Friday, 30 December 2016

The essence of evil

I have a confession to make. I have been reading the Daily Mail.

No, I haven't gone over to the dark side. Rather, I have been true to myself. I have always tried to keep an open mind. And sometimes that means doing something of which my critical self does not approve. Like reading tabloid newspapers.

Reading is an important part of my life. I've always needed time to myself, to read and think. Without that space, my mind fogs and I become irritable. I suppose I am a bit introverted, really.  But shutting people out, even temporarily, can be difficult. Frances has her head in a book again? Just shout to get her attention. Works every time. And now that I have become my father's part-time carer, time for reading and thinking is hard to come by. The fog is slowly descending on my mind.

I discovered long ago that the easiest way of creating time to read and think is just to disappear for a while. So, over the years, I have collected some favourite boltholes. One of them, bizarrely, is Medway Service Station on the M2. Ten years ago, I used to stop there every week on my way to teach in Sittingbourne. It has a decent coffee shop with comfortable chairs. And it has newspapers. You just borrow them to read while you drink your coffee.

Most days now, I drive from my home in Rochester to my father's home on Sheppey, and back again. It's essentially the same journey as I used to do all those years ago.

So, a few days before Christmas, I was driving back from Sheppey to Rochester after helping my father with his shopping. Longing for some time to myself, I decided to stop at Medway Service Station for half an hour.

I ordered a coffee and went to look for a newspaper. The coffee shop was fairly busy, so most newspapers were already in use. There were only three on the stand - the Daily Express, the Daily Mail and the i newspaper. Disappointed, I reached for the i as the best of a bad bunch. But something stopped me. "Keep an open mind," said a voice in my head. And I thought to myself, "I have been critical of the tabloids - and especially of the Daily Mail - but I don't actually read them. I'm a snob."

So I picked up the Daily Mail and headed back to my seat.

It was the day after the Berlin terrorist attack. The first few pages consisted entirely of pictures and reports from people at the scene. I read them with interest. The eyewitness accounts were powerful: I, too, could feel something of the fear and horror that those people experienced, simply from reading their words.

But it was not the reporting of the terror attack that stopped me in my tracks. It was something entirely different.

The previous day, Rabbi Lionel Blue had died, one of many celebrities in the 2016 morgue. In his memory, the Daily Mail devoted an entire page to one of his reflections. In it, he described how he met God in a Quaker meeting - hardly the Holy of Holies for a Jewish man. I was reminded of my father saying he met God on a railway station. People find God in the strangest places....

Irreverent as always, Rabbi Blue dubbed his new friend "Fred":
It’s a friendly name and that’s how he popped up in my imagination.  Fred spoke back to me but his answers weren’t ones I expected.
They weren't what most of us would expect. We imagine God as controlling, not permissive: as dictating what we should believe, not allowing us to decide for ourselves. But Fred was different. Rabbi Blue continued:
‘Do I become Christian?’ I asked him. He was uninterested. ‘That’s your business,’ he said.
As I read this, a memory came to me. A 22-year-old music student standing in a Russian Orthodox church in Moscow, watching with horror the elderly women praying to the icons. "It's idolatry!" cried my younger self. And a voice in my head said, "Nevertheless, these are my children too".

At that time, I believed in God, but my faith was narrow and rigid, excluding others who did not conform to Christian evangelical norms. I was sure what those women were doing was evil. But God had a different opinion. Briefly, he gave me a glimpse of the world as he saw it - and it shocked me to the core. What I thought was evil, he considered unimportant. But condemning those women for their religious practices was a different matter. My version of Christianity was his idea of evil. Not that he was condemning me, mind. He just wanted to open my eyes.

That experience fundamentally changed my world view. To this day, I remain convinced that God is far more tolerant than we can imagine. Fred, utterly uninterested in Lionel Blue's faith choice, is the God that I know, the God I met in that church in Moscow.

We are all Fred's children, whatever faith - or none - we choose. I choose to be a Christian. Lionel Blue chose to become a Jewish Rabbi. Others choose to be Muslim, or Hindu, or Buddhist, or atheist. Our choices are driven by our cultural backgrounds, our temperament, our friends & family, our life experiences. But we have far more in common than the faith choices that divide us. The most important thing we share is our humanity. When we recognise another as a fellow human being, and share in their joy and their pain, we see the face of God.

