Monthly Archives: April 2015

Decoupled Growth: turning the economic lights from red to green

There is a lot of commentary ‘out there’ at the moment on the party manifestos ahead of the general election next month. Some of these comments have basically summarised the Green party manifesto as ‘just Labour, but more left wing’ – higher taxes, higher spending, larger public sector, ending austerity. Maybe.

But a fundamental divide remains when we look at economic growth. Most parties want to promote it – “to share the proceeds of growth” – and it provides politicians with a ready answer to journalists asking where will the money will come from for today’s promises. However, the Green party manifesto says they reject GDP growth entirely as a policy objective, and if in power would be happy to see it flatline.

Decoupling Growth: should it be done?

Some of the greener elements within the Labour party have, quietly and for a while now, been talking about decoupling growth from carbon. This approach allows for increasing GDP, but with a switch to renewable energy and low-or-no carbon technologies. But it is one thing to decouple GDP from carbon; it is something much bigger altogether to decouple it from economic policy.

Other economists, and not all of them green, point to our changing world. They highlight the trend over recent decades from there being just one or two super-powers to a “multi-polar” world where countries such as China and India have a growing influence. These economists point to the massive growth in super-cities, and to population growth heading towards nine billion people. They question how every country can grow its GDP, especially when the days of cheap or exploitation imports from poor countries into rich countries are coming to an end. The oil shock in the 1970s started to teach rich countries that lesson. Areas of difficulty remain. Africa still struggles to sell its food fairly within the tariff-protected West, and there are green debates about food miles which need to be reconciled with equity debates and promoting fair trade.

But basically, we having a changing and complex world where power is shifting. We also have growing inequalities despite these massive global forces. We see large companies with more wealth than small countries. We see individuals with more wealth than whole towns or regions.

When the global financial crisis hit in full force in 2008, the Queen famously asked, “why did no-one see this coming?” Apart from a few Marxist professors choking on their cornflakes, the polite answer would have been, “well Ma’am, they did know it was coming, but it paid them to keep quiet.”

So instead some graduate mathematicians came up with a complex formula that magically confirmed that sub-prime debt can be turned into triple-A assets, and were promptly well-paid by Wall Street to work their alchemy on the balance sheets. Expensive books were written about the new, respectable “value at risk” magic formula. “You see, Ma’am, it was totally tulips.”

So growth and GDP are now damaged goods. The world probably cannot afford it, certainly in the long run. The political economist John Maynard Keynes said, “In the long run, we are all dead.” True, and not to be too gloomy but this just might be how it happens globally unless we change our ideas.

Decoupling Growth: can it be done?

To be blunt about it, GDP growth has been held out politically as the hope for the poorer person everywhere that good times are just around the corner. If that is taken away, what can they look forward to in a world of green economics?

One trick is to have your cake, and eat it too. In this example we prioritise growth in the service sector. So, we can talk about growing employment levels where people provide services to other people. Teachers, nurses, waiters, accountants, advisors and so on, ideally all on bicycles and public transport. A bit flippant, but you get the picture. The difficulty here is how to stop this growth in earnings and economic activity ‘spilling over’ into unsustainable consumption – more air travel for holidays, bigger cars, more stuff at home, and so on.

Another difficulty is that it is perfectly possible to have no growth, but also a worsening environmental balance sheet. Consider, for example, reducing the number of wind turbines in exchange for more use of shale gas or fracking. Zero growth, yet more carbon. Zero growth in itself is not green. Of course, Green party politicians will reasonably point to the rest of their manifesto (home insulations etc) as an overall benefit to the environment.

But, basically there has to be a rationing of carbon and other finite resources – by taxes or regulations or a combination of both. So, green economics would suggest lower taxes on labour and new or higher taxes on carbon.

So, could it be done? Well, we don’t know yet because no-one has yet tried it, nor even dared to suggest it. Higher taxes for rich people still seems easier to sell on the doorstep than higher carbon taxes or rationing for everyone.

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How to save our town centres

Book Review

HOW TO SAVE OUR TOWN CENTRES: A radical agenda for the future of High Streets
Julian Dobson, Policy Press, 2015. ISBN: 9781447323938

Empty shops. Charity shops. Betting shops. The death and decay of our High Streets has been troubling us for at least seven years. Longer, if you live in areas like the coalfield villages in the Welsh valleys and others north of Watford. Julian Dobson has written a great book here on what has gone wrong and, more importantly, what can we now do to rejuvenate our town centres and High Streets. This is long overdue, and vital to our quality of living.

