Tax the Rich Every Last Penny Until the Money Banks Stole is Replaced

Too many people believe the political and media propaganda that we have overspent and we must cut back.

Keep reminding them that the banks overspent, thinking mortgage collateral—houses—would rise in value to cover it—in fact, on the assumption that housing prices would rise indefinitely. They spent money they didn’t have, giving themselves massive bonuses for doing it, then, when the housing market collapsed, they told governments, governments!, they were too big to fail, and told governments, supposedly our governments, they had to give them £$trillions from national treasuries—our money collected as taxes—to replace the money the inept bankers had lost on junk mortgages and junk bonds. What did we have to do with it?

We have already paid the banks—the money they were given was not the government’s money, it was our money, entrusted by us to governments for nation wide social use—yet these governments, supposedly our governments are making us pay again, through enforced austerity measures that have nothing to do with us overspending. Tell them to stuff their austerity measures that hit everyone except the super rich, and to get every penny back from the rich leeches who do nothing and deserve nothing of ours.

The Upper Classes are More Dishonest—Official!

A series of studies conducted by psychologists at the University of California, Berkeley and the University of Toronto in Canada and reported by the NSF reveal something the well off may not want to hear. Those who are relatively high in social class are more likely to engage in unethical behavior. Lead researcher Paul Piff of UC Berkeley said:

Our studies suggest that more positive attitudes toward greed and the pursuit of self-interest among upper class individuals, in part, drive their tendencies toward increased unethical behavior.

Relative to the lower class, the upper class are more likely to break the law while driving, more likely to exhibit unethical decision-making tendencies, more likely to take valued goods from others, more likely to lie in a negotiation, more likely to cheat to increase their chances of winning a prize and more likely to endorse unethical behavior at work.

Piff explained:

The relative privilege and security enjoyed by upper class individuals give rise to independence from others and a prioritization of the self and one’s own welfare over the welfare of others—what we call greed. This is likely to cause someone to be more inclined to break the rules in his or her favor, or to perceive themselves as, in a sense, being “above the law”.

They therefore become more likely to committing unethical behavior.

Procedures

Piff and colleagues conducted seven survey, experimental and naturalistic studies to determine which social class is more likely to behave in unethical ways—to engage in behaviors that have important consequences for society such as cheating, deception or breaking the law.

In two naturalistic field studies that examined unethical behavior on the road, researchers were surprised by the differences between upper and lower class people, finding upper class drivers were significantly more likely to pursue their own self-interests and break the law while driving than were lower-class drivers. In these studies, the researchers defined social class by an observable cultural symbol of social class—namely, their car. Drivers of higher-end automobiles were four times more likely to cut off other vehicles before waiting their turn at a busy, four way intersection with stop signs on all sides. In addition, they found upper class drivers were significantly more likely to drive through a crosswalk without yielding to a waiting pedestrian.

In another laboratory study, the upper classes were more likely to cheat to improve their chances of winning a cash prize. Piff and colleagues first measured social class using the MacArthur scale of subjective socioeconomic status, where participants rank themselves on a 10-rung ladder relative to others in society in terms of their wealth, education and the prestige of their jobs. Participants then played a “game of chance” in which a computer presented them “randomly” with one side of a six-sided die on five separate rolls. Participants were told higher rolls would increase their chances of winning a cash prize, and were asked to report their total score at the end of the game. In fact, die rolls were predetermined to sum up to 12. The extent to which participants reported a total exceeding 12 was a direct measure of their cheating. The researchers concluded greed was a “robust determinant of unethical behavior”.

Plato and Aristotle deemed greed to be at the root of personal immorality, arguing that greed drives desires for material gain at the expense of ethical standards.

Due to their more favorable beliefs about greed, upper class people are more willing to deceive and cheat others for personal gain.

Study 4 sought to provide experimental evidence that the experience of higher social class has a causal effect on unethical decision-making and behavior. It was the only study in which researchers manipulated participants into temporarily feeling either higher or lower in social class rank to test whether these feelings actually caused people to behave more or less unethically.

At the end of the study, the experimenter presented participants with a jar of individually wrapped candies, ostensibly for children in a nearby laboratory, but informed them that they could take some if they wanted. This task served as a measure of unethical behavior because taking candy would reduce the amount that would otherwise be given to children. People in this study, who were made to feel higher in social class rank, took approximately two times as much candy from children than did people who were made to feel lower in social class rank. Piff concluded:

Across all seven studies, the general pattern we find is that as a person’s social class increases, his or her tendency to behave unethically also increases.

Impose a Supertax to Recoup the Money Robbed from our National Treasuries

After the UK bank bailouts in 2007-8, which the National Audit Office said emptied the British exchequer by almost a trillion pounds, UK Labour Chancellor, Alistair Darling, said the banks were henceforth to show restraint, and boasted of the 50 percent supertax he had imposed on bankers’ bonuses. Actually, it was a one-off payroll tax that would only raise £550 million—about 0.06 percent of the money the robbers had received. The bleating professional defenders of the City called it a fresh attack on that sacred institution, but nothing is being said about it now that banks are rewarding their executives, like Stephen Hester of RBS, for that staggering robbery of the treasuries of all the leading capitalist countries, leaving everyone except the ruling junker class tantamount to being bankrupt.

The measure, feeble and ineffective as it was, would prompt defections from the City, the publicity lobbyists claimed. All of these bankers can, apparently, get immensely rewarding jobs anywhere else in the world, and now they shall! It is their own propaganda, though doubtless, like all greedy opportunists, they believe it. And Darling said the banks would actually pay the bonuses tax, so the burden again falls on us, guileless slaves of the rich, whether it is through the exchequer or through the banks that we are robbed. John Whiting, tax policy director of the Chartered Institute of Taxation, immediately warned that the banks would find ways around the tax!

Bonuses are only part of the problem. Income tax is not merely unfair, it is regressive—the richer you are, the less you pay. One of the very richest men in the USA, Warren Buffett, has openly admitted that his tax rate (18 percent) is lower than that of his lower class secretary (30 percent). Can anyone deny that it is grossly unfair that the rich should pay less national tax than those who are much poorer? How is it possible? When income tax was introduced temporarily in 1842, even Queen Victoria paid it. The monarchy later, when it became a normal feature of government funding, was excused it. But in 1992, the British Queen volunteered to pay it again—no doubt with some persuasion—but hoping to gain popularity at a time when monarchy was under criticism.

In 1909, British Chancellor of the Exchequer, Lloyd George, set income tax at 9d (9 pence) in the pound (3.75 cents in the dollar), for incomes less than £2,000, which amounts to about £160,000 at 2012 values. He set a higher rate of 12d (one shilling, or 5 percent) for incomes above £2,000, and an additional “surtax” or “supertax” of 6d (another 2.5 percent) on the amount by which incomes of £5,000 (£400,000 today) or more exceeded £3,000 (£240,000 today). This scheme, applied today, would mean rich people simply pay tax, not supertax, on earnings up to £240,000, but would owe the exchequer £4,000 as soon as they earned £400,000. Effectively, the rich would experience a hike in tax of just 1 percent of their income when they went through the £400,000 barrier, hardly a backbreaking jump. As things stand, the megarich would simply hire top accountants, lawyers and lobbyists to ensure the nation never gets the money they owe it, if everyone else does! But, if this sudden hike were sufficiently large, and avoidance and evasion of it were treated strictly as criminal, banks and corporations would not be inclined to overpay directors, and they would not want to recieve more than the limit and suffer the penalty of the tax barrier.

Republicans brag that, when they took Congress in 1994, they lowered taxes creating an improvement in the economy, and higher tax revenues. Since then they have perpetually called for the same strategem, even though the improvement they boasted of was short lived. What they want is lower taxes for the rich, but it is cutting taxation of the poor and middle classes that improves spending, business transactions, and ultimately the economy as a whole. Money rises like a gas through the classes of any capitalist society like ours, it does not trickle down like water, at least, if it does, it does not trickle down at home where it is needed!

