The question of the EU

The debate is now on and in 100 days we have to make a decision that will have repercussions for at least the next 30 years.

Sovereignty

Lots of people are arguing over the issues of sovereignty. But I should declare my point of view – In an increasingly global world, it not a question of whether we should pool our sovereignty, it is only a question of with whom we should be collaborating?

Great Britain has just 1.3% of the world’s people but we still run the 5th largest economy (by gdp). We are disproportionately well represented in the institutions of the world which is a legacy of our days as an imperial power. None of these benefits are seen by the rest of the world as ‘the natural order of things’, and they are unlikely to help us to sustain them beyond the very near future.

Democratic Deficit

Some claim that there is a democratic deficit at the heart of Europe and that is grounds for leaving. It is True there is a democratic deficit which I deplore!

But that democratic deficit is not unique to Europe. There is a democratic deficit in our 2nd chamber the Lords, or in our eviscerated local government. The house of commons is the most centralised and powerful of all the governments of Europe and whenever we try to deliver democratic accountability, central government closes rank to prevent it on the grounds that it diminishes their power. There is no real political will to give democratic legitimacy to any European institutions. That is why the political establishment is unified in its hatred of ‘ever closer union’. How will it help if we are outside of the EU especially if Scotland and Northern Island end up seceding from the UK.

The Economy

One of the advantages of living longer is that you remember the past. I particularly remember the time when each new Labour election victory was met by a ‘run on the £’. The expectation of poor economic performance meant that the ‘hot money’ of the world’s financiers fled the UK, which in turn devalued the currency and caused the economic problems that they predicted. A vicious circle of self-fulfilling prophesy that impoverished people in the real world. Today that same hot money has been pumping up the UK property bubble to the extent that many people in the South East are now making more from the appreciation of their houses, than they are capable of earning in a full time job.

Once you see lunacy of that magnitude, it is clear that there are troubled times ahead. How should we manage these difficult time? Now is the time when we should be trying hard to make friends not enemies.

Stop the world I want to get off

There are some people who think that the troubles of the EU are the cause of instability rather than the effect. They argue that the EU is on a terminal trajectory towards self-destruction and we should get off the boat before it sinks.

The EU might well be in deep difficulties and I am of the opinion that the global economy is in a worse state than we think because the repercussions of the 2008 banking crisis are yet to work their way through the global economy. Economic dangers abound in all countries and the only bright spot is likely to be the economic stimulus we will derive form the collapse in Oil prices

But even if the EU is especially vulnerable, there are 2 questions we need to consider. If we are at a tipping point of economic Armageddon

1. Could the UK choosing to leave the EU be exactly the push needed to tip the collapse of the EU that we are scared of? There is a sever risk of contagion throughout the continent if we choose to leave.

2. Whether we are inside or outside the EU we will be very adversely affected by a wholesale collapse of the largest economic block in the world. How would being outside the EU protect us from the consequences?

There is some strength in numbers and despite being separated by different languages, our European shared history means that we still have more in common with the people of the EU than we do with the dictatorships of Russia and China or even the type of America being advocated by Donald Trump.

I prefer to face whatever this uncertain future may bring, on the inside of the EU contributing to changes that will help us to collectively navigate a dangerous world, than facing it on our own.

I am sure that if the tectonic plates of the world economy are about to be convulsed by one of its periodic earthquakes, we will be better off as a part of Europe than as the pariah trigger that set it off. An easy target for economic or military forces that may wish to pick us off.

Who should suffer the most from this crisis?

In April 2013 the Conservatives intensified their campaign of vilification of the poorest in our society as part of their justification for making some welfare recipients pay the greatest cost for the economic problems caused by the banking crash of 2008. The gap between the public perception as pushed by these Politians and their newspaper friends, has never been starker. So here are some facts:-

Common misconceptions Actual Facts
Large benefit claiming families are an increasing problem in the UK In 2012 only 2,000 families had 8 or more children.
Families with 3+ children account for just 14% of families.
Both groups are in decline.
Support for the unemployed is about 41% of the welfare budget (opinion poll) Actually it is just 3%
Fraud is a massive problem occurring in 27% of cases (opinion poll) Actually it is just 0.7% of the benefit bill

Isn’t it time to start using more temperate language and discuss these issues without trying to vilify a largely defenceless minority.

By far the largest part of the Welfare budget goes on pensions (about 60%) and with the pensionable population set to rise form 17% to 21% in 2035, this can only get harder to manage.

A fall in GDP might be a good thing

Two consecutive quarters of declining GDP is the definition of recession and a general cause of economic panic which can make further decline a self fulfilling prophecy. But there is something I don’t understand….

