Politicians are always looking to incentivise employment. The general means of accomplishing this is by either cutting taxes on high earners and corporations to encourage entrepreneurship or cutting benefits to get the unemployed off the dole and contributing to GDP and tax revenue. In the run up to today’s third budget of the coalition government Chancellor George Osborne claimed he was planning a “budget to reward work”, i.e. one which will benefit those already in employment and encourage the unemployed to get a job.
Now with the details of the next 12 months of government spending announced we can ask ourselves: to what do degree has he succeeded? There was some welcome news, such as raising the level at which someone in employment begins to pay income tax to £9,205 a year with the aim of raising it to £10,000 next year. Not only will this reduce the tax burden on those with the lowest incomes but all those in employment will pay less tax; the average basic rate tax payer will now be £305 a year better off. This may not sound like a lot but it will boost consumption and aid the economy. Another good idea was tax breaks for firms working in the fields of computer games, animation and high end television manufacture. These are important sectors to the UK economy where we have a competitive advantage and are vital to our growth.
However over the last year those in employment have had their prosperity dogged by the specter of inflation above the Bank of England’s target. Although inflation has fallen back in the last few months (currently the CPI is at 3.4%) higher inflation erodes the value of income made from working and reduces the incentive to enter work. Firms have tended to give lower than inflation pay rises recently so as inflation remains high and those in work are finding themselves worse off. Inflationary pressure is largely the result of rising fuel costs caused by the soaring price of oil and gas on the global market. A domestic fuel subsidy or measures to reduce transport costs could have reduced inflationary pressure and made the income from work more valuable. This, however, was never on the agenda.
Another consideration is where will the funds come from to pay for this tax reduction? Borrowing is projected to be £1bn lower than anticipated which has given the Chancellor room to maneuver. A certain amount of the slack will be taken up by the rise in stamp duty for properties over £2m and the proposed clamp down on tax avoidance. The majority of the additional revenue will be raised by an extra 37p per unit tax on cigarettes. It is worth remembering that taxes on commodities disproportionately affect low earners as they spend a higher proportion of their income on the taxed commodity. A tax break for lower earners could be a double edged sword for those who also smoke – which there is also a higher instance of among the poor.
The other main highlight of the budget was the reduction in the top income tax bracket - from 50p in the pound to 45p – aimed at encouraging entrepreneurship and investment from overseas. I have blogged about this before but investment will remain low and the rate of business start ups will be sluggish while GDP growth is lack luster. With growth in 2012 projected at a mere 0.7%, Osborne should consider a growth strategy if he wishes to stimulate investment and create a fertile environment for new businesses.
Job creation and a plan for boosting growth were not overtly stated in today’s budget. There was protection for some vital areas but others important growth sectors (such as renewable energy) were all but activity discouraged – mainly through the government’s continual commitment to non-renewable energy. Unemployment is projected to hit a peak this year at 8.7% and a clear plan for job creation is needed to protect the recovery. Unemployment and the low growth rate are the biggest problems the UK economy faces right now and the government should commit to a clear strategy for tackling these before it leads to endemic social problems. Such a plan would also send a clear signal to overseas investors and aspiring entrepreneurs that the UK is committed to economic prosperity above political goals.
Overall this is a budget lacking in ambition or a clear plan to boost the economy out of its current dire situation. There were no sweeping cuts, surprise new schemes or massive tax boondocks. Just a few tweaks to the system with the vague goal of stimulating growth and getting more people off benefits and into employment. If Osborne really wanted to create a budget that would reward work he would take measures to reduce inflation or help get more people into work. More employment and a better growth rate would benefit both those in and out of work as it would grow the economy overall. The Coalition maybe attempting to incentivise work but while the economy remains weak, their efforts will be unsuccessful.
Ramblings to the left
Wednesday, 21 March 2012
Monday, 19 March 2012
50p Tax: What’s going through the Torys’ heads?
It is no secret that the Tories want to abolish the 50p tax band. There are few points more fundamental to Tory ideology than the belief that taxing the wealthy is not only bad for the economy but also morally wrong. It runs to the heart of their belief in individual freedom, economic liberalism and personal responsibility. The most surprising fact about the rumoured plans to abolish the 50p tax rate in the forthcoming budget is that it has taken the Tories the better part of two years in government to consider acting.