Time series suggest that governments resist raising tax from the rich except in crises. Then they have sometimes lifted taxation into the supertax category of over 90 percent. When this is done, the revenue is fed in at the base of the economy in public projects and better benefits, lifting spending power at the base and thereby stimulating the economy throughout by the multiplier effect—the way each dollar or pound is spent over and over again, once someone poor gets it to spend in the first place, and the way an initial expenditure triggers further ones, like a tin of paint for the front door stimulating the decoration of the rest of the house, which now looks shabby, then new furniture, and with fresh aspirations, a new car, a new home, and so on. It is Keynesianism. It works! So, taxing the richest boosts the economy. Reducing taxes on the rich induces them to accumulate more capital which they regretably are too often ready to invest overseas for even better profits. Meanwhile, our own economy is deprived of liquidity and unemployment and poverty rise. Tax rates for the richest were being cut until 1928, but they failed to stop, and arguably exacerbated the Great Crash of 1929 and the following long depression, ended only by WWII. Our situation today is frighteningly similar.

Curiously, considering that the upper classes in the USA—not to mention many of the middle classes too, albeit perhaps influenced too much by patriotic propaganda—constantly demand foreign wars, the top rates of income tax go up while wars are being fought and afterwards when their costs have to be met. In WWI, the top US rate of income tax reached 77 percent, but in the aftermath of WWII it went as high as 94 percent. The US Right Wing, who bleat their propaganda line that Obama is a “commie” when he is not being a Moslem or a Satanist, would be certain that supertax equates to communism. Yet it has inevitably preceded the US economy picking up, so that the supertax was soon lifted. Perhaps too soon. UK supertax was lifted in 1973, but replaced by rates of income tax progressiing from zero for the very poorest to much higher levels for the rich, albeit falling short of a supertax. Maybe now, it should be a permanent feature of the modern capitalist state.

HM Revenue and Customs (UK) claims that twice in the post-war years, special tax rates have pushed income tax above 100 percent. Sad parasites of other people’s work received unearned income from stocks and shares, and apparently paid the taxman more than they earned. They must have been Warren Buffets living in cardboard boxes under railway arches. It is a highly dubious calculation which must assume that the different rates are applied additively. They were not. Some rates were either/or, not both in succession. No wonder the tax men leave the calculations to each of us ourselves to submit via self assessment. The people who do pay rates of over 100 percent are the poorest—those on benefits who lose all of certain benefits when they earn above certain levels of income. Unless the increase in income exceeds that lost by loss of benefits, income declines, so the effective tax rate of such poor people is over 100 percent. This is very common indeed, and explains why many people give up looking for work.

When a nation is divided into two contending classes, both cannot have their own way. Democracy is meant to ensure the majority rules, subject to its laws not oppressing the minority, but, for that, it has to be fair. It is not fair when one section owns all the media, and the rich can do that through their wealth. The American paranoia about socialism leads ordinary Americans to accept the rich man’s propaganda, and support the rich man’s interests contrary to their own. So that when sensible policies are proposed the people are confused by those who want a less practicable and more greedy policy, so that what emerges is precisely the wrong kind—acquiescence in wasteful policies, such as militarism and imperialism, rather than taking steps in the right direction.

The British Labour Party has exactly the same problem. Beguiled by Blairism and topped up in the Blair years with careerists and opportunists, it is quite incapabale of taking the right decisions. Even though the Con Dem coalition is on shaky ground, and the people are sick of the succession of Thatcherite policies over the last thirty years by successive governments, the Labour leadership is tied to its outdated mode of thinking—deregulated neo-liberalism—when something new, and actually left wing is needed in the face of the bankers and the junkers.

The 30 Year War Against The American Dream: Henry Schoenberger

Henry Schoenberger, the author of How We Got Swindled By Wall Street Godfathers, Greed and Financial Darwinism, subtitled The 30 Year War Against The American Dream, points out that the OWS protests simply display the plethora of anger around in the USA. The level of poverty is now at its highest level ever—the poor are angry. The successful elderly planning on retirement after a lifetime of hard work are being hit—elderly retirers are angry. Young entrepreneurs, the foundation of our future economy, and those in their prime, whose enterprise should be creating new jobs to give a living to ordinary folk and a first step to the young—even many of those are angry.

Capitalism, as an economic philosophy, is only 200 years old, based as it is on the book by Adam Smith (1723-1790), the title of which is always given now as The Wealth of Nations, published in 1776. The United States declared its independence that same year.

Since then, the abuse and misuse of Capitalism has paralleled the use and abuse of Democracy.

Henry Schoenberger

Smith is often presented by right wing libertarians, Republicans, neoliberals, and assorted conservatives as the model entrepreneurial hero. Yet, he first held the chair of logic at Glasgow University, and then in 1752 became its chair of moral philosophy. So he was really one of those timeserving wasters lolling around a university with students and living off someone else's hard earned income! That, at least is how the right wing regard university teachers and research workers.

In 1759, he wrote the Theory of Moral Sentiments about the standards of conduct that hold society together, explaining how benevolent human motives and activities lead to a society beneficial for all, and thereafter a virtuous circle. Adam Smith had a lifelong interest in the value of morality for the public good. In his book, The Wealth of Nations, he expressed a belief that allowing the entrepreneur to pursue his own interest essentially unfettered would lead to the betterment of all because it would lead to the better use of resources, including time. He never imagined that his theories could be so distorted by the ultra rich cornering one particular resource to the detriment of most of the rest of us—money!

Darwin published his book on the Origin of Species 85 years after The Wealth of Nations, and, although most Protestant pastors in the USA and their theologians who run the Republican Party cannot now abide the thought of evolution, for the first century of so they loved it. The survival of the fittest was a perfect expression of capitalism. So Darwin's theory applied even within human society. It was not restricted only to the wild.

This extension of Darwinism into society was dubbed “Social Darwinism”. It even made it respectable for the protestant churches to abandon Christianity—Christ blessed the poor and damned the rich—but now Social Darwinism made it clear, they thought, that God meant the rich were blessed and the poor were damned! It was a creed that was soon attacked by social scientists, and began to fall into disrepute. Reaganomics and deregulation revived it.

We all need to know a little about economic theories to understand the fallacious arguments advanced today for unfettered greed. For thirty years after WWII, the rate of growth of the incomes of rich and poor were broadly the same. John Maynard Keynes, before the War had shown how economies can be controlled by regulation, such as using taxation to slow down growth when the economy was overheating, and feeding back into feeble economies some of the tax take to boost spending during recessions. It worked wonderfully well.

Controlling self interest worked for decades in the aftermath of the Great Depression. The top tax bracket went up to 90% and still the ultra rich survived, but so did our middle class and our society was not demoralized. There was enough concern on both sides of the aisle to pass Civil Rights legislation and CEOs did not earn more than 40 times the average wage in their industry.

Henry Schoenberger

Interestingly, it was a closer match to Adam Smith's teaching than libertarian capitalists like to admit. Smith knew that regulation was sometimes necessary, and did not pretend otherwise. He believed that once the boundaries were suitably set, and the operators accepted them, then they would work to better themselves and society as a whole through the so called “invisible hand”. The trouble is, when things work well, smug, greedy people always want to try their luck at extending the conditions to their advantage.

That is what Reagan in the USA and Thatcher in the UK tried in the 1980s. In what was imagined as an economic “Big Bang”, a bonfire of the regulations was arranged on both sides of the Atlantic, neoliberalism became the watchword, and Social Darwinism was born again. Survival of the fittest became survival of the richest. In the last thirty years, the workers and even some middle class have lost income, the better off middle classes have maintained theirs, and the rich have multiplied their riches several fold!

In 1776, Adam Smith could not have seen that unregulated Wall Street financiers enjoying tariff free transfer of money anywhere in the world could manipulate markets and the rewards they had from them to the advantage of themselves as a new Brahman class in the supposedly classless western societies. Greed became endemic. Like the living dead they sucked the economic life blood—money—from the middle and working classes. The insatiable greed and selfishness of the rich has killed millions and millions of jobs, people's savings, their livelihoods and increasingly their lives, quite contrary to the ideas of the capitalists' holy book, The Wealth of Nations, by their innocent prophet, Adam Smith. Henry Schoenberger sums up:

Wall Street is a problem because for 30 years it has practiced innovative financial investment at the expense of our economy. Wall Street has turned away from real investment based on innovation for capital formation to create jobs to benefit our economy. Wall Street Trojan megabanks are a major part of the problem.