And that brings me back to the Daily Mail. As I read on, I realised that it was all about people and their struggles. About their health, and their wellbeing. Six pages of eyewitness reports of a terrorist attack. A whole page report about elderly people with dementia being discharged from hospital in the middle of the night without support. Joyful reports about advances in healthcare that make people's lives easier. Angry reports about cost-cutting and meanness that diminish people's quality of life. And through it all, I heard the voice of God. The God who told me to keep an open mind. The God who meets us in the most unlikely places. The concern of my God for humanity shone through that paper that I had despised.

That said, I am not blind. The Daily Mail is partisan and divisive. It appeals to some and alienates others. And, more worrying, it promotes "othering" of those who are not "one of us" - migrants, Muslims, the very poor, the very rich. But I can see why God chose to use this very flawed medium to teach me a lesson. I was every bit as guilty of divisiveness and "othering". It is a lesson I shall not forget.

And it is a lesson that others too need to learn. As I look at the world today, I see fragmentation and discord, growing alienation, and a distressing tendency to divide people into "right" and "wrong", "us" and "them", Leavers and Remainers, Christians and Muslims, citizens and migrants, white and black, "ordinary people" and "experts", workers and bankers .....the list is endless. I find the religious divisions particularly distressing, perhaps because I lived through the years of violent religious discord in the United Kingdom, and I fear for the fragile peace in Northern Ireland. And perhaps also because I still hear "nevertheless, these are my children too" in my head.

When we divide people into "us" and "them", we deny the humanity of those we decide to exclude. And by denying their humanity, we open the door to terrible, terrible things. By convincing ourselves that they are less than human, we can justify to ourselves the torture, rape, slavery, imprisonment and murder of our fellow human beings. Acts of unthinking cruelty become commonplace, social deviants are treated increasingly harshly, false and exaggerated stories whip up the fear that justifies brutality towards those who are "not one of us". This is the essence of evil.

It is often said that for evil to triumph, all that is necessary is for good men to do nothing. But I would say that when we stop seeing our common humanity in the faces of others, the triumph of evil is already assured.

Related reading:

The extent of evil
Joseph Brodsky on the Greatest Antidote to Evil - Brain Pickings
What have we learned from history?
True patriotism

Image: Medway Service Station from the M2. Source: Geograph

Thursday, 22 December 2016

Market failure

I hate the term "neoliberal", but in this piece I am going to use it, simply for want of a better word.

Neoliberal economic dogma says that the public sector crowds out the private sector. So the public sector should only step in as a last resort to provide for those that the private sector cannot or will not serve. In recent years, we have interpreted this to mean that the public sector should only provide for the very poorest in our society. If people can afford to pay, the private sector will provide. 

Is this true? Well, true believers say it is. So, if an elderly man with a gold-plated defined benefit pension and substantial savings needs sheltered accommodation because he is no longer safe to live on his own, he should have no problem finding it, should he? 

I did an internet search for sheltered housing on the Isle of Sheppey, where the elderly man lives. This is what I found:

Only one of these enclaves is sheltered housing: the other is accommodation restricted to over-55s, but it does not have an on-site warden. So, for the whole of the Isle of Sheppey (about 38,000 people, of whom around 25% are over 60), there is one sheltered enclave with 38 units, all of which are currently occupied. It is run by Amicus Housing Association on behalf of Swale Borough Council. There is no private sector sheltered housing on Sheppey. 

Thinking I might have missed something, I checked with estate agents. They confirmed that there is no private sector sheltered housing on Sheppey. There isn't much in Sittingbourne, either. Better go to Faversham. Or Tunbridge Wells. Richer areas. There is lots there. 

The trouble with Sheppey is that it is not an attractive place for private sector providers. Compared not only with the national average but with the county of Kent, it appears to be poor:

Or - is it?

Umm, how does that work, then? Easy. Despite the fact that it is in the South East of England and only about an hour from London by fast commuter train from Sittingbourne, Sheppey's house prices are below the national average. The average house price in England & Wales is currently £216,674, but the average house price on Sheppey is £204,369. Population statistics show that the majority of people on Sheppey are in the 30-59 age bracket, so most of them will have bought their properties some time ago. So the slightly high home ownership rate does not indicate affluence, as the banner at the top of this chart says. Rather, it reflects the affordability of housing on Sheppey relative to the average for the South East - hence the high proportion of mortgages. 