This is partly due to their coalition partners. The Liberal Democrats oppose the removal of the tax without the instigation of another tax on the wealthy in its place. They would prefer the Mansion Tax they proposed in their 2010 manifesto – which is also vehemently opposed by grass roots Conservatives. If the Tories were to repeal the 50p tax rate without implementing the Mansion Tax (or something similar) it could derail the coalition’s remaining legislative agenda at a time where Lib Dem support is essential to pass the government’s welfare reforms.
The second reason why the Tories have waited until now to considering removing the tax is fiscal. The government’s argument that the nation’s coffers are in such a dire state that all must make sacrifices for the economic wellbeing of the country carries little weight if it emerges that there is room in the budget to cut a substantial revenue stream. The Conservatives would be on dodgy political ground if as soon as they entered government they cut the essential services lower income earners rely on (such as EMA) and introduced a tax which falls disproportionally on the poor (the VAT rise) whilst also passing a tax break for the highest earners.
Sound economics does also lie behind the decision to keep the 50p tax rate. To reduce government borrowing as quickly as possible, tax streams would have to be kept at the current level or raised – hence the rise in VAT. Income Tax is the largest proportion of the government’s income from taxation, and high earners pay the lion’s share of this income.
So why act now? Again there is an economic case to repeal the tax. Growth has been poor since the coalition came to power, and many think tanks and economists believe that repealing the 50p tax would stimulate consumption of consumer durables (predominantly purchased by high earners) and boost the economy. It would also go some way toward attracting investment from overseas - although investment will be limited whilst growth remains sluggish. The Tories’ re-election and deficit reduction programme depend on growth rising in the next few years, and cutting taxes on high earners is seen as a short cut to achieving this.
There is also pressure to repeal the tax from within the Tory Party. Cameron has a problem with his own right flank, who feel that too many Liberal Democrat policies are on the agenda, that the government has not played hard ball sufficiently with the EU, and that Cameron is not doing enough to protect the international standing of Britain as a great nation. These MPs are also concerned about their own re-election under the Tory banner, and are crying out for some traditional Tory reforms to take back to their constituencies. Cameron’s failure to support the back-benchers’ proposed EU membership referendum has created resentment within his own party, and he needs a bone to throw to them to ensure they keep supporting the continuation of the coalition.
The Tories do have to consider the strong case for keeping the higher tax rate. Firstly, it generates essential revenue at a time when growth is slow and tax receipts are lower accordingly. Another key point to consider is that those who stand to benefit from the repeal of the rate are the very wealthy, and studies have consistently shown that the wealthy save a higher proportion of their income, whereas those with lower incomes spend the majority of their income out of necessity. If the government’s plan is to boost consumption, then conventional logic suggests the amount of money that circulates around the economy should be raised, rather than the amount left inactive in bank accounts.
Aside from this, the government is faced with a moral responsibility that any government should have, which is to help the less fortunate, the vulnerable, and those who cannot look after themselves. This government is failing in that regard as its austerity programme is cutting the services needed most by those whom society is supposed to look out for. To reduce taxes paid by those most capable of providing for themselves at this time would be a failure on a moral level.
If Osborne wishes to abolish the 50p tax band in tomorrow's budget, then he must consider the political fall-out with his Lib Dem coalition partners as well as the wider economic implications. He must also bear in mind that the most obvious logic of cutting taxes to boost consumption does not always hold true. Whatever decision is reached, it will certainly be considered a test of the Tories’ claim that all sections of society must make sacrifices in order to tackle the budget deficit. The Conservatives certainly would love to abolish the top tax bracket; whether they are willing to spend the political capital needed to do so will be a question that can only be answered by Wednesday's budget.
This is partly due to their coalition partners. The Liberal Democrats oppose the removal of the tax without the instigation of another tax on the wealthy in its place. They would prefer the Mansion Tax they proposed in their 2010 manifesto – which is also vehemently opposed by grass roots Conservatives. If the Tories were to repeal the 50p tax rate without implementing the Mansion Tax (or something similar) it could derail the coalition’s remaining legislative agenda at a time where Lib Dem support is essential to pass the government’s welfare reforms.