Government ought not to be the problem because it is the role of government to regulate, to ensure that the balance of society and its economy are right. Our governments neither guard the public good nor the public. The politicians lack all morality themselves, themselves infected with the zombie infection endemic among the rich and aspirants to riches, with the taste for more and more blood, salivating at the thought of more victims, us, and more dollars, ours.

Schoenberger points out that Goldman has inveigled the government at the highest level for three decades. The OWS movement should demand the removal of any Wall Street executive from any important government post, and equally that government servants should be banned from transferring their allegiance to Wall Street until 10 years after leaving government. Consulting and “Atlantic Bridge” style “charities” and think tanks should be illegal as soon as they get near to government in any direct way, or even indirectly, if the influence can amount to bribery, or any similar illegal approach. That applies too to lobbying, nothing more than approved bribery.

High Street deposit banks must be severed from the high risk investment banks. Bonuses should be illegal. As compensation they must be treated as pay and seriously taxed. Taxes must reflect the reality that 1 percent has 40 percent, so that taxation is at least fair by percentage, and preferably progressive, so that richer people should pay a higher percentage. If a rich man faced with a 60% tax rate gets a rise of $1 million, are we seriously to believe he would refuse to work rather than receive $400,000 after tax.

Schoenberger concludes it “is the time for a movement to kick out all members of congress who vote against jobs! And stop wall street godfathers from taking advantage of the 99% who do not practice unbridled greed!”

Why Scientists Often Have To Repeat Their Studies

Harvard sleep expert, Dr Charles Czeisler, has spent about $3 million over the years showing that doctors who don’t get enough sleep make mistakes on the job. Yet long shifts for interns and residents are a staple of hospital culture, and, as anyone’s welfare in hospital might be at stake, one might have thought it important to rectify excessive hours.

But it has taken Czeisler the best part of three decades getting the medical establishment to acknowledge it, and still the rules governing doctors’ working hours remain hard to change. When he gave evidence that workers on rotating shifts at a chemical plant suffered from disrupted sleep, the medical establishment said doctors were different. Czeisler’s data “was dismissed out of hand”. They kept using the same argument even when tests had refuted it. When he published results showing that physicians’ 24 hour plus shifts contributed to car accidents and attention lapses at work, some said it might be true—but not for them!

In 2008, the Institute of Medicine issued guidelines calling for limiting interns’ and residents’ shifts to 16 consecutive hours. Eventually, authorities did cut back to 16 hours, but only for interns. Czeisler had studied interns, so the establishment claimed they had seen no evidence for residents! Now Czeisler is having to research whether residents’ performance also is affected by lack of sleep. “I can’t believe we have to do this extra study.”

Science cannot accept a single study as definitive proof of its findings. Some error could have been made or some bias have been inadvertantly built in, and any such mistakes need independent repetition of the study to discount error. Repeating a previous study which confirms it multiplies the reliability of both studies. Moreover, this case on the working hours of hospital doctors shows another reason why some research has to be repeated—a refusal to act on well established scientific work for political or economic reasons, or simply reasons of will.

Daniele Fanelli, an expert on bias at the University of Edinburgh in Scotland, points this out. “People want to draw attention to problems” rather than aiming to find something new, especially when important policy decisions are being delayed by procrastination or lack of political will. Experts have to prove some things again and again to get decision makers to act. Some might object that it is not a scientist’s job to persuade decision makers, but it is the duty of all of us to do it, surely, especially when the proof is there that lack of action is costing lives.

“There are some subjects where it seems you can never publish enough”, says Ronald J Iannotti, a psychologist at the National Institutes of Health. “Think about the number of studies that had to be published for people to realize smoking is bad for you.” Almost 50 years after cancer and lung disease were first linked to smoking, work continues to be published because the extent of the problem is still challenged, not least by those who make money out of selling tobacco products. A detailed analysis in the Canadian Medical Association Journal has had painstakingly to lay out that secondhand smoke in cars is bad for children. Many people will say that is too obvious to merit funding, but cigarette vendors, and those still addicted to smoking evidently still need reminding that harming the health of kids is not excusable—it is wrong.

The Ig Nobel Prizes are spoof awards to mock improbable research. One winner was a study that found nose picking was common among teens. Some might consider the research is not only pointless but in bad taste(!), yet it can hardly be said to be obviously so, and finding that it is common has health consequences. Staphylococcus aureus is a bacterium that is getting highly dangerous through its growing resistance to antibiotics (MRSA).

Iannotti says, even if initial findings seem self evident “you still need to establish the facts. That’s how science moves forward—incrementally”. Plainly not every study is equally worthwhile, and some studies approved for funding might be bad decisions, but the danger is that an over zealous aim to cut back on wasteful research will succeed only in cutting out useful research.

It would be far more useful to cut back on the excessive rewards given to bankers for not doing much at all, and to stop giving them even bigger rewards for wrecking the national economy. It is far more costly and ridiculous to reward useless bankers than it is to hand out funds for occasionally poorly thought out scientific studies. Bankers reward themselves with millions of dollars each a year. Many useful studies cost buttons by comparison, but no one seems to object to us giving megabucks to greedy bankers for doing little of merit.

Bonuses and Distribution of Wealth in the UK

UK society, like the US, is skewed horribly in favour of the rich and against the poor. Some 53 of the UK’s richest 1,000 are billionaires. The wealth of these 1000 people has increased from £98.99 billion in 1997 to £335.5 billion today. Over the past 12 months, they got richer by an incredible 29 per cent. Despite the worsening economic situation, this is the largest annual increase in the wealth of this rich minority. What these figures show is an increasingly unequal society that has enriched the already megarich at our expense. The amount of gross domestic product (GDP, annual national production) dedicated to wages and salaries has declined over the past three decades. There is no way that such a distribution of wealth can be said to favour the common good.

The injustice of wealth distribution is in need of urgent debate. Why is the argument for higher taxation on the highest earners continually rejected out of hand? If the country wants better services then they have to be paid for. It is not possible to have something for nothing. And those who earn the most—and usually have got most out of the system—should pay more tax. Justice should be applied to the economic system by restoring higher levels of tax on those most able to pay. If they want to leave the country, then the country can put an even higher tax on any wealth they propose to take with them? Then we can say good riddance to bad rubbish, and let our youth have the chances they are now being denied.

In 1976, wages and salaries accounted for 65.1 per cent of GDP, this had reduced to 52.6 per cent by 1996, a time when the wealth of the richest 1,000 increased threefold. But society took a fairer proportion of that wealth increase. Levels of taxation were far higher on the rich. Tax rates above 80 per cent on those earning the most were not uncommon. Society was more equal and cohesive as a result. Reagan’s pandering to the megarich demands for tax cutting spread to his lapbitch, Margaret Thatcher, then to Bush’s lapbitch, Tony Blair, leading to today’s gross inequality and unfairness, in imitation of the USA.

Top FTSE 100 chief executives earned 47 times median earnings in 2000 and 88 times in 2010. In the public sector the ratio is far lower, more like 12 to one. Even so, the top 1% of public officials earned an average of £120,000. Why does a senior executive need a financial incentive, when every other worker does not get them and makes do with an agree wage? Would executives refuse to work? Would a hospital director let people die if not awarded a bonus?

The Big Society is an austerity program. The coalition government cynically chants its slogan “we’re all in it together” in reducing the deficit. Yet the policy implemented cuts public services, freezes public sector workers pay, cuts jobs and reduces pension rights, while inviting billionaires from everywhere to live here untaxed! When we discover that 1,000 people in Britain now have over £300 million each, we should be seriously complaining that the entire cost of deficit reduction is falling on the poor 65 million of us. At present it is the poorest who continue to pay for the deficit while the megarich grow ever wealthier. This cannot be right.

It has been suggested that there would be no deficit at all, if the treasury recooped some of the wealth the rich have robbed us of in the last thirty of forty years. MP Austin Mitchell thinks this 1,000 people with the most wealth could yield 25 per cent of it for the sake of the economy upon which the rich depend for future wealth. It would clear £84 billion from the deficit. Another suggestion was that the top 1 percent of the richest people, about 650,000 in the UK, could give up 20 percent of their accumulated wealth, clearing the deficit all together. Note that these megarich people would still be megarich under either scheme. They would still have 75 to 80 percent of their amassed riches.