And this also explains why there is no private sector sheltered housing, or indeed any private sector accommodation for the elderly other than a couple of care homes. The return on capital is not high enough to justify the property investment. What housebuilding there is on Sheppey is aimed at commuters moving into the area to take advantage of fast road and rail links to London. New housing developments are mostly two and three bedroom homes, plus some larger properties, built close to the roads that take the commuters off the island. I asked one property developer about flats in town centres, and she said "oh we don't do those". They aren't what the commuters want. 

So we have a total market failure. The private sector does not provide for the elderly on Sheppey. In fact it doesn't really provide for local people at all. It is entirely focused on attracting London commuters. 

Since I couldn't find private sector accommodation, I issued a preliminary enquiry to Amicus Housing Association about Davie Court. (I have redacted personal details, obviously, and added the red underline.) 

This was the response:

So, the need of a frail elderly man for sheltered accommodation is treated as a housing problem not a care problem. This is really going well, isn't it?

Swale Borough Council's criteria for housing say absolutely nothing about care needs or risk. But they do say a lot about money:

I knew he wouldn't qualify. He has too much money. But I emailed them anyway, reminding them of their duty of care:

The response was a slapdown:

Translation: ""F**k off. Rich bastards like your father are not our problem". 

So, the private sector won't provide, and neither will the public sector. And the third sector has sold out to the public sector. The really stupid thing is that my father is able and willing to pay. But no-one is willing to provide. I am unable to find the sheltered housing that my father needs in the area where he has lived fo 18 years. 

And so far, I am unable to find care support either. 

Swale Borough Council referred my enquiry to the Social Services department of Kent County Council. But I had already contacted them about care support - and they decided that because my father doesn't need help washing or dressing, he doesn't need any help at all. They interpreted their remit so narrowly that ensuring his safety simply didn't feature. 

So I have had to step up myself. I am currently spending several hours at my father's house nearly every day, a round trip of 60 miles, just to ensure that he is safe. And I am permanently on call: he has an assistive helpline, but the first person on the call list is me. I am trying to find support from private sector care agencies: there are a few, though their capacity is limited at present. Maybe, in the new year.....

Fortunately, my working hours are flexible, though my work is suffering: I didn't meet my Forbes mandate last month, I didn't write my Co-Op News column either, I have cancelled numerous singing lessons, and I finally completed my American Express assignments for this year yesterday, one month late. But nevertheless, I am fortunate. Most people do not have such flexible working lives. Many are forced to give up work to care for elderly relatives.  

Market failure like this has economic consequences. Government waxes lyrical about the need for affordable childcare so that women with young children can stay in the workforce, while simultaneously cutting back on the services needed to ensure that women with elderly relatives can stay in the workforce. I say women, because the burden of elderly care by families still falls principally on women, though of course some men are carers too. What is the cost to the economy of people leaving the workforce because neither the private nor the public sector will provide adequate care for their elderly relatives?

The next neoliberal cultist who tells me that the public sector should be slashed to the bone to make way for the private sector will receive a very dusty response. Get real, ideologues. The private sector only provides when it perceives that it is in its interests to do so. 

Market failures need public sector intervention. Local authorities that only provide for the poorest and fail to ensure that the rest of their constituents have adequate provision are not doing their job. In fact they are breaking the law. The Care Act 2014 specifically assigns to local authorities the responsibility for ensuring that there is a functioning market in social care provision. 

The rich in Faversham and Tunbridge Wells are provided for by the private sector. And the poor on Sheppey are provided for by the public sector. But the people in the middle - the in-betweeners - are on their own. No-one is meeting their needs. 

Related reading:

Friday, 9 December 2016

The in-betweeners

How effective is monetary policy?

Highly effective, according to the Governor of the Bank of England. In a speech earlier this week, Mark Carney robustly defended the Bank of England's record:
"Simulations using the Bank’s main forecasting model suggest that the Bank’s monetary policy measures raised the level of GDP by around 8% relative to trend and lowered unemployment by 4 percentage points at their peak. Without this action, real wages would have been 8% lower, or around £2,000 per worker per year, and 1.5 million more people would have been out of work."
Well, lots of us might agree that monetary policy did help to offset the damaging effects of bank and household deleveraging in the aftermath of the worst financial crisis since the 1930s.

