Corbyn is a threat … to the Establishment

One year after all the hyperbole over the threat the Scottish National Party and an independent Scotland would pose to world peace, economic stability, oil reserves, the Queen and about every other ridiculous thing all mainstream parties could invent, we find an alarmingly familiar situation in the appointment of one Jeremy Corbyn to leader of the British Labour Party.  From the majority of his own MPs to the leaders of all the other British and Western mainstream parties to the hacks churning out the fear, it’s the usual story: any politician arguing that austerity may not be a good thing or considering raising taxes on the rich or questioning the spending of billions on nuclear weapons must be crazy and not living the real world.  You know the real world, that place where we still follow the advice of the same financiers that plundered and nearly brought the world’s economic system to a halt.  That place where we make the poor and the handicapped pay for the crimes of the rich.  That place where we make the least wealthy countries hand over their assets and their autonomy in a manner that would make the colonialists of the 18th century blush.

Corbyn - a threat to Neocon Establishment Troughers Everywhere

Corbyn – a threat to Neocon Establishment Troughers Everywhere

I mean Jeremy Corbyn wears home knitted jumpers, had the lowest expenses of any MP and is a vegetarian!  How could he ever be leader of a (fading) power such as the UK?  This seemed to be a bit of a problem for the Wall Street Journal in their piece yesterday and they were not the only one.  No, the problem is that he does not go along with the increasingly monotone, all singing from the same hymn sheet world of western politics.  Now don’t get me wrong and immediately assume I am saying he’s got all the answers or that I agree with everything he says.  Nope, my point is that whenever you’ve got a group, company, organization, country where everyone thinks alike then you’ve actually got trouble in long run.  If you look back at UK politics over the last ten years you’ll rarely see a difference in the policies of the main three national parties (SNP is Scotland only).  They all want more wars, they all want to appear the toughest on immigration, they all want austerity, they all want to continue following the Neoconservative, Neoliberal agenda.

The SNP took 56 of the 59 seats in Scotland in May.  This is a party that questioned the status quo and pushed for greater equality, better care for the weakest, the scrapping of Trident, the growth of renewable energy.  After their leader appeared on UK television before the 2015 General Election one of the most googled search terms by people in England was “How can I vote for the SNP?” They asked this because they wanted an alternative.  If Corbyn can survive the Ides of March then perhaps he can be this alternative.  Being confronted by an alternative agenda is never a bad thing; it forces you to re-evaluate your beliefs and question your decisions. It tempers the excesses.

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Programmers, Engineers and Politics

Should engineers and other technical people be more involved in politics?  Yes, we probably should.  With our analytic problem solving minds we could or should be able to provide a stabilizing hand to the sound-bite laden hubris.  However that means dealing with the kind of people that we’d normally prefer to avoid.  Almost universally there has been a rise in a political class – career politicians with no experience of the world beyond that of politics.  There is the amusing anecdote of former British minister for health under Tony Blair, Alan Milburn who by default was in charge of one of the world’s largest employers – the NHS.  He actually had business experience having run a second hand book store in the 60s caused Daze of Hope, which more usually went under the name Haze of Dope.  This is still more than could be said of his fellow ministers with the exception of John Prescott, who had been a ship’s steward in the 1950s.

English: John Prescott, British Labour politic...

English: John Prescott, British Labour politician, during his last day as Deputy Prime Minister. (Photo credit: Wikipedia)

The political class are the game players that have come to increasingly rule the landscape of governance, intelligence and even that of business.  And game is the apt word even if they are literally dealing with the welfare and lives of millions of people.  The financial crisis of 2008 and its continuing fall out remains a complex scenario.  The causes are well discussed and apparently were clear to see for many in the know, plus the all-knowing man in the pub who at heart knew that we can’t all get rich off selling each other houses with fantasy world values.  What remains a greater mystery is the inability to decide on a means of exiting the recessions and declining fates hitting many economies.  Is it possible to look at this as an engineering problem?  Here is my take on it.

First there was the bailout.  Now that was essentially done to stop global meltdown and general bad news by ensuring that banks could still lend to each other and keep the flow of money going.  Many too big to fails with men in the right places ensured that their institutions not only survived but were rapidly back to declaring record levels of profit (of which next to none is paid out in tax).  Meanwhile thousands of real world product and service businesses small and large went to the wall as they saw orders placed on hold or cancelled and their lines of credit drying up.

Second we saw the complete lack of prosecutions, or Too Big to Jail.  Unlike the Savings and Loans Crisis of the late 1980s we saw comparatively few prosecutions of guilty bankers – outliers like Madoff going to jail until the end of time and some French wet behind the ears minion (Jérôme Kerviel) getting a fine of €5 billion were meant to assuage our anger and thirst for blood.

