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Just as we are trying to get to grips with whether the Liberal Conspiracy is actually Liberal, so now we have Dave the Chameleon saying the the Conservatives and the Co-operative Movement have always been natural bed-buddies:

The co-op movement has generally been associated with the political left. I think that's a shame. First, because there have always been people on the centre-right concerned about the effects of capitalism on the social fabric. Men like Carlyle and Disraeli, following the tradition of Edmund Burke and Adam Smith himself, who recognised at the outset of the industrial revolution that profit was not the only organising principle of a healthy society. And second, because the co-operative principle reflects an important part of the vision of social progress that we on the centre-right believe in: the role of strong independent institutions, run by and for local people. That's why Conservatives have always argued that free enterprise and the co-operative principle are partners, not adversaries.

It is true that, faced with an alternative between co-operative localism and central state organization, the Conservatives have occasionally championed the mutual. Notably in 1908 when the Old Age Pensions Act was passed the Conservatives tried to promote the use of Friendly Societies and Mutuals instead of a state pension system. And it may be that there have been well-meaning Tories worried about the "effects of capitalism on the social fabric". And yes, co-operatives operate in the same markets as capitalists often and compete, often successfully with them.

However, the International Co-operative Alliance provides the ground rules for bona fide co-operative enterprises. And the Co-operative Values they promote are indeed motherhood and apple pie stuff: "Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity."

But the Co-operative Principles, developed from this vision and building on the rules of the Rochdale Pioneers, set bona fide co-operatives at odds with the traditional capitalism that the Tory party has long championed. "Democratic Member Control" for example means that every member, regardless of their financial stake, has an equal say in the running of the business. Capitalism is based on the exact opposite - that he with the most shares has the greatest say.

"Voluntary Open Membership" was a challenge to the "Church and State" party - with many mutuals founded precisely because their non-conformist members were barred from services and facilities because of their religious associations.

The Co-operative Movement, at least in Britain, was basically founded to empower the lower classes against the Tory ruling class and its economic hold over them. Its principles can be and are used to democratise and devolve services from an overbearing state as with Cameron's regurgitation of the liberal Milton Friedman's idea for co-operative schooling. But it is an extra-ordinary claim that the principles of the Co-op Movement are compatible with the protectionist capitalism embodied in the Conservative party.

Dave incidentally perpetuated the popular story that the co-operative movement started in Rochdale - they codified the idea of course, but it was proto-socialist Robert Owen who opened the first co-op store for his workers in New Lanark, and, to take it to its logical origins, Gerrard Winstanley's Diggers in 1649 who set the scene for the long battle between co-operation and collectivism on the one hand and enclosure and privatisation of our common birthright on the other. I doubt the Conservative Co-operative Movement will be agitating any day soon for wholesale equitable redistribution of the common wealth.

Incidentally Guido - I believe you are quite wrong in this respect - a hedge fund partnership cannot by definition be a bona fide co-operative since one of the other obligations of a bona fide co-operaive is to promote and educate about the co-operative principles. The hedge fund exploits to the max the capitalist principles of shareholder power - might is right. I don't have a principled objection to hedge funds and private equity - they have their place in this broken world, but they cannot be counted as members of the co-operative movement by any stretch of the imagination.

In Icelandic banks refused extensions on loans, Tom Bawden reports that:

ICELAND’S three biggest banks had their finances called into question last night, after US institutions refused to extend some of their loans to the banks. A group of US insurers and mutual funds yesterday decided not to roll over $600 million of so-called short-term extendable notes they had made to Kaupthing, the icelandic bank.

Just a bank with a few cash flow problems you might say. Right. But there are some messages for all of us in this about how money is created and circulates and who holds real power in the world as a result. For example:

Richard Thomas, an analyst at Merrill Lynch, said: “We are seeing the classic signs of an overleveraged banking system and this has flashed a red alarm signal. The banks are extremely vulnerable and it is clear that the sentiment is shifting against them.”
Iceland’s biggest banks have grown so fast in the past three years that the loans they have made are now three times as great as their deposits, Mr Thomas said. A solid European bank would typically have a loan value of between one and 1½ times its deposits, he said.

Well, he would say that, wouldn't he. He wants to give the common impression that the banking system is balanced. We are always told that banks don't create money, they just move it around, balancing people with spare money with those in need of it to make investments. I hesitate to give anyone from the "great" Merrill Lynch a lesson in banking but he ought to know how banking started and how the system continues today to hide a massive fraud that affects every single one of us, indebted or not.

