods and services I receive on credit. It will pay you to place your savings with it so that it will not be unable to pay if I default and it makes its money of the difference between what it can charge me and others for its loan guarantee service and the cost of paying for your savings and its other costs. It does not so much lend me your money, as use your money to cover the risk of my and others default. In practice the amount of loans guaranteed can be many times the amount of savings it holds on deposit.

However what I promise to repay for the goods and services I buy with my bank loan are goods and services of equal value. This being true for all borrowers, the amount of debt should relate to the amount of goods and services being produced. If all loans were for one year, the amount of debt that could be honoured would be the value of all goods and services traded in that year, less those that were traded for cash. This would be disastrous, for as the year end approached all loan notes would need to be matched with goods and services delivered and any debts outstanding would be in default. In practice though the process of making promises to pay with real goods and services in the future is constantly rolled forward, so there is no reason to panic that the loans will not be repaid because time has run out.

Well that is nearly true, but nearly true is a dangerous thing in banking. Suppose that the amount of loans made each year, together with loans from previous years still outstanding was 1% greater than the economy as a whole could produce real goods and services for (over and above those paid in cash or immediate barter) and that this was always the case, year after year. What would happen. Well to start with it wouldn't matter, but over time the amount of loans outstanding would get bigger and bigger relative to real goods and services. In fact this gap would grow exponentially. After about 20 years it would result in debt being the same as a whole years goods and services. Unchecked, after a few more decades the gap between debts and real goods and services  would be three times what could be produced in a year. In reality this would mean that the whole society was awash with promises that could never be honoured. This is what has happened.

To some extent this is inevitable. To give an example. The government decides to borrow to build a new road between two cities. It calculates that because of the new road people in both cities will produce enough extra goods and services that the increased tax will more than pay for the road. Meanwhile shrewd investors realise that the small towns along the road will also benefit and so borrow money to buy property in the small towns. Sure enough, the property in the small towns becomes a more profitable location for business and the speculators pay off their loans as they sell on the property at a good profit. The banks soon realise that provided the economy is growing that they make more money from this sort of speculation on future growth than on actually financing growth in the production and consumption of real goods and services. However, speculation does not itself increase real production. So the increase in debt relative to real production is driven by speculation.

Bankers are not stupid. They can see when this problem is growing. However they do tend to look at the position of their own organisation, not the economy as a whole. As the risk of default grew, they did not stop lending, but rather looked at how they could shift the risk away from themselves using insurance and other vehicles. When it became obvious that some banks had defaults they couldn't cover, there was panic that threatened the whole system and governments had to commit future tax revenues to guarantee the banks' ability to deliver the future goods and services that their borrowers were unlikely to deliver.

Stupidly, some governments, such as the UK, took this to mean that government now had less ability to buy goods and services. As a result the value of goods and services being produced decreased. As a result the demand for loans increased as both households and businesses wanted to borrow when they experienced what they hoped would be a short term difficulty obtaining the goods and services they needed. Banks were is a bind though. They didn't want to take on risky lending. This meant they could not pay savers much. From the governments perspective this was good and bad. If there was a decrease in borrowing then they could have very low interest rates. In theory this would support people producing real goods and services, but with the banks avoiding risk this made little difference. Low interests did make it cheaper for the government to borrow. On the down side returns on savings declined and the government had to start creating money to put into banks to replace savers' money. That is to say the government was replacing savers as the source of liquidity to underwrite the bank's promise that its debtors would deliver goods and services. While this helped the banks to appear viable it was of course a complete nonsense. The system is only working when sufficient goods and services are being produced that the people who sell them become savers interested in investing in the future production of more goods and services. If the amount of goods and services is in decline and the banks are not rewarding savers, apart from keeping banks alive for the sake of it, governments giving money to banks to keep going is like wanking - it might feel like sex, but its not going to be productive.

In the meantime the real underlying problem persists. There are more promises to deliver goods and services out there than there is any real prospect of being honoured. For a short while there is a justification for governments to stand as guarantors to stop a system collapse, but if they start believing that if they just keep rescuing the banks then the problem will gradually go away then they are badly deluded. There is a need for real action to rectify the problem.