His experience and knowledge shine through in this clearly and carefully written book. For me, anyone can catch my attention when they acknowledge Jane Jacobs and her thinking on street design, and Julian doesn’t just quote her, he understands her. And though he is very measured in his writing, you do get an occasional glimpse behind the curtain. Folk working for firms of High Street lawyers might want a stiff drink before reading pages ten and eleven. And a similar caution later for university library manager friends in Sheffield.

Julian covers the ground thoroughly, reminding us of the pioneers and initiatives which still hold lessons for the future. He rightly cautions us against trying to make our High Streets into unsustainable copies of a nostalgic past. Perhaps here his biggest contribution to our understanding how our bad our High Streets have become is his forensic analysis of the British commercial property professions. There is a lot of fresh work here, and with plenty of research leads for others to usefully explore. The professional tension between risk-aversion and promoting bubble economics is laid bare.

He concludes this fine book with a section on what can be done today to improve our High Streets. These suggestions are very practical and pragmatic. Julian resists a simple solution, whether it would be a new law or a new technical fix. So there should be no excuses for waiting for someone or something else – anyone concerned with their High Street can start straight away with these improvement ideas. It is a collective enterprise, going as he says from ‘me towns’ to ‘we towns’.

I really hope that there is a second edition of this book, and soon. It would have another chapter— on how it all started getting better. Julian would be too modest to add his influence within such a chapter, but we would know.

And if I can speculate for a moment. Things only seem impossible until someone makes them happen. Cities were in decline not long ago. But consider people like Tony Wilson and Tom Bloxham. Tom was a young man starting out in business who saw that, in his own words, old buildings were cheaper to buy per square foot than carpet. Now thousands of property companies have followed the lead of pioneers in urban regeneration such as Urban Splash. It set a new normal. And if Tom rewired urban property, Tony rewired the urban brain for a new generation. Many, many helped – like a town centre, a city is a collective enterprise – but someone had to open the door.

Julian rightly describes how some areas have taken these changes to an unsustainable level, often with a mistaken belief that retail-led regeneration will solve every town centre problem. ‘Boom goggles’ he calls them. Or ‘cargo cults’, as anthropologists would describe them.

But I quietly suspect that someone, probably young, possibly with a background in video blogging, skateboarding and graphic books, even now is sitting with their mate in some greasy spoon cafe in Collyhurst and saying, “those empty shops and stuff, you know what…”

And so a door opens on our next new normal.

Using algorithms to detect fraud and find criminal behaviour

In California the owner of a firm supplying power wheelchairs paid for by the Medicare and Medi-Cal funds, was convicted on 20 March 2015 of fraud of $3.5million (1). She had been paid almost $2million, and sentencing is set for June 2015.

Fraud within public funds is not new. In the UK the programme of Individual Learning Accounts had to be abruptly closed and abandoned because of fraudulent claims by criminals using powerful computers. They searched for weaknesses in the system’s data and then made hundreds of automatic false claims on each ‘find’, each claim for over £150.

In the USA the authorities are making it known that all financial claims are now monitored by anti-fraud algorithms which look for known patterns of criminal behaviour. Clearly these algorithms are not themselves in the public domain, but common sense suggests that any statistically significant ‘spikes’ in the claims will raise a red flag.

But more important than money is life itself. The same algorithms can also be used to interrogate health data as well as health funding.

Harold (Fred) Shipman, the mass murderer, killed patients at an estimated one a month for 25 years, mostly elderly women living alone. “By 1998 … a local taxi driver, who often ferried old ladies around, noticed that they seemed to die shortly after seeing Shipman. Linda Reynolds, a nearby GP, noticed that his patients were dying three times more frequently than hers.” (2) The subsequent Inquiry determined that he murdered 210 people, plus a possible 45 others.

The Mid-Staffordshire hospital scandal of appalling local health care was also first detected by patients’ relatives who knew that something was wrong. In retrospect, the data told the story in terms of falsely coding people’s deaths. The senior managers in charge at the time tried to “explain away” these sudden lurches in unlikely deaths, but the relatives’ stories and the data supported each other and the truth emerged.

Back to funding in the UK, and at a more routine level thankfully, we have the recent convictions for fraud by some A4E staff making false claims to the Department for Work and Pensions and to the European Social Fund.

Auditors are usually well aware that – if it looks too good to be true, then it probably is suspect. Such as projects which achieve all their outputs and outcomes, with everything spot-on the original profile, along with wonderfully neat files all signed in the same shade of ink. Hmmm.

It might not be as high-tech as super-computer algorithms, but auditors as well as machines can know which trends or characteristics in the data will need further investigation.

(1) http://www.justice.gov/opa/pr/owner-medical-equipment-supply-company-convicted-35-million-medicare-and-medi-cal-fraud

(2) Forensics: an anatomy of crime, Val McDermid, 2014, p107.