The second reason why the Tories have waited until now to considering removing the tax is fiscal. The government’s argument that the nation’s coffers are in such a dire state that all must make sacrifices for the economic wellbeing of the country carries little weight if it emerges that there is room in the budget to cut a substantial revenue stream. The Conservatives would be on dodgy political ground if as soon as they entered government they cut the essential services lower income earners rely on (such as EMA) and introduced a tax which falls disproportionally on the poor (the VAT rise) whilst also passing a tax break for the highest earners.
Sound economics does also lie behind the decision to keep the 50p tax rate. To reduce government borrowing as quickly as possible, tax streams would have to be kept at the current level or raised – hence the rise in VAT. Income Tax is the largest proportion of the government’s income from taxation, and high earners pay the lion’s share of this income.
So why act now? Again there is an economic case to repeal the tax. Growth has been poor since the coalition came to power, and many think tanks and economists believe that repealing the 50p tax would stimulate consumption of consumer durables (predominantly purchased by high earners) and boost the economy. It would also go some way toward attracting investment from overseas - although investment will be limited whilst growth remains sluggish. The Tories’ re-election and deficit reduction programme depend on growth rising in the next few years, and cutting taxes on high earners is seen as a short cut to achieving this.
There is also pressure to repeal the tax from within the Tory Party. Cameron has a problem with his own right flank, who feel that too many Liberal Democrat policies are on the agenda, that the government has not played hard ball sufficiently with the EU, and that Cameron is not doing enough to protect the international standing of Britain as a great nation. These MPs are also concerned about their own re-election under the Tory banner, and are crying out for some traditional Tory reforms to take back to their constituencies. Cameron’s failure to support the back-benchers’ proposed EU membership referendum has created resentment within his own party, and he needs a bone to throw to them to ensure they keep supporting the continuation of the coalition.
The Tories do have to consider the strong case for keeping the higher tax rate. Firstly, it generates essential revenue at a time when growth is slow and tax receipts are lower accordingly. Another key point to consider is that those who stand to benefit from the repeal of the rate are the very wealthy, and studies have consistently shown that the wealthy save a higher proportion of their income, whereas those with lower incomes spend the majority of their income out of necessity. If the government’s plan is to boost consumption, then conventional logic suggests the amount of money that circulates around the economy should be raised, rather than the amount left inactive in bank accounts.
Aside from this, the government is faced with a moral responsibility that any government should have, which is to help the less fortunate, the vulnerable, and those who cannot look after themselves. This government is failing in that regard as its austerity programme is cutting the services needed most by those whom society is supposed to look out for. To reduce taxes paid by those most capable of providing for themselves at this time would be a failure on a moral level.
If Osborne wishes to abolish the 50p tax band in tomorrow's budget, then he must consider the political fall-out with his Lib Dem coalition partners as well as the wider economic implications. He must also bear in mind that the most obvious logic of cutting taxes to boost consumption does not always hold true. Whatever decision is reached, it will certainly be considered a test of the Tories’ claim that all sections of society must make sacrifices in order to tackle the budget deficit. The Conservatives certainly would love to abolish the top tax bracket; whether they are willing to spend the political capital needed to do so will be a question that can only be answered by Wednesday's budget.
Tuesday, 6 March 2012
Austerity economics: how we were misled
Hindsight is wonderful thing in economics. Knowing exactly what should have been done at certain cross road in history to avert catastrophe has been the subject of many books and PhD thesis. The Former US Defence Secretary Robert S. McNamara once said that “historians are not interested in counterfactuals. The what might have beens.” Economists certainly are. Economists use the data from lead indicators, current indicators and lag indicators to work out exactly what the state of the economy is and what would be the best course of action. Sometimes this is simple, growth is low interest rates are cut and households have more money. Thus aggregate demand is boosted and there is a spike in growth. Usually it is much more complicated than that and the data shows no clear path to be taken out of a crisis.
In the absence of knowing for certain what needs be done, politics often comes into play in making the decision. In other words, the debate becomes about what should be done. The root of all politics is philosophy. Governments decided on a philosophy of marketization or state intervention and from this their politics and the economics follows. By the time this reaches the public in the form of social pressures it often appears that the facts have been twisted to be in line with the philosophy.