Carney suggested that monetary policy also dampened the effect of premature fiscal consolidation when everyone panicked about government deficits in the wake of the Greek crisis:
Fiscal policy quickly came under severe strain as tax revenues plunged, the costs of social benefits rose sharply, and the huge bills for too-big-to-fail banks came due. Since then sustained austerity has reduced the fiscal deficit from around 10% of GDP in 2010 to around 3 ½ % today. While necessary, this has, on average, subtracted around 1 percentage point from demand each year. Over that time, structural policies have boosted participation in the labour market but have been unable to return productivity growth to anything resembling its historic average. For seven years, in the face of severe headwinds to growth, monetary policy has been the only game in town. 
He is probably right. The counterfactual is the Eurozone, where severe fiscal consolidation has been undertaken by several countries without monetary policy support. Eight years on, unemployment remains distressingly high, growth is flat and inflation is negative, reflecting a massive collapse of aggregate demand. The ECB's monetary easing has been too little, too late for countries like Spain, where some of the unemployed have been out of work for over four years. Whole generations have been thrown on the scrapheap because of monetary and fiscal intransigence. Eventually, the price for such harshness will be paid politically.

But the most persistent criticism of monetary policy is that it has, in the words of HSBC's Stephen King, "unfortunate distributional effects". It benefits the holders of financial assets - primarily the rich - at the expense of those dependent on interest income, who are believed to be much poorer, though not necessarily the poorest.

Carney is having none of it. He rejected the distributional criticism of monetary policy on the grounds that savers are also asset holders:
Just 2% of households have deposit holdings in excess of £5,000, few other financial assets, and don’t own a home. So the vast majority of savers who might have lost some interest income from lower policy rates have stood to gain from increases in asset prices, particularly the recovery in house prices.  
Of course, realising those gains is not necessarily easy. Your house may have gone up in value, but you are still living in it. For those trying to live on declining interest income from savings, asset price rises are cold comfort.

But Carney is not having that either. He points to these two charts as evidence that the poor have done better than the rich from monetary policy:

These charts do indeed appear to show that the poorest have seen the largest rises in both wealth and income since 2006. But they are presented without explanation or notes, and they are opaque to say the least. The wealth chart, in particular, is something of a mystery.

The wealth increase of the top two quintiles is easily explained. These quintiles not only own property, they own financial assets - and monetary policy has increased the value of financial assets. But the rest of the chart is much less clear.

Firstly, it shows a very large increase in wealth for the poorest quintile, followed by a sizeable collapse and then a recovery. The Governor says that the wealth buildup for the lowest quintile after 2010 came from brutal deleveraging of property debt. I don't believe it.

This is the UK's wealth distribution in 2012-14, from the fourth and final "wave" of the Wealth and Assets Survey (WAS). The divisions are deciles: the Bank of England has used quintiles, but these are easy to derive from this chart.

Wave 4 of the WAS does say that the principal form of wealth for poorer people is property. However, the survey says that only 40% of those in the bottom half of the wealth distribution own property - i.e. P50 and below. That includes the lower-middle quintile and part of the middle quintile in the Bank of England's chart. Given that only about two-thirds of UK households own property, and the proportion of high-wealth households that own no property is vanishingly small, it is highly unlikely that the lowest quintile (P0 to P20) would include sufficient homeowners for property rises to have such a dramatic effect on net wealth for that quintile.

I think the net wealth changes for the poorest quintile are much more likely to stem from rapid buildup and deleveraging of unsecured debt (credit cards and high-interest loans), followed by renewed saving. This is supported by this statement from Wave 1 of the WAS (2006-8):
25 percent of households had net financial wealth that was negligible: a large number of households at the lower end of the distribution had negligible, zero or negative net financial wealth. 
The poorest 20% didn't have mortgages, they had credit cards and payday loans. And in the deep recession after the financial crisis, many of them defaulted on them. Some had their possessions seized to pay off debts. The few that might have owned houses in 2006 don't, any more. Now, they are free of debt and are beginning to build up savings, perhaps with the help of charities such as Stepchange.

Can monetary policy take the credit for this? Absolutely not. If there had been no monetary policy support, far more of this group would have defaulted on their debts. Under UK law, if debt default results in personal bankruptcy, the individual is not left destitute. Possessions are seized, yes, but the individual is allowed to keep sufficient possessions to support a basic lifestyle. Writing off the debts therefore leaves the individual with net positive wealth. The Bank of England's chart is absolutely correct to show this as a noticeable increase in net wealth for the poorest 20%, but this is not due to monetary policy. It is due to the disastrous 2008 crash, the personal bankruptcies that resulted from it, and the determination of many of this group never to be so vulnerable again. Perversely, monetary policy has if anything impeded the deleveraging of this group and restricted improvement in net wealth.