The original banks in the western financial system were goldsmiths. Our cash was in the form of precious metals, primarily gold and silver. But it's pretty inconvenient stuff. People wanted a way of spending what they had without having to lug around gold and silver. So the goldsmiths used to store the gold for their customers and give them a slip of paper (a bank note, if you will) that told someone they were going to trade with that they could collect the gold when they wanted from such and such a goldsmith.

The goldsmiths found that these bits of paper themselves were traded without anyone ever coming to redeem the notes for the underlying gold. So they worked out that they could make some money themselves on this by lending another customer the rights to the gold already in their coffers and charge them a little, interest, for doing so. But the notes were no different. You wouldn't know by accepting such a note in payment whether the person paying you had actually deposited any gold at the bank concerned or whether they were just borrowing the "right" to use it - from the goldsmith of course, not the person who actually had deposited the gold in the first place.

This system did occasionally get out of hand and runs on banks occurred when people thought that the bank concerned had "inflated" the amount of paper in circulation beyond what their gold deposits could really stand.

So, you might ask, how is this relevant today when Mr Thomas tells us that normally a bank will only lend one to one and a half times what it has in deposits? And moreover, our money is no longer backed with gold, or anything else. The fiver in your hand may say "I promise to pay the bearer on demand the sum of five pounds Sterling" but what would you expect to get if you demanded it? Gold? No. You'd get another fiver. Our monetary base is no longer based on gold but on the economic activity, the credit, of the nation and its citizens. That fiver is the "gold" of today. The entire basis of our money supply is just a quantity of paper worked out by the Bank of England.

On Mr Thomas's claim then, we know that just the mortgage sector of personal lending accounts for £974.6bn as of January 2006 (source, Credit Action). So all of that has real deposits backing it up does it? Far, far from it. How much "real cash" is there in the system? It turns out that there is just £43.5bn as of December 2005 (source Bank of England Statistical Release Dec 2005).

So, whilst Mr Thomas might rightly claim that banks' balance sheets do nearly balance (of course they should being BALANCE sheets), it's nearly all "money" they have themselves created in the commercial banking system that actually has no backing in hard cash.

So what, you may ask? Well, as we have been told for at least two decades now and known in the back of our minds for much longer, too much money creates inflation. So what are we doing allowing the banking system to take £44bn and turn it into the £1.5 trillion of debt that lubricates our ability to trade? That £44bn created by the Bank of England costs only the cost of production to create - the ink, the paper, the coin dies, the non-precious metal, the distribution costs. But think what it costs to borrow money. 5% ANNUALLY of the outstanding balance, and often far more - the unsecured personal lending outstanding of £193.2bn is mostly credit cards, and averages 15% ANNUALLY.

If you buy something from a firm that borrowed money to manufacture it, not only are you paying for the wages and materials and other "hard" inputs that went into creating it for you, but that firm also has to cover its borrowing costs. If you borrow to buy something now and pay later you have to earn that much more in coming years to pay it back, and often as not you're going to have to replace it before you finish paying for it!

So, it is the process of creating most of our money by the commercial banks and lending it out at interest that increases the money supply, causing inflation and making it necessary to chase economic growth to suck in more money in order to pay off the interest on the whole money supply.

Is there an answer? It hasn't always been this way has it? Well, no, it hasn't. In terms of the proportions of free money against interest bearing artificial money at least. In the sixties about 20% of our total money supply in the UK was created by the Bank of England, free of interest, against the credit of the nation and its citizens. Now it is less than 3%. The annual interest bill born by the citizens now in all forms exceeds the government's capital spending plans per year.

There's no need for any legislation. Just the political balls to start restricting the banks' ability to create new money through increased operational deposits (all that is left of the old "fractional reserve" system) and introduce appropriate amounts of new, interest free money, into the system, probably by capital investment in state provided supply side projects - schools, hospitals, transport networks and even "good causes". At the same time we could massively cut taxation and completely eliminate the national debt.

Whether you are an economist or not, I would urge you to go do some reading:

James Robertson and Joseph Huber's "Creating New Money" is available online from the New Economics Foundation.
Michael Rowbotham's "Grip of Death: A study of modern money, debt slavery and destructive economics" is a very readable primer, and
Bernard Lietaer's "The Future of Money" gives a more detailed look at the implementation of different solutions.
And if you don't believe me about how money is created and want to hear it from a real economist, John Kenneth Galbraith wrote a good book on the subject in which he debunks lots of the myths that economists and bankers continue to promulgate in order to confuse right-thinking people into believing that they do not perpetrate the most egregious fraud and counterfeit called "Money, Whence it Came, Where it Went"

And in the meantime, all this monetary revolutionary can hope is that for the sake of all of mankind, and the future of the planet in general, a reasonably well thought of, western, sophisticated economy can have a banking crisis that brings these issues more to the fore. Iceland has the wherewithal to deal with it I am sure. They could even create credit on the basis of the natural energy wealth they have bubbling up through their streets and hillsides.