The proposals are all the more attractive because of the neglible tax that most of these people pay and have ever paid, through their use of corporate lawyers to exploit taxation loopholes, and simply defraud the exchequer. Strict taxation on the rich is a basic justice that should be implemented now. The complaint of ordinary middle class people in the late Roman empire was that their megarich paid no taxes, or simply increased rents to cover any they had to pay. Soon after, the western empire collapsed. The people preferred barbarians to their own rulers.

A recent government inquiry considered that there should be a maximum pay ratio of 20:1 between top and bottom. It was meant to be only in the public sector, but, if it was considered just, why not overall? It was a hostage to fortune even to suggest it, so it disappeared in the final report. Instead, it recommended bonuses as being fair! CEOs should have a marginal element of their pay “at risk”, subject to meeting agreed objectives. Then public services would not be offering rewards for failure.

No research has shown that bonuses improve performance, nor do firms paying them do better. Paying students to get better passes did not work. The ones who did well, did it because they enjoyed what they were doing. The same should be applied to bankers and CEOs. If they don’t like it, then let them quit and join the oridnary Joes who have to like it or survive in frugality on benefits. In any case, who would judge the CEO’s performance? A team of bureaucrats?

Schemes like this are bogus, even where performance can be measured. Sir Fred Goodwin of RBS was awarded a discretionary £16m pension pot, while he wrecked the biggest bank in the world. The package was approved by the bank’s remunerators and non-executives, his friends and associates. Directors rip off shareholders with the collusion of institutions, so they get bonuses whether good or useless. Bankers’ bonuses are the biggest because the City is a massive gang of monkeys scratching each others’ backs furiously.

Bonuses are not incentives. They are measures of greed and selfishness, and are possible because corporate leadership is no longer properly accountable. Such schemes were thought up in the 1980s to let top earners take ever larger sums of money from their companies. It was unfair, dishonest, and, for the banks, disastrous. Top executives are paid above the average to work harder and more successfully than the rest of us. If they fail, they should be fired, with no golden handshakes.

Pay should be fixed and pay scales fairly flat. The bonus anyone should get is acclaim by peers and the public for doing a good job.

Reporting from the UK Morning Star and the UK Guardian.

How Incentives Destroy Co-operation and Will Destroy Society

Human societies depend upon each of us helping our neighbors, and not exploiting them, and about 80 percent of us are willing to participate fairly in joint projects of mutual benefit. The other 20 percent are skivers, people who will try to get the benefits with as little effort as they can get away with. The skiving free loaders are not popular with the others who pull their weight, and usually sanctions or punishments are applied to those who try to exploit other people’s mutual effort for their own gain. It is called norm enforcement, the norm being that everyone should pull their weight, and those who do not are deviants from the norm.

Data like these are not difficult to get by testing in controlled situations. If my neighbor and I could each build a house on our acre plot in six months, but by co-operating we could do a better job making use of our complementary skills and finish the two houses in eight months, then we have a clear benefit from co-operating. If the houses still took six months each and were no better, we might as well build our own, and we only have ourselves to blame for anything that goes wrong. The act of co-operating must itself have a benefit or there is no point in it. So setting up a test in which people can share a sum of money they have been given with other participants to get a benefit from the pooled resource mimics my neighbor and I helping each other build a house, as long as it is likely that by sharing we can all be better off.

In such tests, Professor Stephan Meier, Assistant Professor in Management at Columbia Business School, and co-worker, Andreas Fuster, PhD candidate, Harvard University Department of Economics, discovered that when people were given private incentives, norm enforcement became less effective. The incentives seemed to take the edge off the hard feeling towards the skivers.

1. Participants were asked to contribute to a common pool of cash to be divided equally among them all at the end of each of six rounds, whether or not all participants contributed. No kind of norm enforcement was used. People gave only small amounts to begin with, and gave less in each round.
   
2. By adding an incentive to contribute (a lottery ticket), with no opportunity to enforce norms, people contributed more gladly, including free riders.
   
3. Norm enforcement was introduced to the first test, in the shape of a fine on free riders at the end of each round. Those who were fined, most of them, increased their contributions in subsequent rounds.
   
4. Adding the lottery ticket incentive made contributors scale back their punishment of free riders by almost half, and free riders were less likely to make larger contributions in subsequent rounds whether or not they were punished. The result tended towards the previous test without incentives.
   

Fuster says:

Individual incentives can really change the structure of how we deal with one another, what the norms are, and how we enforce norms. If social forces in an organization are important, managers need to be attuned to norm enforcement and peer effects. They should understand that adding monetary incentives can dramatically change this dynamic and lead to a net negative effect.

The point is that the lottery ticket became the aim of participating, there being nothing to be gained by sharing through the common pool. Free riding therefore became irrelevant. Everyone would give just enough to get a lottery ticket, whether a free rider or not.

On the face of it the experiments are flawed. There is no co-operative gain to be made by contributing to the common fund. The pool needs to be enhanced in some way to make it more like human co-operation. Even so, it is easy to see that a separate incentive can draw attention from the whole point of a co-operative venture—the advantages of co-operating—by distracting attention from the primary objective.

It is the reason, for example, why sports can be so easily disrupted by gambling. Whatever is to be gained from illegal betting can make sportsmen actually want to sabotage the supposedly co-operative team objective, and lose for their personal gain.

The same is true of senior managers and board members who begin to give themselves bonuses from the company’s earnings. The drive to maximize bonuses distract from the corporate aims, and when shareholders will not sack managers and board members who are lining their own pockets at the expense of the shareholder, then the managers can run amuck.

That is what happened in our banks. Barclays’ shares for example sank by a half over several years when top managers in most banks lifted their own compensation, including bonuses, by obscene amounts, and shareholders let them get away with it. Needless to say, the holders of large blocks of shares, able to sway any shareholders’ meeting, are often themselves large banks and city institutions, so effectively they are in a scam to rob the ordinary small shareholder and the customers.

Politicians are the same. Their objective is supposed to be to represent the interests of the people who vote for them, but they are all too easily distracted by the wads of maney waved at them from corporate bosses. Tony Blair is getting his compensastion now for his sacrifice of pretending to be a Labour Party Prime Minister, when he was a Republican Quisling. The incentives of the rich soon make most career politics forget what they are there for.

Our societies used to take an extremely dim view of bribery, but no longer. Bribes are today incentives, and the law enforcers themselves are too ready to accept them. A cabal of superrich people have corrupted the western world beyond redemption. Western society is decadent and immoral. Democracy is superficial. We are run by this megarich class, which controls every party with its incentives, incentives to do as they want, and not what is good for society.

The often despised Arabs are showing more courage and awareness now than the once militant workers of the UK and France. Workers in the US have always been too easily fooled by their betters. Even after thirty years of declining real wages, longer hours and poorer conditions for those in work, and a labor pool of twenty or thirty million unemployed or part time workers, while the top thousand or so people have trebled their wealth, the average American is still beguiled by the moribund American dream, Republican crooks and pastors, and their own inability to comprehend what is going on. They are the ones without the incentives, but rather are offered carrots.

Carrots might be incentives for donkeys, but Americans ought to be more sophisticated than those famously uncomplaining beasts of burden. Its time they started to do what the Arabs have already begun. Get out in mass on to the streets, trash a few corporate HQs and banks, and threaten revolution. Social instability is one thing the rich do not like, and can do little about, except getting national guards to shoot citizens.

Then everyone will realize that the state is not theirs, and democracy is an illusion.

Downturn in Housing—Nothing has Changed

Nothing has changed in the last two years. Bankers still get obscene bonuses, and the ordinary Joe is still being robbed by a system arranged to suit the rich. A report from the W P Carey School of Business at Arizona State University suggests a new downturn in the housing market.

Foreclosures had been held steady by foreclosure moratoria, but as these played out, it seems the rate of foreclosure is going up to where it would have been otherwise. In the last few months of 2010, foreclosures had fallen to 30 percent, but, in January and February 2011, it had risen again to 43 percent of recorded sales. Associate professor of Real Estate Jay Butler, who wrote the report, said:

January 2011 showed a re-emergence of troubled times, which continued through February.

Housing prices were also being influenced by foreclosure related activity. 40 percent of normal market sales were resales of previously foreclosed on houses. Adding these to the 43 percent of sold foreclosed houses means 66 percent of the market in January and February related to foreclosed buildings. That and the absence of a strong move up market, which is fundamental to a housing recovery, is restricting growth in home prices, leaving many home owners in negative equity.