With the benefit of hindsight we can see that the Thatcher government’s curtailing of union powers was philosophical and not economic. It stemmed from her government’s ideological commitment to neo-liberalism and not a genuine need to decrease union powers to make the economy more prosperous and therefore grow faster. At the time it was sold as such but now we can see how the economics flowed from the politics and that the politics had its root in her philosophical views.
It is no longer fashionable for parties to have a clear ideology but there is still philosophy at the root of their politics. Nearly two years into the coalition government, with the benefit of hindsight, we can start to see how the philosophy has guided the economics and where the mistakes were made.
Austerity is the economics of the coalition government. In the campaign there was also a commitment to opening public services to market competition but this has been less forthcoming, especially with the woes associated with NHS reforms. When George Osborne became Chancellor he offered us a simple economic parable, cut the state and the private sector will grow. Two years later with growth lacklustre at best, unemployment higher than it has been at any point under Labour and the country teetering on the brink of another recession this parable seems more like a fairy tale - or a coma fantasy. In years to come Osborne’s austerity program will be seen as a result of his philosophical commitment to neo-liberalism rather than a response to the economic necessity of cutting the budget deficit. This goes hand in hand with his proposals to open public services to competition from private firms. Right now the philosophy is still being sold as economics, but it is politicians who are driving the economics and their philosophy which drives them.
Sociology is applied economics and the social consequence of economics facts - such as rising number of the unemployed – are seen in urban decay and public order offences. Last August’s riots were in essence the application of economic factors to the population and as incomes continue to fall and more and more people are out of work social breakdown becomes more likely.
Social breakdown is also in evidence in Greece were rioting against the government’s austerity program has become a feature of daily life. The Greek coalition government is attempting to impose a gruelling program of public sector cuts in order to secure essential funds from the European Central Bank and the International Monetary Fund to prevent a default on their sovereign debt. However with the Greek economy entering its fifth consecutive year of recession and the most recent data indicating that this recession is depending and not improving, austerity does not seem like the best course of action. Couple this with evidence from the UK that our recovery has faltered since the beginning of our program of cuts and the case for austerity in Greece looks pretty week. Of course the pressure for austerity emanates from the ECB and IMF and their control of the bail out money. These bodies, the IMF especially, also have philosophical ties to neo-liberalism and use their status as the world’s creditor to pressure their own political agenda. Economic good comes behind a philosophical world view and social consequences to the ordinary Greeks comes last of all. Hence the neo-liberal agenda of the IMF and others leads to rioting on the streets of Athens.
Austerity was sold to the public as economics when in actual fact it is a philosophy; a philosophy which the data – the life blood of economics – does not support. Until economists can see the future, they will always need philosophy and politics to guide them. Yet philosophy and politics need be informed the data of economic reality and must consider the social consequences of their actions. Philosophy and Politics are essential to governance, as they are a vision to aim for and a direction to travel in. Even this blog, ostensibly an economics blog, frequently wonders into politics and philosophy.
Hindsight is useful for knowing exactly which economic policy should have been adopted at a cross roads - like the one Britain and the Euro face. Lacking hindsight in the present we must always be aware that sometimes when politicians are selling us economic necessity they are in fact selling us their philosophical desires.
In the absence of knowing for certain what needs be done, politics often comes into play in making the decision. In other words, the debate becomes about what should be done. The root of all politics is philosophy. Governments decided on a philosophy of marketization or state intervention and from this their politics and the economics follows. By the time this reaches the public in the form of social pressures it often appears that the facts have been twisted to be in line with the philosophy.
With the benefit of hindsight we can see that the Thatcher government’s curtailing of union powers was philosophical and not economic. It stemmed from her government’s ideological commitment to neo-liberalism and not a genuine need to decrease union powers to make the economy more prosperous and therefore grow faster. At the time it was sold as such but now we can see how the economics flowed from the politics and that the politics had its root in her philosophical views.
It is no longer fashionable for parties to have a clear ideology but there is still philosophy at the root of their politics. Nearly two years into the coalition government, with the benefit of hindsight, we can start to see how the philosophy has guided the economics and where the mistakes were made.