The alternative is more unsustainable growth, more pain for indebted individuals unwittingly participating in the greatest fraud in history because it is literally the only way to survive in this screwed up monetary system. And continued unaccountable unrepresentative power going to the owners of the commercial banking system.

The Home Affairs Select Committee has apparently published a report suggesting that we may be wandering unaware into a Surveillance State. Just where have these people been for the last decade and more?

When I was on Oxford City Council we used to receive applications for new CCTV cameras and we were often cautious about permitting them. To be fair to the Greens on the council at the time it was usually they who made most noise about the civil liberties connotations (maybe they were on the wrong side of the "If you have nothing to hide" argument!).

I also tried to have put into the council's constitution a condition to make any surveillance under the Regulation of Investigatory Powers Act (the one that the newspapers are now braying that councils are using to snoop on dogs shitting not terrorist catching - for which it was never explicitly intended) subject to scrutiny and approval of elected councillors and not just officers, at whatever level.

Around the time the News of the Screws started campaigning for "Sarah's Law" in 2000 already there were academics implanting their daughters with chips to find out where they were all the time and already there were people, including me, questioning this as an invention that ought to be lost because of the implcations for civil liberties.

It is not just astonishing, but a dereliction of their duties in my opinion, that those who purport to represent and lead us at the highest level of government to have taken till summer of 2008 to come up with a similar suggestion, that we are sleepwalking into an all pervasive surveillance state. Absolutely amazing.

This need not be a case of shutting the stable door after the horse has bolted though. Much of the technology is, at least superficially, comforting, with its claims to be able to prevent crime or find our loved ones in trouble, and much of it has benign application as well as potential for abuse. More importantly it's not a good reason to get all neo-Luddite about technology.

Surveillance can and is used to protect public safety for instance that need not be able to identify individuals at all. You can monitor the flow of crowds, such as might have prevented the Hillborough disaster, through thermal imaging (indeed it's easier for a computer to pick up just body temperature hotspots in order to be able to enforce, say, a safe numerical capacity in a building or trace someone missing in an emergency, than it is for them to pick up visible light images with less contrast in the image).

Databases can and are used to enhance our experience of all sorts of services without being linked to any super database providing nefarious users access to all data anyone holds on a person. And modern communications can and are used to ensure timely delivery of information that will help us, even save our lives, without needing to be centralized.

Even tracking systems can and are used to help us find our way around, or even to help others find us if we are in trouble, without actually tracking our every move when we don't need them.

So why is it that when this technology is touched by the heavy hand of government it nearly always seems that it is being used against us?

Well first of course, Lord Acton's dictum applies. And information is power. Those who seek power over us, seek information by which to maintain that power. Because even with the best will in the world, they think they know best, and what's best of all is if they manage to stick around to implement it. There can be no other explanation for o'erleaping political ambition.

Second, they are easily corruptible in this search for power, whether it be over individuals or power over whole markets and systems - which "progressives" at least seem to feel they require in order to enable their interventionist policies of "robbery" and "redistribution". With nearly half of the nation's income to spend, government is a huge target for someone to sell their "stuff". If some of the comments about it are true, the Lib Dems, with their latest road pricing policy, on which more in another post , have fallen victim to this. Companies who invest in technology want to make money out of that technology. If they can use it to land a great big fat government contract they have hit the jackpot.

Third, I always reckon that the people who "integrate" the individual technologies of others, mostly morally neutral and benign, don't much care about the outcomes beyond their own "problem domain". They too are after making a bit of money by finding innovative ways of putting others' work to use. And that means being "first to market" with the ideas. Corners are cut. In the process of producing something useful first to get that sale, they don't have to think too much about consequences outside of their own field. They are only selling a database system. It's the uses it is put to or what it is mixed with, out of their control, that can make it intrusive or benign, and that is for the future to boot.

Now don't get me wrong. I am an optimist about most modern technology. Because of modern communications methods and the sharing of certain data, I do believe we are entering an epoch in which discovery of all sorts will be speeded up. Cures for diseases will be discovered in double time. Technology that will enable the poorest third of the world at last to access some of the benefits of the past couple of hundred years, or education, health care, industry and the growth of material wealth, even to ensure they have enough to eat. That our ability to communicate, and trade with, individuals and enterprises right around the planet has the ability to spread wealth and peace more widely than ever before. That it is about to unleash a truly "giant leap for mankind".