The median price for the traditional market in February was $127,500, which is an improvement over the $125,000 in January, but down from $140,000 last year. The foreclosed properties in February had a median price of $141,385 in contrast to $143,580 for January and $153,695 for a year ago. Even expensive homes continued to be foreclosed, with 19 being over $1 million in February, so people who consider themselves middle class are being hit too.

The ones who are not being hit are the 0.1 percent of the population who rule the country, the mega rich, whose wealth equals that of the poorest half of Americans. Half of Americans is around 150 million! The mega rich, have as much money as 50 percent of all Americans and the proportion is rising each year. These people are never satisfied by however much they have.

The sad thing is that so many Americans are intoxicated by the American dream, that they can, somehow, be one of the mega rich. A dream is all it is for 99.9 percent of Americans.

Wise up, Yankees!

Who are the “Mindless” Ones?

UK Students Protest Vigorously Over Political Liars

Yesterday the Liberal Democrats in the UK’s Con-Dem coalition government voted to increase university tuition fees by 100 to 200 percent. Some did vote against and a few abstained, and even a few Tories voted against the outrageous measure, but sufficient members voted for it to ensure a government majority of 21 in the House of Commons. The Tory House of Lords, newly packed by Tory leader, David Cameron, with a load of Tory time servers, will back the motion.

Students are so outraged at this that they have started a campaign to register their utter disapproval by confronting the state, and particularly, that section of the coalition, the Liberals who solemnly pledged before the election that they would not support the Tory proposals for higher university fees under any circumstances. Liberal leader, Nick Clegg, says the pledge was a mistake because the Treasury is worse off than he and his party had reckoned. It therefore cannot be honored.

Indeed, there can be no honor among thieves and Clegg had his own excellent education because he is from a long line of them. His family are among the country’s rich, he had a private education at Westminster school, and went to one of the UK’s best universities, Cambridge, because his father was a banker, and his varied family background includes Ukrainian nobility. He is, in short, not without a few quid to his name.

Now, having joined the coalition government led by another rich Tory, David Cameron, he has decided that the country can no longer afford free, or even cheap, university education because the Treasury is deep in debt, and the country has to fill it and meanwhile service its borrowing requirements—we have to borrow from the banks to pay the interest on our debts, and so we cannot afford public services like free education any more!

The Banks—Robbers!

The students, however, unlike many trades unionists and Labour Party supporters are intelligent enough to realize the public purse is empty because we have given all our money and more to the banks to bail them out of insolvency when they were on the verge of collapse two years ago through speculative investments meant to further enrich already super rich financiers, and line the pockets of their agents the bankers simultaneously, through the enormous bonuses they paid themselves for robbing the rest of us.

All of this done under the innocent and admiring gaze of the pathetic supporters of the criminal New Labour Party of one T Blair, otherwise known as T Bliar, who is now coining it for his neoconservative takeover of the British traditional trades union and socialist party on behalf of the big criminals who bribed him to support the US Bush administration in its greedy adventures, and are now faithfully rewarding him with their spare change.

Students know it, and are young enough and angry enough to want to do something about it, unlike most of the British working class who are gulled into a zombic stupor by a media controlled by the same class of megarich criminals feeding them mindless reality TV, soap operas and a “get rich quick” celebrity culture that blurs the distinction between fantasy and reality for many. The students, after sleeping for almost fifty years, are now waking up to the state of the nation. We are not broke, but we have been robbed in a blatant scam, and the students of the future are among the ones who will have to pay for the heist.

Note thet these mindless students are not protesting for themselves. Most of them will have graduated before the measures are brought in, but the university under-graduates have been supported by many school pupils and students of pre-university sixth form colleges, who know they will be affected by the government class-laden legislation. Class-laden? Young people from poor families will hesitate getting into massive debt before they even start on their adult careers, and the assurances of grants and special measures for the poorest does not impress them. They are sops to get the measures passed, and need be worth nothing more than the Liberal “pledge” to oppose such acts. That was plainly worthless!

Mindless MPs

Yesterday’s demonstrations ended up chaotic, and the culprits are being called names by the media—“mindless” and “thugs”. It is the media pundits who are mindless, and the idiotic MPs who think they can gull the people forever. The students are showing that is not the case. Unjust societies fall apart because people will not put up with it, and the British are beginning to realize how they have been tricked. It is simply that they have lost the will or the courage to publicly demonstrate their diaproval, but students are leading the way.

The students are not “mindless”, it is liberal MPs like the local empty-headed idiot, Don Foster, who represents the rather posh city of Bath. Someone threw a rock through his window, and Mr Foster responded that he did not enter politics to win a popularity contest but to change things. He seemed quite oblivious to the fact that he actually stood as an MP in a popularity contest—it is called democracy! MPs are elected when they gain the popularity of the electorate, and that popularity is based on what they promise to do.

The half witted Foster, reneged on his promise and merely had a brick through his window. Next time, if the electorate are learning anything, he will be evicted. The local MP for this constituency of Somerton and Frome, David heath, a Liberal Democrat, who has had a narrow majority for several elections can hardly expect to remain in his seat in parliament now that he too has voted against the students’ and the country’s best interests. These two and their fellow opportunists will doubtless by then have abandoned all pretence of being Liberals and will have joined the Tories.

Mindless Media

Media pundist are never “mindless”. They write their columns and usually have sufficient ego not to want to humble themselves even when proved to be wrong. One of them, on Murdoch’s TV tried to bombast an NUS spokesman into condemning the NUS organized demonstrations, but the young man admirably stood his ground despite the anchor man speaking over him, and attempting to harass him into slipping up. The demonstrations had been taken over by “anarchists”! It is a general assertion made by media pundits trying to make out that demonstrations are fundamentally vehicles for what they also like to call “rent a crowd”, professional rioters. Quite where these professionals hide or make aliving when there are no riots to lead, is hard to figure, but they always emerge mysteriously when a demonstration gets out of hand. No one ever seems to figure that it is frustration and anger at being duped by professional careerists called policemen and politicians.

No one ever considers either that, it being in the interest of the state apparatus to discredit demonstrations by introducing petty but violent acts, they have undercover agents provocateurs actually causing and inciting trouble. Any self respecting professional rioter, having broken into Millbank or the Treasury building would have set them both on fire, but these professional anarchists only set fire to a few placards and wooden staves in the streets. These professionals could hardly expect to get employed again, could they?

Mindless Police

Certainly the police professionally anger crowds by their so-called “crowd control” techniques. They “kettle” crowds or sections of a large crowd—confine them by force—into a narrow space and refuse to allow them to pass. This naturally causes immense frustration when people want to relieve themselves or to go for food or drink. Yesterday, a section of the crowd were induced to cross Westminster Bridge to escape the kettle, but then were stopped half way across and confined for hours in the narrow space of the bridge. The police are meant to be the guardians of the right of lawful citizens to move along the Queen’s highways, but they wilfully break the law themselves, with the result that violence is the only way to escape. Innocent people have died in these kettles, and a young man needed a three hour brain operation yesterday after a baton attack. It goes without saying that any rogue policeman will be innocent.

The police too are “mindless” because the media are forever highlighting violent protests but ignore peaceful ones. A peaceful “candle lit” vigil across the bridge in the South Bank was hardly mentioned by press or TV. So the provocation of the police and their plain clothes agents might actually be giving the publicity that will arouse the sleeping giant of the British public and their generally compliant trades unions from their slumbers.

The Effective Tactic—Destabilization

If Parliament relies on demonstrations being forever peaceful, and therefore of no consequence so it can simply ignore them, it is making a big error, one it has often made before. The present situation is plain to anyone who thinks just a little. The rich get richer even when the country is, they tell us, broke. Only last week, Ireland had to go cap in hand for a large multibillion Euro loan to bail out its own banks. This week the Irish banks are handing out tens of millions in bonuses, just as British and US banks have done. The banks and their employers, the super rich financiers, gleefully put up two fingers to the world, while the people have to scratch about to pay their mortgages and rents, aye and taxes, if they can. That is why the students are angry, and why we all should be angry too. It is why we should support them and ignore the whingeing special pleading of the press and the broadcast media.