Austerity is the economics of the coalition government. In the campaign there was also a commitment to opening public services to market competition but this has been less forthcoming, especially with the woes associated with NHS reforms. When George Osborne became Chancellor he offered us a simple economic parable, cut the state and the private sector will grow. Two years later with growth lacklustre at best, unemployment higher than it has been at any point under Labour and the country teetering on the brink of another recession this parable seems more like a fairy tale - or a coma fantasy. In years to come Osborne’s austerity program will be seen as a result of his philosophical commitment to neo-liberalism rather than a response to the economic necessity of cutting the budget deficit. This goes hand in hand with his proposals to open public services to competition from private firms. Right now the philosophy is still being sold as economics, but it is politicians who are driving the economics and their philosophy which drives them.
Sociology is applied economics and the social consequence of economics facts - such as rising number of the unemployed – are seen in urban decay and public order offences. Last August’s riots were in essence the application of economic factors to the population and as incomes continue to fall and more and more people are out of work social breakdown becomes more likely.
Social breakdown is also in evidence in Greece were rioting against the government’s austerity program has become a feature of daily life. The Greek coalition government is attempting to impose a gruelling program of public sector cuts in order to secure essential funds from the European Central Bank and the International Monetary Fund to prevent a default on their sovereign debt. However with the Greek economy entering its fifth consecutive year of recession and the most recent data indicating that this recession is depending and not improving, austerity does not seem like the best course of action. Couple this with evidence from the UK that our recovery has faltered since the beginning of our program of cuts and the case for austerity in Greece looks pretty week. Of course the pressure for austerity emanates from the ECB and IMF and their control of the bail out money. These bodies, the IMF especially, also have philosophical ties to neo-liberalism and use their status as the world’s creditor to pressure their own political agenda. Economic good comes behind a philosophical world view and social consequences to the ordinary Greeks comes last of all. Hence the neo-liberal agenda of the IMF and others leads to rioting on the streets of Athens.
Austerity was sold to the public as economics when in actual fact it is a philosophy; a philosophy which the data – the life blood of economics – does not support. Until economists can see the future, they will always need philosophy and politics to guide them. Yet philosophy and politics need be informed the data of economic reality and must consider the social consequences of their actions. Philosophy and Politics are essential to governance, as they are a vision to aim for and a direction to travel in. Even this blog, ostensibly an economics blog, frequently wonders into politics and philosophy.
Hindsight is useful for knowing exactly which economic policy should have been adopted at a cross roads - like the one Britain and the Euro face. Lacking hindsight in the present we must always be aware that sometimes when politicians are selling us economic necessity they are in fact selling us their philosophical desires.
Monday, 13 February 2012
The Rolls Royce Government: The case for big government protecting social values
What does the Continental European model of social democracy and a Rolls Royce have in common? We will return to this metaphor after some brief analysis.
Last week David Miliband wrote in the New Statesman that Labour should not be the party of the “big state” - this comes against a recent trend of criticism of large governments, which many politicians believe, are bad for the economy and unpopular with voters. Western governments are not without their legitimate criticism as anyone who has had to claim benefits or submit a planning application will be aware of. The marsh of bureaucracy which the public has to deal with when they want something from their government creates a feeling of disillusionment with the virtues of the public sector which turns voters away from any politician who claims that we need more government to solve societies’ problems. The slick efficiency of the tills at Tesco stand in sharp contrast to the long periods of standing around waiting at the Job Centre. It is no wonder politicians who favour the selling of public services to private companies find voters agreeing with them at all levels of society.
The scepticism directed towards big government is partly a result of real fear caused by the European Sovereign Debt Crisis but it is also a definite effort to shift the agenda towards a free-market small government approach by those with vested interest in this opinion. This being large companies and right leaning governments keen to drum up support for their ideologically motivated austerity programs. Miliband argues that it was faith in big government which caused the Labour party to lose the public’s trust over the economy. He is pandering to the view that Labour is the party of the “nanny state” and that the Conservatives are the party of individual freedom.
