New Year Dishonours

On learning that Lynton Crosby, the slimy spin doctor who ran the Tory’s 2015 election campaign, had be awarded a knighthood under the New Year’s Honours List, Shadow Chancellor John McDonnell said that it would make the public think that the awards system had become “an old boys’ club”. He did not go far enough. The entire awards system is rotten to the core. It should be abolished and the titles that go with it. While it limps on we can only marvel at the lack of self- respect of those who accepted these tarnished baubles.

Lynton Crosby aside, it’s true that, for example, Imelda Staunton is a fine actress and Tony McCoy is an excellent jockey. The time has, however, long past when actresses were a despised group in need of public recognition and sportsmen performed for the fun of it and to scratch a subsistence living. We have Oscars, Emmys etc to recognise the former and the Sports Personality of the Year (such a tautology!) to recognise the latter. As for the other 1,193 recipients, some are, no doubt, worthy individuals, some (but not all) pay their UK tax and not all of them will disingenuously claim that the award is a form of recognition for their colleagues and employees. Let them have their day at Buckingham Palace, but those we salute today are those who see honours for what they are and decline them. Well done you lot!

Happy New Year.

Is the Paris Agreement credible?

In the blog last week I suggested that the credibility of the agreement reached in Paris last weekend on climate change should be judged by what happened to the share prices of oil and gas producers following the announcement of the agreement – or at least following the first indication that such an agreement would be reached. If the agreement really signalled a switch away from oil and gas based economy, we could expect to see a significant fall in these share prices. What we actually saw was a fall of only some 3.6%. See the chart below:

oil and gas index

Oil and Gas Producer’s index (NMX0530)

Under capitalism bad news tends to hit unexpectedly[1] – or at least it comes as a surprise to the Nobel Prize winning economists and bank regulators who provide capitalism’s high priesthood. Under capitalism when problems are clearly predictable, they are, however, discounted at the so called “cost of capital”. This is the long run average return investors expect to rake in and is estimated by the priesthood to be about 5% per annum before inflation. Thus a cost, or loss of profits, occurring in 20 years time would be currently valued by markets at only 38% [2]of the eventual cost in real (i.e. inflation adjusted) terms. Thus it could be argued that the observed 3.6% drop in share prices actually represents around a 10% drop in profits in 20 years time. But a fall in oil companies’ profits of only 10% by 2035 is hardly consistent with a target ceiling for global warming of 1.5 degrees centigrade and a new goal of net zero CO2 emissions by the second half of this century.

Conclusion: stock markets think capitalism is incapable of delivering the Paris Agreement. So do I. We need to replace capitalism.

Happy Christmas, everyone!

 

[1] In the past such crises tended to happen every fifteen years or twenty years, but the dot.com bubble bust in 2000 followed by the bank bust in 2007 suggests that such crises are now occurring more frequently.

[2] 1.05-20 = 0.38

Agreement in Paris!

The agreement reached in Paris yesterday at the UN Convention on Climate Change (COP 21 See attached,) is to be welcomed. Recognition of a new target ceiling for global warming of 1.5 degrees centigrade and a new goal of net zero emissions by the second half of this century are both highly desirable. The first test of whether this agreement is to be taken seriously will be how stock markets respond when they open on Monday. If the share prices of oil, gas and coal companies fall substantially and stay down, this first test will be passed. We shall see.

It would be foolish to celebrate COP 21 and abandon all scepticism when the USA has yet to ratify the Kyoto Agreement and when our own government has been cutting green subsidies and is seeking to overcome environmental objections to a third runway at Heathrow (or the no less serious environmental objections to Gatwick expansion). Furthermore, there are no sanctions on governments who fail to deliver their obligations under COP 21. This is in sharp contrast to TTIP under which businesses will be able to prosecute governments who stand in their way of their profit making by taking into account environmental considerations. Can a government willing to sign up to TTIP be trusted to deliver under COP 21 when the latter has no sanctions?

A low carbon future is attainable, but whether it can be delivered without dismantling capitalism first is quite another matter.

Looking for a Good Day to Publish Bad News

While attention has been focused on British bombers on runways in Cyprus waiting to take off and bomb Syria and on the premature attempt to launch Bomber Benn’s campaign to become Labour Leader – unlike the actual bombers, it stalled on the runway following the Oldham West and Royton by election – another runway event has gone extraordinarily quiet. This is the announcement of the government’s decision on the third London runway. Presumably the government has concluded that announcing such an environmental catastrophe while the UN Climate Change Conference in Paris is still meeting would be hard sell even with the capitalist press and the BBC in their pocket. We must presumably await another headline grabbing distraction before the government will announce its decision.

Another environmental catastrophe continues, however, to simmer away without attracting any attention at all – except, that is, in the small circulation literary magazine, Granta. In the current edition, Number 133, entitled What Have We Done, there is a splendid article by Fred Pearce on Sellafield. Splendid? Perhaps I mean ‘terrifying’. Fred Pearce is an environment consultant and former editor of New Scientist. In the article he recounts the history of Sellafield, formerly Windscale, and describes what Sellafield’s managers call its ‘legacy’ problem – the lamentable history of management failures that created and continues to create a backlog of radioactive waste and allows it to accumulate in unsafe conditions. This waste will be around on a geological timescale, i.e. for longer than human social and organisational structures have so far existed. Its accumulation under a care and maintenance regime is inconsistent with the fragility of the capitalist system that created it.

Sellafield currently has 240 radioactive buildings awaiting decommissioning, including the pile that caught fire almost 60 years ago – an event that was largely hushed up at the time. This pile comprising the core and an estimated fifteen tons of buckled uranium fuel has been left alone lest it catches fire again or even explodes. Yet, according to the Nuclear Decommissioning Authority, there are four other silos at Sellafield considered to be in even more urgent need of being ’made safe’. This should have been done decades ago but these radioactive dumps were abandoned and now represent, in Fred Pearce’s words, “the dark hearts of Sellafield, the radioactive reminders of past follies”. The tragedy is that we were not forced into these follies by the need to reduce consumption of fossil fuel – something we may, arguably, have to face up to in future. The primary motive was the UK’s nuclear weapons programme. And so the folly continues.

Hilary Benn Speech on Syria

Hilary Benn has come in for justifiable criticism for his shameful, pompous and historically illiterate attempt to use the International Brigade’s fight against fascism in the Spanish Civil War to justify bombing Syria during his intervention in the Commons debate on Wednesday. Let’s be clear. By doing this he was supporting an imperialist agenda designed to topple the legitimate Government of a sovereign nation. Readers may recall that Harold Wilson commented acidly of his father, Tony Benn, that he “immatured with age”, as he moved steadily to the left through his political life. If only the same could be said of Hilary!

Chris Guiton