But that threatens government. It threatens those who, having attained power, need to justify their own existence, and expense accounts. But the good news is that the market, the producers and integrators of those technologies still have to make money. So they continue developing, and this is where our influence can come in. Our pressure, our reaction to their previous attempts, can shape the factors that will go into their next research. At some point, perhaps when they understand that the technology has only made a minute difference, opinion will swing against the untrammelled benefits of CCTV and the manufacturers will look for ways of delivering the benefits without the snooping.

And it's up to those of us with half an interest in the technology, amateur or professional, to think for ourselves and propose possible solutions that resolve the problems we ourselves have with the systems currently on offer. Those whose job it is to scrutinise and hold government to account cannot be trusted to do so if it has taken them all this time to state what has been bloody obvious to anyone with all synapses firing.

Most of all, it is government itself that is the problem. To roll back the surveillance state, we need to roll back the state itself. Never before have governments had so much power over us. Yet they continually fail to make the differences they promise at election time. It's time we woke up to this and stopped listening to their spin, excuses and lies and stopped putting our trust in them.

Good news from Oxford's Lib Dem group (at last some would say, but hey, it's only just two months since elections), who are manfully (in a non-gender-specific way of course) striving to clear up the big pile of number-twos that are the city's finances and operations after Labour's "ancien regime".

In their itsie-bitsie mini-budget 'Putting People First' they are going to spend just £84,000 (and fifty of that only in this year, non-recurring) on four little projects that will bring glad tidings of great joy to many people in the city - well, something like that anyway...

The Lord Mayor's Deposit Guarantee Scheme was established seven, maybe eight years ago now to give private landlords the confidence that in taking low income tenants (who nevertheless would not qualify for priority need for council provided temporary or permanent housing) they would not lose out from any mishaps that would normally be covered by a deposit bond. With 5,000 households on the housing register and around 1,000 in temporary accommodation Oxford's homelessness costs are enormous, and this has proved the only way for many (in my experience mainly young, hale and hearty, but on low incomes) to access very expensive private rented accommodation for which deposits are often into four figures that they would normally have to find up front.

When the Lib Dem-Green joint administration ended in 2002 I know we were looking at ways in which this fund itself could be insured against having to pay out for damage to landlords to protect it for longer and make the money go further, but it seems it has more recently been run down to nearly nothing, whether insured against or not, so this £50k will keep it going for a while yet and help a fair number of the most excluded households.

The next biggest chunk - some £23,000 - goes to making entry free at the Museum of Oxford - fulfilling a promise of Mr Blair's in 1997's elections if I recall correctly to open up access to the cultural delights of public museums and galleries that in Oxford at least his local acolytes have not found a way of doing so far. And Oxford's museum, despite its size, has a lot of history in it. I've been only once, with my young nieces, and they loved the stories of the Civil War and the growth of the University and C L Dodgson's Alice in Wonderland - okay, perhaps not quite as much as the old rocks in the University museum - but they both fancy themselves as scientists rather than artsy girls.

Having heard all sorts of stories recently about graduating students who, when asked by proud parents to show them this that or the other of Oxford, haven't got a clue, I reckon I should maybe try to make it a compulsory part of our introduction in halls of residence next year now - at least they'll know where they can send their parents to find out, while they and their fellow new graduates skulk in the Bear pub round the corner! It should in fact pay for itself anyway, now that there's a new cafe and so on that can generate a bit more income out of the entry-free visitors.

Thirdly, for just £8,000 a year, they're finally going to extend the "Shopmobility" scheme, that lets people with mobility problems book help and equipment like wheelchairs to help them get around the city centre, to Saturdays. Yes, for as long as anyone can remember the scheme has excluded people who need help to get into and about town on the most popular day of the week!

And finally for now (well - the Town Hall cupboards were not exactly crammed with used fivers on 6th May) some "bread and circuses". Lots of people have become disappointed, at what many have seen as a decline in the annual Lord Mayor's Parade and several other annual civic events. What used to be big pageants are reduced, often through "health and safety" issues, to an open topped bus, a brass band and some majorettes, or similar. The final £8,000 will boost support for some of these events, just a little, and ensure that they are a bit of free entertainment enjoyed certainly in previous years by a great number of local people.

So, just a little glimpse of what is to come from the Portfolio Holder for a Cheaper Oxford Better Finances and his friends. Of course they could all still go for a burton since the Lib Dems can be outvoted by the "constructive opposition" of Labour and the Greens acting together. But do they dare be so mean spirited as not to support four very good, if small, improvements for Oxford's residents? But then I would say that, wouldn't I!

Technorati Tags: lib dems, oxford, politics

Over at The 1909 Group website - I argue that the past few days have seen the final repeal of all that was good about the People's Budget of 1909. Liberals everywhere should be outraged.