I personally, have never had a problem with the label nanny state. When you think about it, who is a nanny? A warm and comforting figure that looks after children when they are cannot look after themselves. I cannot think of a better role model for government. However western voters are opposed to oppressive, overbearing regimes which meddle in the daily lives of their citizens. The fear behind this is also legitimate, only a fool in the West would want to live under a Cold War Communist regime. However, in the left learning parties of Europe’s desperate attempts to escape the spectre of being labelled a Marxist-Leninist, some of what was truly important about socialism has been washed away in the bland acceptance of the free market.
What is important about socialism is not a commitment to the big state but to a set of underlying principles that society should be directed towards income equality, the removal of class divides causes by wealth inequality, an equality of opportunity for all citizens as a birth right and safety net for those who are unable (temporally or permanently) to provide for themselves and their families. Self-reliance should not be the governing rule of society and the collective should look out for the individual. In exchange for this the individual must be willing to make a sacrifice for the good of the collective in terms of personal wealth and some degree of personal freedom. The social democratic parties of European - some of which are differentiated from the socialist parties of Europe and some of which are not – maintain the commitment to these values on a social level but not an economic one. In place of the economic proportion of socialism there is a general acceptance of the virtues of free market capitalism as the best method to allocate societies’ scarce resources.
David Miliband and the Brown Government embodied this notion of a commitment to social justice along with a commitment to small state free market capitalism. The coalition government has continued the shift towards right wing economic principles by further reducing the state at the expense of any commitment to the values of stated above. Miliband’s insistance that Labour move beyond the big state verses small state argument may win him support with voters but will do little to reassure those who believe that Labour has lost touch with the key values at the root of socialism from which the party draws its ideology.
I submit that a rebranding of the virtues of big government is needed by social democrats if they are to distinguish themselves from the economically right leaning parties and reconnect with the values at the root of their past popularity. This rebranding should be focused on the core values stated above. There are many who are concerned about the growing divide between the rich and the poor and how unevenly wealth is distributed across society. This is also where Rolls Royce comes in.
The typical criticism of big government by the right is three fold: 1, that state involvement in the market causes a problems for industry, 2, that that it requires higher taxation and 3, the old nanny state argument. I will take each point in turn:
Firstly, I have already written on the need for Capital Conscious Socialism. I have said that government should always be mindful of the needs of private business to provide employment when intervening in the economy. It is also worth considering that state invention is often necessary to make sure that industry allocates societies’ scare resources so that they create the most social good not economic good. An example of this is medicine, which should be allocated where it benefits society by curing diseases rather than where it is most profitable.
Secondly, the cost is key to the value of large Government. We should think of Government like a car. If we opt for the cheap option (economically right wing with low taxation and spending) then we will receive a cheap government, one which is ineffectual at meeting our needs and protecting our values. If we opt for the Rolls Royce government, which is expensive but capable then we will have a government that is empowered to tackle social problems and is something to be proud off. Spending more on our government should be viewed the same as buying a luxury car. That the price tag is part of the appeal because only with an expensive product can we achieve satisfaction from our spending.
Thirdly, social democrats should remind the public that it is their government’s duty to look after them and not simply get out of the way of private businesses. It is the role of government to embody the values of altruistic medieval kings. To clothe the naked, feed the poor, provide shelter for the homeless. Those who have the least are the most vulnerable to the problems created by wealth inequality and the basic safety net provided by the state ensure that the needs of the very worst off are not forgotten. The state may intervene in our lives to protect us from letting the selfishness - which the free market uses to drive economic growth - from entering our social conscience and thus kicking aside the poor, the vulnerable and the politically weak.
The values at the heart of socialism and big government will resonate with voters once framed within the right context. The argument of big state verses small state is not the right context. The argument of Rolls Royce against a budget banger is the right context. It is important that social democrats across Europe defend these values less society become deeply divided between rich and poor. The core values behind socialism are important in building a fairer society and there is still merit to the argument that big government can help to achieve this.
Ed Miliband would do wise to bare this in mind during his review of Labour’s policies - rather than listening to the supposed wisdom of his older brother. Many on the left hope the results of the policy review will bring the Labour party out of inertia and back into the business of providing a genuine alternative to the methods of the coalition government. Until that time we should remember that we get back from our government what we put in. If we give it scepticism and starve it of funds it will be ineffective at protecting our core values. If we view government spending as an important step to having a fairer society then we can empower government to tackle the root causes of social ills.
