Of Bedrooms and Defunct Economists

It was thirty years ago that I opted for the Economic and Social Thought paper at Oxford and studied, with, I hope, historians’ scepticism, the works of Marx, Ricardo, Keynes et al. Fascinating reading it was too and I can recommend Keynes as a writer of wonderful English prose. During one tutorial my tutor, Ross McKibbin at St. John’s, talked about the French neoclassical economist Leon Walras (1834-1910) who had attempted to express all of human economic activity in a series of complex mathematical equations. The intellectual architecture of Walras system was impressive and way beyond my mathematical capacity but, as McKibbin drily observed, ‘You need a degree of detachment from the real world to come up with something like that.’ I was reminded of this as I read about yesterday’s nationwide protests against the so-called Bedroom Tax.

The thinking behind the ‘Bedroom Tax’ is simple. There are many families living in accommodation that is apparently larger than they need whilst other families are unable to find housing adequate for their needs. By docking a portion of their Housing Benefit families occupying accommodation larger than they need are encouraged to move to smaller accommodation, this freeing up much needed housing for larger families. No doubt the logic looks impeccable on the spreadsheet and the numbers stack up. I can imagine pages and pages of ‘What If’ analysis calculating to the nearest brick how many oversized properties will be freed up.

Unfortunately for its supporters the ‘Bedroom Tax’ is looking more and more likely to fail the real world test. But why would families, given a clear financial incentive to move, not do so? There are many reasons but here are three.

Firstly there is no suitable smaller accommodation in their area for many of them to move to. It is estimated that some 660,000 families are in this position. The Bedroom Tax is, for them, not a ‘nudge’ to use a currently modish policy wonk phrase – but a cut in their income they can do nothing about.

Secondly many people are reluctant to move because doing so will take them out of neighbourhoods where they have lived for many years, away from family and friends, away from established social networks which are particularly important for people whose lives are a daily struggle to make ends meet.

Thirdly there are families who actually need the ‘surplus’ rooms they have. Consider the case of couples where one partner has a chronic illness or disability such that they are unable to share a bedroom, or need a spare room to store disability aids.

There are also unintended consequences. Nottingham City Council quickly realised that the Tax would make already hard to let high rise flats even harder to let and so redesignated two bedroom flats as one bedroom. This also highlights a potential difficulty with applying the policy in practice. Like many apparently simple concepts, that of ‘bedroom’ may turn out to be more slippery than supposed. It is also argued by some commentators that by forcing many families into smaller accommodation in the private rented sector where rents are higher, there may actually be an INCREASE in the Housing Benefit bill. Finally the policy does nothing to address the main issue which is an overall shortage of affordable housing.

The conclusion from all this is that human behaviour and motivations are complex, sometimes seemingly irrational and not reducible to assumptions on spreadsheet models. This is a policy based on theory, a policy devised by people with limited exposure to the real world, with all its contradictions and grey areas, a policy designed by people in intellectual thrall to the likes of Leon Walras. The Bedroom Tax is not the only example of such policy making. There was the plan to sell off the Forestry Commission in pieces tom local community groups, there was most worryingly the upheaval in the NHS. Somewhere a policy wonk’s spreadsheet says it will all work. I wish I could be so sure.

Where do these policies originate? The answer is in think tanks with links to the major political parties. These are staffed by so-called policy wonks. The wonks are generally young, and not long out of university. They are generally academically bright, they are ambitious and getting noticed is a first step on the ladder of a political career. They have, inevitably, little experience of the real world, being young and having spent too much time in the bubble of professional politics. An example of the type is Planning Minister Nicholas Boles, formerly of the Policy Exchange think tank, a man who thinks we should protect the countryside by building houses all over it, a man, too, who advocated handing public services over to local people to run saying that it may result in chaos but that chaos was a good thing, a version of Schumpeter’s ‘creative destruction.’ Schumpeter, by the way, was a big admirer of Leon Walras.

It is surely the job of ministers to apply the cold shower of common sense to some of the nonsense the wonks come up with it. But in the case of the Bedroom Tax we are talking about Iain Duncan Smith, the Conservative party’s most ineffectual leader ever, a man who is leading the race to be the most incompetent minister in Britain’s most incompetent government since the Second World War.

As for the wonks, they can’t help being young. But they could put down the likes of Cass Sunstein’s Nudge and find time to read literature, read the Bible (or the Koran for that matter), to listen to Beethoven’s late string quartets as they work. Then they might understand the key message of today, Easter Sunday, that ‘man does not live by bread alone.’ Once they have grasped that they might understand why human beings don’t always do what spreadsheets say they ought to and we might just have a chance of getting policies that make peoples’ lives better rather than worse.