Listen! The richest 1 percent of the world’s population owns over $200 trillion. No need to guess where most of the 1 percent live. Maybe as little as 5 percent of this largess would solve the world’s economic problems, but Obama has just caved in to the rich man’s lobby in the US called the Republican Party, and most of the world’s leading developed countries have bailed out their banks while putting the burden of their empty treasuries on the people, not where it should be, on the minority who own as much as the rest put together. Governments ought to be joining together to ensure the rich are taxed and pay it.

Curiously many, the most intelligent among the rich, do not mind it as a temporary burden! Those rich people not among the “mindless” realize that their riches are most secure in a stable world, and corporate and financial greed is now destabilizing the world. That they do not like. It follows in all logic that the best way to get the rich to pay their fair share towards economic stability is to threaten instability. That is what “mindless” students are doing.

Cash Bailouts Are Frittered as Added Executive Compensation

A business study of corporate bailouts has found that debt relief is more successful than cash injections. It revealed that, in the year after a cash bailout, executives paid themselves and some employees higher compensation!

Executives of firms that receive cash almost immediately give their employees and themselves raises.

Professor Kenneth Kim

The study of the performance of 104 corporate bailouts in 21 countries between 1987 and 2005, was carried out by Kenneth Kim, associate professor, and Zhan Jiang, assistant professor, at the University at Buffalo School of Management, and Hao Zhang, assistant professor, at the Rochester Institute of Technology.

They found also that bailed out firms could recover to a point where their performance was as good as before, depending upon several factors. Recovery was best for firms that had had a sudden decline for reasons outside management control, or because they had problems servicing their debt. Firms that had declined more gradually with no significant external factors, or were unprofitable, were genuinely sick, and could not recover as well despite the bailout, though many did survive. Kim noted:

The former were profitable, they just needed a hand. So, it makes more sense to rescue firms that have been otherwise strong than to keep afloat “prolonged decliner” firms that have been weak or inefficient for some time.

Firms recovered least from governmental bailouts, because governments:

1. don't monitor firms after the bailout as closely as large shareholders and banks
2. may bail out a firm to keep people employed or to keep the economy going, regardless of the firm's performance
3. are more inclined to bail out firms with government connections.

It is Time We Removed Inequality

Robert H Frank, an economics professor at the Johnson Graduate School of Management at Cornell University, wrote in the New York Times about the present financial crisis, comparing it with past times and using a new survey.

Incomes in the US rose at about the same rate, almost 3 percent a year, for all income levels in the three decades immediately after World War II. Prosperity extended across the whole population, irrespective of class. The country's infrastructure of highways, railroads, dams and bridges were well maintained, and new industries in communications, electronics and airlines were growing.

In the last three decades the economy has grown only slowly, infrastructure is decaying, and many people have trouble finding adequate work because industry is floundering.

Moreover the change in circumstances has not been evenly distributed. The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent. The rich have been getting richer ever more quickly while the poor and the squeezed middle classes have remained static or lost out. The situation is plainly unfair and antisocial by any standard.

Societies must be founded on a sense of fairness and justice even if they are not unquestionably fair. The people of the US have been ready to tolerate a degree of unfairness in income and wealth distribution providing that they felt they had a chance of joining the wealthy by dint of personal effort, and proving that living standards generally improved because a large number of people were working in concert to build a better country. In short, providing that income was not distributed unfairly to a minority of the already rich while everyone else struggled.

Frank notes that the founder of modern capitalist theory, the Scot, Adam Smith, who wrote Wealth of Nations, the capitalist's bible, peppered it with trenchant moral analysis. He was, after all, a professor of moral philosophy at the University of Glasgow.

Yet rising inequality has created enormous losses and few gains, even for its ostensible beneficiaries, the mega rich class, who now have reason to worry that social instability will ruin them, if it is allowed to develop further. In any case, increasing riches alone never improves overall happiness once people have sufficient not to feel insecure. All that happens is that they notice that others are just as well off, and they then want another increase. Everyone wants to keep up with the Joneses, but these people are already loaded!

Frank reveals that he and two co-workers have found that the US state counties where income inequality grew fastest also showed the biggest increases in symptoms of financial distress. Even after controlling for other factors, counties with the biggest increases in inequality had the largest increases in bankruptcy filings, and also reported the largest increases in divorce rates, divorce rates being reliable indicator of financial distress.

Families short on cash will try to make ends meet by moving to where housing is cheaper, usually farther from work. So, long commute times are another footprint of financial distress, and the counties where commute times had grown the most were those with the largest increases in inequality.

Even basic public services are no longer being properly maintained because of the persistent objection the rich have to paying their proportionate share of taxation. Rich and poor alike endure crumbling roads, weak bridges, an unreliable rail system, and insecure cargo containers, and many Americans live in the shadow of poorly maintained dams that could collapse at any moment. The right wing lobbyists and their academic parrots say nothing can be done, and most advocate policies like tax cuts for the wealthy that put the burden on the poorest in society.

There is no compelling evidence that greater inequality bolsters economic growth or enhances anyone’s well being. The rich remain a minority, though they hold a majority of the country's dollars. They can buy bigger mansions and host expensive parties, but it will not keep the majority employed and adequately compensated, and in any case the wealth of the rich is mainly invested abroad in places like China and India where the best rates of return can be had, and the exchange rate offer a hedge against losses. Then again the obscene bonuses wall street bankers and brokers pay themselves attract the most intelligent graduates, leaving vital sectors like industry, science, technology and engineering devoid of creative talent—and bang goes any competitive advantage we might expect to have in the future. Yet, any grifter can learn how to gamble in junk bonds but not how to succeed in science or engineering, or even in proper good stock picking.

No one dares to argue that rising inequality is required in the name of fairness. John Rawls in his theory of justice as fairness (A Theory of Justice) though inequality was only justifiable when the poor were nevertheless getting wealthier, albeit maybe not as quickly as the wealthy. So we should agree inequality is a bad thing, and do something about it.

In the UK, Professor Greg Philo suggested that the top 10% should pay a one off tax of 20% of their wealth. It caused some outcry, but surprisingly, a lot of wealthy people were willing to do it. They were the ones who realized it would be far worse if social unrest got so bad, especially if it were worldwide, as is the financial crisis, that all of their wealth might be threatened by social instability. They knew that the one off payment, though substantial, would repay itself if we got into a new ers of financial stability as a consequence. Their remaining investments would soon grow to pay back the lost 20%. Though the short sighted greedy rich would moan like hell until the benefits came through, everyone would end up happy.

Greg Philo: Privatize the National Debt

Britain is the sixth richest nation in the world. Total personal wealth in the UK is £9 trillion, and the richest 10% of the British people—about a million wealthy families—own £4 trillion of it, with an average per rich family of £4 million. The bottom 50% of the British people own just 9% of the wealth, the least wealthy being the bottom 10% of households who are in debt—they owe more money than they own.

Yet we are in such a crisis, having emptied the treasury to prop up the banks, and to pay the £ million bonuses the parasitic banking community take whether we like it or not, that we are all to suffer the worst cuts in public services ever! The media sing in chorus “we are all in it together”, but does it seriously sound as though we are, with such a vast inequality of wealth distribution?

The economy has already recovered sufficiently for the banks to have started making obscene profits again, and to have already returned to giving themselves financial commendations in the shape of fatter bonuses than ever, and the country is already richer than it was before the financial crisis, despite the media bleating. Maybe it is because the economy meant is that very wealth I made account of in the paragraph above. With stock markets rising, banks making profits, cash bonuses and champagne eqally profusely flowing, the sector of the economy that covers the rich are indeed looking up, and the reason is that the rest of us are having to count the cost!

There is no popular mandate for Con-Dem policies that will radically reduce growth, put up unemployment and affect the bottom 6 million people hardest—those who have no wealth at all. The Con-Dems are doing this though their popularity is already steeply in decline, and Labour has already gone ahead of the other parties according to a recent poll. The consequence of what they are doing is likely to be serious social unrest. The British people are not passive and it is a myth that they will accept policies that they see as profoundly unfair. The consequences of unfair policies is revolution—as a minimum, mass demonstrations, strikes, popular unrest and perhaps rioting.

Professor Greg Philo of the Glasgow University Media Group says the answer is plain, and he has checked it out via public opinion surveys and interviews with wealthy people. He proposes a one-off tax of just 20% on the wealthy decile. This tax of 20% on the very richest people in Britain would raise £800 billion—a fifth of the total £4 trillion they own. That is enough pay off the national debt and dramatically reduce the deficit, since interest payments on the national debt are a large part of government spending.