English: Bernard Madoff's mugshot

English: Bernard Madoff’s mugshot (Photo credit: Wikipedia)

Thirdly, governments discussed how we may best reanimate the wavering economies.  Interestingly the weakest economies were dealt an additional blow when their credit ratings were downgraded which in turn increased their cost of borrowing.  Even more interesting is that the credit rating agencies that now chose to downgrade whole countries were the same agencies that saw fit to put AAA ratings on the toxic subprime mortgage packages.  And in parallel the same politicians who allowed the whole mess to occur were the same to decide how we’d crawl our way out.  Primary solutions involved slashing interest rates, quantitative easing and austerity.  Now the former two are essentially giving the banks access to more money in the laughable hope they will lend it to businesses that can resurrect the economy.  Austerity is even more controversial.

From what I can figure almost no country had ever managed to successfully use budget cuts to get out of a financial hole.  Yes there is no point in wasting money, but not every country is as extreme as Greece and therefore vast overspending on internal costs is rarely the key issue (Greece also received massive loans before the proverbial hit the fan in order to continue consuming foreign goods that they could ill afford).  Basically countries are forced by world or continent level banks (World, European, etc) to conform to certain economic indicators.  These include trade deficits, interest rates, spending, etc.  At stake is our ratings doled out as discussed previously which in turn affects borrowing rates.  Bizarrely enough making gross cuts in things like welfare and education scores big points with the lords that be, even if it is likely to result in a more unstable society and long term skills shortage.  When the public protests we hear “We’re all in it together, we must all suffer.” Unfortunately if you are earning €10K per year and you lose 10% of that, this is far more painful than losing say 10% of €100K.  Yes really.  Cutting back on care is also an idiotic move that is rooted in fiction and exposes a cruel element of human nature.  A government says they need to cut €1 billion from the home help budget.  Now has this got anything to do with needing that €1 billion somewhere else?  Let’s forget any level of human compassion here and act like a hard, cold blooded money man.  That €1 billion is paid to carers who help old and disabled people stay at home longer.  We cut it and watch the real consequences.  First of all those carers pay tax, so we get a decent whack of that back anyway.  Secondly, we end up paying unemployment money and housing benefit to have some capable person sit at home, or if welfare not present we risk increasing crime rates.  Thirdly we need more places for old people in nursing homes which is far more expensive.  Fourthly we lose flow of money that these now out of work people would bring to their communities, the sales tax and the taxes these people pay.   Such cuts have nothing to do with economic reality.

Despite being told by financiers that we engineers do not understand the complex world of national and global economics, that does not mean we cannot apply some hard pragmatism.  As far as I know finance does not break down as we go to the world level as Newtonian physics does when moving to the subatomic.  No, it is quite simple at heart and all the layers of shenanigans above are just that, a means of disguising and delaying hard truths.  Goldman Sachs fudged the books for Greece and in the 1990s and 2000s the Irish gave an impression that they were the Celtic Tiger and were richer per capita than Germany.  This was, as was borne out, complete bullshit.

A country within its own borders need only decide what standard of living it wishes to maintain.  Is there a minimum level that we refuse to see people live below?  We then as a society distribute the work to ensure we meet that level.  Infrastructure such as roads, power generation and distribution, water and sewage, roads, railways, airports need building and maintaining; we need healthcare, food, transport, education, and we want entertainment, some luxuries.  If we can meet all these needs within our own borders the state bank need only create enough money to grease the system.  The money is invented from thin air as it always could be and still is.

Hoover Dam Bypass

Hoover Dam Bypass (Photo credit: dherrera_96)

After the great depression of the early 1930s the USA embarked on a series of massive public projects.  They were broke but they could still invent the money to get the work done.  How successful this was is still debated, with many believing that real growth in the USA only began after World War II.  The rise of Nazi Germany was in response to the devastated German economy of the 1920s.  But if the economy was so poor how could they afford to build the greatest war machine in history?  And amazingly even a broke country busy with cutting social services can pull plans out of the hat to build say a high speed railway or fight yet another war in a far flung land?

Ultimately the country draws parallels with the family – if we decide to outsource our housework then we better have the means to pay for it in an external valid currency (at home we can choose to use monopoly money or barter, outside our home we typically use the national currency but there are also local community currencies and the likes of Bitcoin).  If we choose to close our own coal mines and steelworks because it is cheaper abroad then we better have enough foreign currency to pay for it.  That means we need to export enough other things.  When we don’t then we need to borrow, so we need a good credit rating.  The good rating is dependent on factors like our trade deficit.  This can be hidden by making arbitrary cuts in internal budgets and playing in the casinos that our financial centres resemble, but ultimately a country cannot go on forever importing more than it exports.

Challenger

Challenger (Photo credit: jesvwilliams)

Richard Feynman famously said that at the conclusion of the Challenger enquiry “For a successful technology, reality must take precedence over public relations, for nature cannot be fooled”.  I’d say this equally applies to economics and society.   As engineers, scientists and programmers we can keep this in mind next time we’re downwind of a mob of game playing bankers and politicians.