More Lazy Journalism

Many people in Liverpool have boycotted the Sun for the last 24 years, ever since the newspaper uncritically parroted the South Yorkshire Police version of events at Hillsborough. That police accounts of the disaster were self-serving lies is now well known. The point is that there was evidence at the time to suggest that. To accept uncritically police accounts of events, any events, is at best lazy journalism.

Lazy journalism is not what you expect from the Independent but that is what we saw yesterday. Joan Smith visited Stockholm to tour the city at night with the police as they enforced the country’s laws criminalising the purchase of sex.

http://www.independent.co.uk/life-style/health-and-families/features/why-the-games-up-for-swedens-sex-trade-8548854.html?origin=internalSearch

She parroted all that she was told about the success of this law in reducing prostitution. Readers would not necessarily know that these laws are controversial, that they are opposed not only by sex workers, but also by academics who have conducted research in the area and argue that the claims made by the Swedish authorities for the law are not supported by evidence.

I do not intend to explore here the question of who is right. That is not the issue.  The point is that the readers of quality newspapers are entitled to expect objective and critical journalism, not PR puffs for the Swedish police. .

It’s Not Just About Pierogi

It’s ‘be horrible to immigrants’ time again. David Cameron is running scared of UKIP and proposes to tell councils who they should allocate houses to. So much for localism. He proposes to restrict access to benefits for people from EU countries which may be unlawful under European law. This probably suits him as a further stick to beat Brussels with. As a policy it is anyway unworkable.

He can’t have it both ways and neither can European politicians generally. We have free movement of capital and a single market. Free movement of people is a logical consequence. Some people here don’t want to see that. Many are trapped in fallacies of the king that say ‘we have a million unemployed and a million employed migrants. Therefore immigration is causing unemployment.’

This is a fallacy based on a view of the economy as static with a fixed volume of employment. In effect immigration and employment is a zero sum game on this analysis. The most obvious new immigration into the UK is from Poland. It is worth taking a look at the Poles. There are now so many of them that they have an infrastructure of their own, shops, cafes, hairdressing salons, newspapers etc. Many Poles work in these businesses and the jobs would disappear if they left. In any event knowledge of the Polish language is a prerequisite for many of these jobs.

The businesses also create opportunities for the British businesses who supply them. They also generate tax income. A number of Poles have set up businesses providing goods and services to the wider community. Guess what? Many of them employ British people,

The presence of significant numbers of generally young, enterprising and hard working people stimulates economic activity and we have a desperate need for any kind of economic stimulus.

Generally immigration is a good thing. It is also, if you subscribe to free market thinking, self correcting. Once the labour market becomes saturated, the marginal economic advantage from moving here will reduce to a point when potential migrants will opt to stay at home. Simple really. The problem is that politicians who lay lip service to neo-liberal nostrums don’t really believe them, especially when the Daily Mail is in full steam.

Immigration is also culturally beneficial. The idea that Englishness arose in isolation from the rest of Europe is laughable. Look at our language. Ours is a West Germanic tongue with significant overlays of Scandinavian, Latin and Norman French. I have used words from all four sources in writing this piece. Immigration has made the English language what it is, a thing of exceptional richness and beauty.

One final remark. I like curry, I like crispy fried duck, I like pizza, I like pierogi. I look forward to trying Rumanian food.

Food for Thought

I am listening to UB40’s debut single as I write. The band apparently don’t particularly like their first album Signing Off but it’s always been a favourite of mine. It is not, however, the music that forms the starting point for this piece but the name of the band.  Younger readers may not be aware that, back in 1980, when you signed on for the dole you received an entitlement card which was known as a UB40. Things were a little different in those days. There was no Job Seekers Allowance. Instead there was Supplementary Benefit for those claimants who had not paid National Insurance contributions and Unemployment Benefit for those who had. This was payable for twelve months and had an earnings related element, at least until 1982. As a result benefits were a little more generous than they are now.

You signed in weekly, not in a cosy Job Centre Plus building as you do these days but in some cold and damp DHSS office. There were no job search forms to fill in either. You signed to say that you had been available for work and were handed a giro cheque which you cashed at the Post Office. How do I know this? In those days students could sign on in the summer vacation. Here too times have changed and not for the better.

We should not get too nostalgic. Unemployed people were made to feel like worthless scroungers and the whole system was designed almost to degrade and humiliate people. But at least they were open about it and paid a level of benefit that you could, at a pinch, live on. Today you sign on in a nice warm office, you are referred to as a customer, but, underneath, the contempt remains. The benefits are now wholly inadequate, particularly if you don’t have children. The Government think a married couple can survive on £111.45 a week.

The other change for the worse is that they can make you perform forced labour. Workfare they call it. This frequently involves working for commercial enterprises or large charities that can afford to pay the proper rate for the job.