Nor would this rich segment of society actually have to produce the money immediately, if at all! Voodoo economics? Not at all. If the richest 10% assume liability for the £ billion national debt, it would be cleared from the governments accounts, reducing the deficit instantly to a manageable size. That would instantly relieve the pressure on markets which would soar, and the stock and bond owners, including the banks would immediately be presented with remarkable gains which would go a long way to returning to them the money they have agreed to pay out. Indeed, they can pay their 20% tax in installments out of the earnings they would be making, and even if that were not sufficient to pay off all of their 20%, they could simply agree to pay it along with their death duty.

Philo's group commissioned a YouGov poll of over 2,000 people to test attitudes to the tax and found it was an extremely popular proposal. 74% of the population approved (44% strongly), and agreement was spread right through social groups. Only 10% did not approve. Those in the higher income brackets were more supportive than the less well paid of the wealthy class. They were the ones who realized the measure would turn out to be beneficial for them as well as the country, not merely in the immediate returns they would get, but also in their desire to keep society on an even keel. They knew that unrest, strikes and riots would reduce confidence and profits, and that the poor are the ultimate consumers, and stripping them of the little they have will just depress markets. Even if they were unable to recover all of the 20%, they knew they were wealthy enough not to actually miss the loss.

A problem for the British and US economies is that much of the nations' resources have been directed into inflated property values, which is where many of the bonuses ended up. Extra houses is buried money. It is not liquid and is inaccessible. The tax would re-circulating some of it once the government had no need to cut services, as public spending, stimulating growth. Unemployment resulting from the proposed cuts would be avoided, extra benefits would then also be avoided, and tax revenue would not fall.

At present, we have a lot of billionaires resident in the UK who pay no tax at all. There is quite a separate call for them to pay their just taxes. If people have substantial assets, want to live here and to be British, then they will have to pay their bit. The public will have little time for non-doms, exiles or what will be seen as unacceptable attempts at avoidance. This proposal is similar, but is a mere one off necessity. The Revenue offices know who have the wealth and collecting it ought not to be a problem. The main problem indeed is likely to be the extent of privatization of revenue collection. That, most sensible Britain’s will think, should not be in private hands. Already it has led to absurd mistakes and injustices, so it should be returned fully to the civil service.

The absurdity of privatizing many of our public services is itself a symptom of the desperate need for reliable sinks for the surplus capital swilling around the world. It should be used to put people into work, not to squeeze even more unneeded capital out of them.

David Harvey on the Capitalist Crisis

David Harvey has had a series of short lectures made by RSA Animate into clever little animated movies, available at You Tube. They are educational and entertaining, and must be seen by anyone critical of our excessively bent system. Jail the Bankers!

Sounds Familiar: Aneurin Bevan in 1959

I have enough faith in my fellow creatures in Great Britain to believe that when they have got over the delirium of the television, when they realize that their new homes that they have been put into are mortgaged to the hilt, when they realize that the moneylender has been elevated to the highest position in the land, when they realize that the refinements for which they should look are not there, that it is a vulgar society of which no decent person could be proud, when they realize all those things, when the years go by and they see the challenge of modern society not being met by the Tories who can consolidate their political powers only on the basis of national mediocrity, who are unable to exploit the resources of their scientists because they are prevented by the greed of their capitalism from doing so, when they realize that the flower of our youth goes abroad today because they are not being given opportunities of using their skill and their knowledge properly at home, when they realize that all the tides of history are flowing in our direction, that we are not beaten, that we represent the future: then, when we say it and mean it, then we shall lead our people to where they deserve to be led!

Nothing much changes, or has changed, in the intervening fifty years except that Bevan’s Labour Party was sold out to Blair’s New Labour party, which more appropriately should have been called Not Labour. Blair made the Labour party into a neoconservative party, and brought about the state of affairs Bevan predicted. Now we have five neoconservatives, or at least four and an opportunist, standing for the leadership of the New Labour party. So nothing will change. Labour voters have always mostly been dupes of the Oxbridge middle classes. Maybe, it is time they trusted to a few socialists instead, or even thought about politics instead of watching the “delirium” of reality and “celebrity” TV.

The recent vast bailouts to the world's bankers certainly show that the moneylenders have taken over, and already they are making vast profits and, of course, bonuses. Why should they get bonuses for these profits? The Bank Rate is set in the UK to 0.5 percent, so anyone with money in the bank will get this meagre rate of interest. Yet the bank can lend it to businesses, not usually British ones, at anything up to 10 percent, earning an automatic profit of 9.5 percent, or at least a substantial one for doing nothing to earn it. The bank of England sets the bank rate for the benefit of the banks, and they benefit, but what have they done to merit any bonuses? It is yet another banking scam.

Meanwhile, the new British Tory government, with the help of their chums who own the media, like Rupert Murdoch, propagate the myth that the country is bankrupt, and swinging cuts must be made, notably in unemployment and other benefits for the poor. In this way, the anger of the people at being mugged by bankers is diverted to anger at the unemployed for drawing benefits! How easy it is to manipulate the masses.

No cuts would be needed at all if the government retrieved from the banks what it gave them, if it taxed the billionaire hangers on who come from places like the former Soviet Union with chests of ill-gotten cash—the so-called oligarchs, if it taxed our own British megarich more progressively, and if it legislated against the scams and loop holes that the wealthy use to multiply their wealth at the expense of the lower and middle classes.

There is nothing at all complicated about this. You do not need a degree to understand it, yet the British today claim it is all too complicated. One has to conclude on the contrary that people are too lazy to think for themselves and too ready to accept what they read in their newspapers, and see on the television news.

Bevan saw it all, and sadly, the way the Labour party got taken over by Blair and Brown, there was nothing to stand in the way of it. Resurrecting Labour will be harder than resurrecting Christ, so maybe a new left wing party is needed. The Germans seem to be heading in that direction. It needs to begin with a Clause 4. If anyone does not know what it is, maybe they should Google it!

US Middle Class ready to Revolt against Wall Street Parasites and Financial Terrorists

The Max Keiser Report 65

The Human as Molecule—The Statistical Mechanics of Wage Earners

PhysOrg.com—A Purdue University professor of chemical engineering has used “econophysics” to show that under ideal circumstances free markets promote fair salaries for workers and do not support CEO compensation practices common today. The research presents a new perspective on 18th century economist Adam Smith’s concept that an “invisible hand” drives a free market economy to a collective good:

It is generally believed that the free market cares only about efficiency and not fairness. However, my theory shows that even though companies focus primarily on making profits and individuals are only looking out for themselves, the collective self-organizing free market dynamics, under ideal conditions, leads to fairness as an emergent property. In reality, the self-correcting free market mechanisms have broken down for CEOs and other top executives in the market, but they seem to be working fine for the remaining 95 percent of employees.

Venkat Venkatasubramanian

Venkatasubramanian proposes using statistical mechanics and econophysics concepts to gain some insights into the problem:

This is at the intersection of physics and economics. We are generalizing concepts from statistical thermodynamics—the branch of physics that describes the behavior of gases, liquids and solids under heat—to analyze how free markets should perform ideally.

Findings are detailed in a research paper that appeared in the online journal Entropy. Venkatasubramanian has already used the approach to determine that the 2008 salaries of the top 35 CEOs in the United States were about 129 times their ideal fair salaries—and CEOs in the Standard & Poor’s 500 averaged about 50 times their fair pay—raising questions about the effectiveness of the free market to properly determine CEO pay.

In the new work, the researcher has determined that fairness is integral to a normally functioning free market economy. A key idea in Venkatasubramanian’s theory is a new interpretation of entropy, used in science to measure disorder in thermodynamics and uncertainty in information theory. He shows, however, that entropy also is a measure of fairness, an insight that seems to have been largely missed over the years, he said. Andrew Hirsch, another Purdue professor adds:

Venkat’s insight goes beyond the simple grafting of the mathematics of information theory and statistical physics onto the question of fairness of salary distributions within a free market economy. He has recast the notion of entropy into a context that has meaning and relevance for this particular problem.