The problem is too much debt. It doesn't matter whose debts might be better than others. It is the sheer quantity of accumulated promises that physically can not all be honoured. There is only one solution and that is to tear up the promises. It is to say to people that they don't owe money on credit cards and mortgages and overdrafts and bank loans and student loans. It is to say to them that they can go and use the money they were paying to get their lives working again. To get new clothes, to repair the car, to insulate their homes, to buy decent food, to learn new skills or what ever it is they need.

Of course in practice this can't be done quite like that. Firstly if it were done all at once it would flood the economy with a demand for goods and services that could not be met, sending prices through the roof and secondly not all debt needs to be wiped out to get the system working again. Further there is the difficult issue of savers. If the debts were wiped out so would their money be. The suggestion of the Australian radical economist Steve Keen would make a good starting point: he suggests that a sum of money be given to everyone. If they have debts they have to use the money to pay it off. If not its a bonus. For some it would be a crude (and no doubt unfair) compensation for the loss of value in their savings, for others with no debt and no savings it would be a bonus.

There are many details to sort out, but if nothing is done we are going to endure a slow misery of decline, with young adults in particular having their hopes lost as they try to survive in a land that is willing to sacrifice itself so that the holders of empty promises can accumulate the rights to everything. While the process of unrealistic debt accumulation has been going on, there has been another change taking place. Increasingly the ultimate owners of wealth have placed their assets in tax havens. This advantage has allowed them to become the winners in what is becoming increasingly like the the last stage in a game of monopoly. Awed by their wealth and power governments do their bidding. Government services are contracted out to them. Their taxes are reduced, Bank regulation is watered down. Laws are put in place to control the restless masses. With no change in policy, these owners of great wealth will gradually accumulate more and more, acquiring property and access to tax revenues. This tyranny has affected much of the developing world, it is now coming to haunt us.

IT IS TIME TO END THE TYRANNY OF THE BARONS

We are at one of those points in history when the assumptions about the organisation of power are being tested. These moments come around and in the crisis some truth is revealed, but usually the deeper lie is retained. The deeper lie is the right of individuals and groups of individuals to acquire great wealth and power at the expense of others. It is the collusion with this lie that makes most governments illegitimate, but is also invariably the root of their access to power. This is the biggest danger we all face.

Governments draw their power from their power of coercion, from their power to compensate and their power to manipulate the beliefs of the people. It is no coincidence that governments control a military bound by symbols of tradition or that god is invoked as the authority of the state. The cost of this power is always the complicity of the baronial class, be they landowners, mine owners, bankers or newspaper owners. In revolutions the baronial class has been guillotined, shot, starved and forced to toil the land, but never has a way been found to stop their re-emergence. It would be easy to conclude that they are an inevitable part of civilization, but this is to misunderstand the nature of the lie.

The proper role of government is to create and enforce a body of law for the good management of a country in the best interests of the people who live there in such a way that it does does not do harm to other countries or the broader global environment. Beyond the enforcement of the law, government does not have any specific duty. If it chooses to raise money to finance services that are needed, there is nothing that says that it must itself provide those services, however it should have due regard for the best interests of the people and this is not achieved by passing the money and the duty to the baronial class. By the same token, in choosing to provide such services itself, government should be honest enough to realise that the interests of the people are unlikely to be served by government itself acquiring baronial power.

The enemy of the baron is the anarchist. The anarchist would have it that the barons would not exist. The anarchist knows in his heart that there is nothing that is provided for the people by a baron that does not come but at the price of freedom. He cares not that the baron is the government or if the baron is a freelancer or a corporation. The baron knows that it is vital to his power to always deny the anarchist the opportunity to learn how to organise people in systems of equity and autonomy. This is the ruthless front line of politics. It is why Cromwell slaughtered the Levellers, it is why the Guardian was established after Peterloo, it is why one revolution after another has been betrayed, it is why the BBC and Fox News exist. It is the reason why for one thousand years Britain has been in a state of conflict with some country somewhere. It is why drugs are prohibited so as to justify a massive police and prison system. It is why Labour Governments centralize power. It is why the rich always buy land, control finance and block and manipulate local government. If it were ever demonstrated that we could organise ourselves without the baronial class the deep lie of politics would be unmasked.

This is the front line of the battle for a future for the people of Earth. As the energy, land and other resources that have enabled our population to rise exponentially go into decline we face a future of horror. The baronial class will let this happen to protect itself. What chance there may be to manage the decline in our numbers to levels that can be sustained is something we can only explore in a spirit of trust and co-operation. The barons have no part to play in this.They must go.