Last year two jobseekers won a case in the High Court which ruled that their benefits had been stopped unlawfully after they refused to work for nothing. One of them, Cait Reilly, was the target of vilification and abuse from politicians who should have known better. She was ordered to stack shelves at Poundland. Poundland is a large profitable commercial enterprise that is well able to pay the rate for the job. Why, in any event, do we have a national minimum wage? Cait was not sitting on her sofa drinking cider, she was doing voluntary work at a museum acquiring knowledge and skills for the career she intended to pursue. Working for Poundland would not have done this and the museum would have had significant problems without her contribution. According to Iain Duncan Smith she was a ‘snob’ who, apparently, thought she was ‘too good’ to work at Poundland. Far from it. Cait now has a part time job at Morrison’s. The point is she gets paid for working there.

The government has now passed a retrospective law to make legal what was declared illegal by the court and got out of paying £130 million in benefits withheld from claimants. This is arguably a breach of the Human Rights Act (indeed in many jurisdictions retrospective legislation is unconstitutional) and shows clearly the contempt in which the Government holds benefit claimants. That Labour abstained and failed to oppose the legislation is to their lasting shame.

It gets worse as , this week, the Guardian published a leaked e-mail from a Job Centre manager to her staff threatening g them with disciplinary action if they didn’t refer more people for sanction. The Government has denied that targets for benefit withdrawal are being set but here was the clear proof. Sanction is a sanitised way of reducing people who are already struggling to destitution. That there are people in Britain in 2013 who literally do not know where their next meal is coming from shames us all.

In defending the legislation to avoid paying out benefits withheld the Government talked about protecting the economy. In fact these payouts would have been good for the economy as all of the money would have been spent, providing an injection of much needed demand. Wage freezes and benefit cuts for those at the bottom and tax cuts for higher earners redistribute income from bottom to top and this, leaving aside the moral question, is inefficient economically. To boost demand and get the economy moving I propose the following: an increase in the top rate of tax to 60%, an increase in the 20% band to £40,000 per annum  reducing the tax burden on average earners, and a doubling of benefits. Quantitative Easing should be replaced by a hand out of £10,000 to every man woman and child in household earning less than £50,.000 per annum, to be spent within 28 days or used to pay down debt.  In this way we can get the economy moving, and have a fairer society. The point is that fairness and greater equality are not the enemy of economic growth but essential to it.

To the outgoing Governor of the Bank of England I say, along with UB40, ‘King where are your people now?’

Remembering the Wall

Jirkowsky

The girl in this picture is Marienetta Jirkowsky. She was born in Bad Saarow near Berlin on 25th August 1962 and died in hospital in Hohen Neuendorf on 22nd November 1980 a few hours after being shot in the stomach while attempting to cross the Wall into West Berlin with her boyfriend and another man. They both made it over the Wall but Marienetta who was only just over five feet tall could not scramble up onto the Wall despite her boyfriend’s desperate attempts to pull her up. As guards came and opened fire on the defenceless young woman he threw himself off the Wall onto the western side..

Marienetta died twice. After her death the Stasi worked on her family to portray her not as a victim of an unjust system but as a worthless trollop who associated with criminals and who deserved what she got. Photographs of her were seized for fear they might fall into the hands of the Western media. This picture is one of the few that were believed to have survived although many of the confiscated pictures were discovered in the Stasi archives as recently as 2010. The Stasi action was successful and Marienetta was posthumously disowned by many of her own family and by people in the small town of Spreenhagen where she grew up.

It has been left to others to remember. In 2010 the town of Hohen Neuendorf named a new roundabout situated just yards away from the spot where she was shot Marienetta – Jirkowsky- Platz in her memory. Members of her family (not her parents who were both dead) fought to stop this arguing that it was an invasion of her privacy but the argument that remembering victims of the Wall cannot be considered a private matter won.

I mention this case simply because Marienetta was my age and because she died less than six months before I first visited Berlin. All the stories of those who died are tragic but this one is somehow closest to me. Whilst they are all remembered in a daily service in the Reconciliation Church built in the former no man’s land behind the Wall in the Bernauer Strasse  the actual Wall itself has largely disappeared, most of it, of course, in the first two or three years after it came down on 9th November 1989.

Few sections of the Wall now remain in their original location. One of the best known is the so-called East Side Gallery on the banks of the Spree not far from the Ostbanhhof. Here the Wall was built back to front with no man’s land of barbed wire and raked sand on the western side, on the banks of the Spree which, at this point, formed the border. The actual Wall runs down one side of the Muhlenstrasse and it was here that some of the world’s most famous street art. was created, street art with a serious purpose. Like this:

gallery

Now work has begun to remove part of this section of Wall to create access to riverside flats for wealthy incomers. Only a section admittedly but with so little remaining, particularly in the central areas visited by tourists it is unfortunate. That Berlin is losing much of the alternative edginess that made it interesting is perhaps an inevitable consequence if it being the capital. It must not, however, lose its memory, of the Wall and of its 136 victims including one of the youngest, an 18 year old apprentice named Marienetta Jirkowsky.