Venkatasubramanian calls his new theory, statistical teleodynamics, from the Greek telos, which means goal driven:

In statistical thermodynamics, we study the movement of large numbers of molecules. In economic systems, we have a large number of people moving around in a free market system, but instead of thermal energy driving the movement people are motivated by goals.

His theory describes how goal driven rational agents, normally people, will behave in a free market economic environment under ideal conditions.

The bottom line is that the free market does care about fairness. Clearly, the next step is to conduct more comprehensive studies of salary distributions in various organizations and sectors in order to understand in greater detail the deviations in the real world from the ideal, fairness maximizing, free market for labor.

The excessive pay of CEO's can be seen from a simple analysis of the wage distribution curve—too many have incomes way above the average that any defendable distribution curve predicts—showing that CEO's, who pay themselves, with only formal approval from the occasional stockholder meeting, rate themselves as superhuman, according to normal distribution measures. Venkatasubramanian seems to have come up with an ususual basis for a compensation distribution curve, which he claims is 95% fair, but attempts to use the mathematics of statistical physics in sociology and economics have failed in the past. It remains to be seen whether this approach is based on valid asumptions and not merely the desire to use a neat mathematical scheme outside its original frame of reference.

Jail the Banking Confidence Tricksters

Clever bank executives lend money at mortgage to poor people unlikely to be able to repay it. The bankers do not mind because the housing market is rising. They know that when they inevitably foreclose on the mortgage, the property will have risen in value, and they will be able to sell it on, get back their mortgage money and have some left as profit.

This scheme is fraudulent because it is effectively a “Ponzi scheme”, in other words, it is is pyramidal selling. It works as long as the housing market is rising according to expectations. Housing looks like a reliable investment, so people are keen to enter the property market in the hope of making a profit. But eventually, the market will saturate, as it always does once everyone able to enter the base of the pyramid—expecting to move up it—has done. Once this happens, there is no one left to buy up the foreclosed houses, and expectations change. The housing market stutters. Banks cannot sell foreclosed properties, stop lending on mortgage, and the house market collapses.

The banking gangsters—banksters, as Rooseveldt called them—know this, but cunningly decided to package the mortgages they had lent out into bonds giving anyone willing to buy them a proportion of the annual profit from houses foreclosed and sold on. While the housing market was rising, they looked like a risk free investment and were snapped up by stock market traders and even other banksters. Of course, the banksters knew they had to fail ultimately, so devised a cunning plan to get rich while the gravy train was still running. They paid themselves massive bonuses because they were turning over so much money trading in these junk bonds. Bonuses were in cash, so they did not have to risk holding the bonds. Their customers, including the customers and shareholders of the banks took that risk, and even the general public, because the banksters knew that no government could allow major banks to collapse. So the buck ultimately ended with the taxpayer—you and me!

That is what happened, and that is why banks have been given $trillions to bale them out—$trillions of our money.

And have the governments sought to catch the banksters who devised this scam, and others like it, doling out $billions of our money in bonuses to themselves? Not a bit of it. Politicians hope to get their rewards when they leave office by cashing in on the gratitude of the banking gangsters by becoming one.

We all knew it was a scam, except—it seems—governments. But the banks have been so blatant and unconcerned that they will be caught and convicted that they have been utterly blasé about it all. Now we have evidence, perhaps proof, that Goldman Sachs knew all along they were acting fraudulently. One of its executive directors emailed:

The whole building is about to collapse… only potential survivor, the fabulous Fab [himself, Fabrice Tourre]&hellip standing in the middle of all these complex highly leveraged, exotic trades he created without necessarily understanding all of the implications of these monstrosities!!!

He understood enough to know the bonds were junk and were about to collapse, but Goldman Sachs approved because he was indemnifying the business by selling the bonds while being in collaboration with Paulson and Co who were short selling the bonds knowing they were junk, so they could buy them at less than they sold them, profiting from the knowledge that they were bound to end up worth less.

Meanwhile Goldman Sachs the famous banksters are paying out $5 billion in bonuses. Or rather we are paying out the banksters $billion bonuses.

It has to be time these people were charged. Do not vote for anyone who does not:

1. undertake to stop banking fraud
2. puts the fraudsters on trial and jails the guilty ones at the top
3. breaks up banks that are considered too big to fail
4. splits lending banks from trading banks
5. properly and firmly regulates the banks that remain.

Promises, Promises: Return to Principle Labour!

Industry and its employees are paying the price for a crisis brought on by the bankers. A loan to save 900 skilled workers from the dole cost a mere £4m, a single banker’s bonus! If taxpayers’ money can be used to bail out the banks, it should also be available to help vital industries. Yet the government persists in enforcing its old dogmas, as if nothing had changed.

Why try to force people who are ill or disabled or workshy and old people over 65 to work when there is not enough work for those who are able bodied and want to work? If there is not enough work for everyone, why not reduce the working week? If there is not enough work to go round, why did Labour help fix 48 hours as the minimum working week by refusing any amendment to the Brussels Working Time Directive. In doing this, the Labour government ignored its own party conference and the policy of both the trades unions democratically and publicly agreed through the TUC. It also defied the stance of most Labour and Socialist members of the European Parliament in an earlier vote in Strasbourg.

The Labour Party was founded by the trades union movement, and reduction in working hours was the aim of the first trades unions. Long hours and abject working conditions meant an early death for working people, including children. Strike pay was the only benefit that the first union offered, and reducing the hours of labour was, “the whole aim and intention of the union”, Will Thorne said. The eight hour day became a basic principle of trades unionism. The primary cause of trades unionism was not higher wages but shorter hours.

The first victory of British trades unionism was at the Beckton Gas Works in London’s East End—the replacement of a twelve hour day by eight hour shifts with no loss of pay. Since then the struggle to humanize work and change the economy has been long and arduous. For a century, the trades unions won significant reductions in hours through their struggles and sacrifices. By the seventies, the demand was for a 35 hour week. But the subsequent victory of the Thatcherite Tories and Blair’s Thatcherite New Labour—just when people thought they were voting for the rejection of Thatcherism—paved the way for the working week to rise from the 1980s onwards.

If the first British trades unionists knew shorter hours helped in the struggle against unemployment, the sons and daughters of clergymen, pseudes and shopkeepers constituting Blair’s and now Brown’s New Labour party simply do not get it still. Its decision to stick with a 48 hour week is a goad to all those who think the UK Labour government’s neoconservative, nineteenth century policies need to be fought with a campaign to reduce working hours in the face of rising unemployment.

Their slogan should be, “Shorter hours for better life”. Long hours preclude a good quality of life, cut down family time, erode away leisure time. And long hours of work are a health and safety issue. Health and safety at work should not be left up to arbitrary local negotiations between trade unions and employers, any more than burglary should be left up to the burgled and the burglar, to use Richard Leonard’s words. Both are matters of public interest, and so are a government responsibility in a civilized democratic society.

Paying workers dole money because they have no work at all for months or years makes no sense. What is required are loans for businesses that cut the working hours of their staff to avoid short time working, or going to the wall. Industry needs money, so credit from the banks has to be forced, if banks are determined to stay divorced from their prime purpose. Their prime purpose is not to devise pyramid selling schemes that allow dealers to get rich quick through the bonuses they pay each other. It is to lend deposited money at modest interest to entrepreneurs.

The nation has put cash into the banks to save them from their own folly. It is time to see it coming out again, in loans to industry. Workers are footing the bill for bankers’ blunders, but the money extracted from ordinary people’s pay should not be a long time commitment. The banks must be made to pay back what they have so far been given apparently unconditionally. They can only do it without stimulating an identical crisis, by returning to prudent business methods.

Too many Labour ministers have no knowledge or interest in the history of the party they represent. They are ignorant of any of the principles that motivated the party, and have opted instead for self gratification, and ingratiating themselves with US plutocrats and Russian oligarchs. They have forgotten that they were elected to serve working people, those who create wealth, not those who own the means of doing it, and certainly not themselves for personal gain.

Labour must return to principles, but since it lost all pretence of democracy in the Blair years, it has to be doggedly pushed and even threatened by the unions, which now represent not only blue collar workers but large numbers of middle class white collar workers, technicians, teachers and civil servants. This great trades union Leviathan has to get rolling again. It means members have to snap out of the lethargy induced by the borrowing boom of the Blair years. It was not a golden age but a tinsel age. Like Blair himself, it was all false.