That said, monetary policy has to some extent protected the poorest quintile from high unemployment and large income falls. So, indirectly, it has helped them to pay off problem debt and start to build up savings.

Now we have explained the wealth increases of the richest and the poorest on the Bank of England's chart. That leaves the lower-middle and middle income quintiles (P20 to P60) - what we might call the "in-betweeners".

These people were not as vulnerable as the poorest group in the 2008 crash. They had higher levels of property ownership than the bottom quintile, less unsecured debt and more savings. But the chart shows that as a group, they have apparently been largely unaffected both by the 2008-10 housing market crash and the subsequent housing market recovery. This cannot be explained by the fact that most homes are mortgaged. Mortgages are nominal, not real. They do not increase and decrease in response to house price changes. When the price of a mortgaged home rises, the homeowner's net wealth increases. So why have house price rises had so little effect on the wealth of the in-betweeners?

My reading of the chart is that it is the in-betweeners, not the poorest, that suffered distressed deleveraging of property debt. The WAS says that much of their wealth is tied up in property: Wave 2 tells us that the average value of their property fell sharply in 2008-10, in some areas by over 8%. But if the aggregate value of their mortgages also fell, because they were paying them off, then the net wealth of the group as a whole would remain the same even though house prices were falling.

Once the housing market started to recover, of course, the deleveraging stopped and new buyers entered the market, all of them mortgaged to the hilt. So although mortgages themselves don't adjust with property prices, rising property wealth for the "in-betweeners" is nonetheless offset by rising mortgage debt. Net wealth for these groups therefore does not rise as fast as it does for richer groups, who are much less likely to be mortgaged and for whom property wealth is less significant anyway. (The WAS says that pensions - notably defined-benefit pensions - are the most important part of the wealth of the top two quintiles.)

Can monetary policy claim credit for this? Not really. The US experienced a much worse property market crash than the UK despite drastic interest rate cuts and large amounts of QE. The reasons why the UK did not experience a housing market correction on the scale of 1990 are something of a mystery, but restricted supply, political support for the housing market through a variety of fiscal initiatives, and the rise of London property as an international safe asset are all important factors.

So now we have a full explanation for the wealth chart. Monetary policy supported the rich - we knew that. It supported the poor to some extent, though it was far from being the sole cause of the large increase in wealth evident from the chart. But it didn't help the in-betweeners much.

Now to the income chart. Once again, it shows a large increase for the poorest. Can monetary policy lay claim to this? No. This is mostly due to fiscal policy. The ONS observes that incomes in the lower half of the income distribution are extensively smoothed by benefit top-ups. Working-age benefits rose from 2007 to 2010, then were cut back sharply by the Coalition government. This should have caused aggregate income in the bottom two quintiles to fall, but the cutbacks were offset by rising payments to retirees and increases in the minimum wage. The resulting income stagnation from 2010-13 is apparent from the chart.

The income chart does show that the incomes of the higher quintiles have been squeezed. But when your own income is stagnating, you feel angry about the rich even if their incomes are falling. The position of the middle quintile is particularly stark: their income was flat from 2007 to 2013. They could be forgiven for thinking that monetary policy passed them by.

So, Governor, I remain unconvinced that monetary policy has been "highly effective". There are many moving parts in this particular machine, and you have ignored most of them.

It is all very well crowing that the poorest have been supported. They have, to some extent, though perhaps not quite as much as you claim. But it is painfully evident that the "in-betweeners" have had much less support. Relative to the rich, they have lost out both in wealth and in income. And relative to the poor, they have lost out too: they no longer qualify for many benefits and other public support, and they are seeing public money going to people not much poorer than them while they are left to struggle on their own. These are people who see themselves as having done everything right: they have worked hard, saved and paid into the system. Now, they think the system has abandoned them. And with reason.

To be fair, it is not the Bank of England that has abandoned them, though some of them blame you for their woes: "in-betweener" pensioners are those who have been hardest hit by very low interest rates. The real failures lie on the fiscal side, and are of very long standing.

The promise of "cradle to grave" support upon which the British welfare state was founded has been systematically dismantled. Now, only the poorest are supported. The neglected in-betweeners are on their own. And their anger is shaking our political establishment to its foundations.

Related reading:

Austerity and the rise of populism
Raising interest rates is not that simple, Lord Hague

Image: "A mouse in between", by Open Graphics.