I am sure that most of you have heard of ‘Moore’s Law’ – the prediction by the Intel executive that the price of computer chips would halve every 18 months and the their power would double.  This exponential rise in power has been more than fulfilled for the last 30 years and shows no signs of slowing down, giving rise to a massive  2^20 growth in computing power or a million times growth in power.

And, of course, it is not just computers that are seeing that kind of exponential growth in power. Texting went from zero to 8trillion texts per year in just 20 years which is a doubling of popularity every 3 months over the entire period. Even more extra-ordinary – it took $3bn and several years to decrypt the first genome of a human being.  It is expected that within 2 years the cost will be down to under $1 and it will be done in under an hour. So what are the economic consequences of these phenomenal increases in power?

If just 10% of the GDP of the economy were to reduce costs by 50%, the impact would be a 5% cut in our GDP.

Can some economist explain to me why this fabulous growth in productivity is a cause for recessionary angst instead of universal celebration?

A crisis is also an opportunity for change

Pre Christmas gloom following Osborne’s scary Autumn statement has settled like a cloak of depression over the whole country.  A wasted decade of zero or less GDP growth, unemployed youth and 50 year olds thrown onto a scrap heap that is becoming cruelly indifferent to their plight. Business cut backs and loss of confidence creating a self fulfilling prophecy of decline.

There is no doubt that we live in dangerous times. The economic upheaval that started in 2008 with a bank liquidity crisis and has been transformed by the bailout then, into a sovereign debt crisis today, represents a major challenge to Capitalism as it has been played.

So where are the grounds for optimism?

“If  its not broke, don’t fix it”
– well now it is  broke, so we had better do something!

As a small business we know that our opportunities come when the tectonic plates of the existing established order start to shift.  That is the moment when businesses and institutions are prepared to contemplate the idea that unfamiliar ways of doing things, may be risky, but are better than the alternative.

We live in a time of unprecedented technical innovation and each one has the potential to create opportunities to re-invent business processes. Moore’s Law which described the speed at which computing power would double every 18 months and halve in price, is only one of the many defining events (programming, DNA, genomics, neural science and many others which are showing even faster rates of exponential growth) that will certainly transform our world over the next 50 to 100 years.

To take a step back:-

    • The genus Homo arose about 2,500,000 years ago
    • I took a couple of million years to for Homo sapiens to evolve, about 500,000 years ago
    • We had reached the Bronze age about 3,000 years ago.
    • The industrial revolution and the birth of  our modern age is about 300 years old.
    • The age of modern computing and communication started about 50 years ago and I only have to think back to the world of my youth to see the impact that has already had and will continue to create on the way we live our lives.

If we can be flexible, imaginative and focussed, there is no end to the opportunities and the excitement that the very near future holds.

Confidence is good for the individual and bad for the organisation

We all look to experts in order to help us navigate round an increasingly complex world.  The difficulty is in working out who to trust?  Is it the person who shows plenty of self confidence and never admits either being wrong, or not knowing? Or the quiet self deprecating person in the corner?

On the whole we tend to look to those alpha beings who are prepared to take a stand and trust them to make at least some of our decisions for us.  Unfortunately there is now plenty of evidence that their self-confidence is often misplaced. (Click here for details). Autopsies have shown that even doctors who declare themselves total confident in their diagnosis of patients when they were alive , were proved to be wrong 40% of the time.

It seems that Bill Clinton has taken this very much to heart and now has a new Mantra.  Once a day he makes it a rule to say out loud “I didn’t know that” and “I was wrong”! While I don’t doubt that this makes him a better person and it is certainly a interesting  experiment from somebody with his background, the question that I would really like to get answered is whether there is any way he could have been elected as President of the United States with that level of public self doubt? My guess is that he would have been ripped apart by the press, his political enemies and the public at large.

We all claim that we want leaders to say sorry.  But it is up to the great public to enable it to happen.  In the meantime keep this definition in the back of your mind.

Definition of an Expert:   X – an unknown quantity.
Spurt – a drip acting under pressure.

An atheist in a moral universe

There was a time when the possibility of the earth revolving round the sun was the subject of much debate and, since there was a limited amount of evidence, it was basically a matter of belief and philosophy. Today there is no longer any serious debate, not least because we have actually travelled to the moon and walked around on it.

100 years ago the only way to understand the ‘moral’ laws that govern our social construct, was inductive reasoning; but over the last few years we have made amazing discoveries in genetics (popularised in “the selfish gene”), and how the brain works (read “The tell tale brain”) and a recent book “The braintrust” now argues that morality originates in the biology of the brain. It describes the “neurobiological platform of bonding” that, modified by evolutionary pressures and cultural values, has led to human styles of moral behaviour.

I am not saying that science has all the answers, but I am sure that it will bring new insights to the function of moral codes and explanations of how they can work even without recourse to the authority of a god figure to back them up. As an atheist it is important to understand that our moral code is just as strong and well based as that of any religious person.