Last week David Miliband wrote in the New Statesman that Labour should not be the party of the “big state” - this comes against a recent trend of criticism of large governments, which many politicians believe, are bad for the economy and unpopular with voters. Western governments are not without their legitimate criticism as anyone who has had to claim benefits or submit a planning application will be aware of. The marsh of bureaucracy which the public has to deal with when they want something from their government creates a feeling of disillusionment with the virtues of the public sector which turns voters away from any politician who claims that we need more government to solve societies’ problems. The slick efficiency of the tills at Tesco stand in sharp contrast to the long periods of standing around waiting at the Job Centre. It is no wonder politicians who favour the selling of public services to private companies find voters agreeing with them at all levels of society.
The scepticism directed towards big government is partly a result of real fear caused by the European Sovereign Debt Crisis but it is also a definite effort to shift the agenda towards a free-market small government approach by those with vested interest in this opinion. This being large companies and right leaning governments keen to drum up support for their ideologically motivated austerity programs. Miliband argues that it was faith in big government which caused the Labour party to lose the public’s trust over the economy. He is pandering to the view that Labour is the party of the “nanny state” and that the Conservatives are the party of individual freedom.
I personally, have never had a problem with the label nanny state. When you think about it, who is a nanny? A warm and comforting figure that looks after children when they are cannot look after themselves. I cannot think of a better role model for government. However western voters are opposed to oppressive, overbearing regimes which meddle in the daily lives of their citizens. The fear behind this is also legitimate, only a fool in the West would want to live under a Cold War Communist regime. However, in the left learning parties of Europe’s desperate attempts to escape the spectre of being labelled a Marxist-Leninist, some of what was truly important about socialism has been washed away in the bland acceptance of the free market.
What is important about socialism is not a commitment to the big state but to a set of underlying principles that society should be directed towards income equality, the removal of class divides causes by wealth inequality, an equality of opportunity for all citizens as a birth right and safety net for those who are unable (temporally or permanently) to provide for themselves and their families. Self-reliance should not be the governing rule of society and the collective should look out for the individual. In exchange for this the individual must be willing to make a sacrifice for the good of the collective in terms of personal wealth and some degree of personal freedom. The social democratic parties of European - some of which are differentiated from the socialist parties of Europe and some of which are not – maintain the commitment to these values on a social level but not an economic one. In place of the economic proportion of socialism there is a general acceptance of the virtues of free market capitalism as the best method to allocate societies’ scarce resources.
David Miliband and the Brown Government embodied this notion of a commitment to social justice along with a commitment to small state free market capitalism. The coalition government has continued the shift towards right wing economic principles by further reducing the state at the expense of any commitment to the values of stated above. Miliband’s insistance that Labour move beyond the big state verses small state argument may win him support with voters but will do little to reassure those who believe that Labour has lost touch with the key values at the root of socialism from which the party draws its ideology.
I submit that a rebranding of the virtues of big government is needed by social democrats if they are to distinguish themselves from the economically right leaning parties and reconnect with the values at the root of their past popularity. This rebranding should be focused on the core values stated above. There are many who are concerned about the growing divide between the rich and the poor and how unevenly wealth is distributed across society. This is also where Rolls Royce comes in.
The typical criticism of big government by the right is three fold: 1, that state involvement in the market causes a problems for industry, 2, that that it requires higher taxation and 3, the old nanny state argument. I will take each point in turn:
Firstly, I have already written on the need for Capital Conscious Socialism. I have said that government should always be mindful of the needs of private business to provide employment when intervening in the economy. It is also worth considering that state invention is often necessary to make sure that industry allocates societies’ scare resources so that they create the most social good not economic good. An example of this is medicine, which should be allocated where it benefits society by curing diseases rather than where it is most profitable.
Secondly, the cost is key to the value of large Government. We should think of Government like a car. If we opt for the cheap option (economically right wing with low taxation and spending) then we will receive a cheap government, one which is ineffectual at meeting our needs and protecting our values. If we opt for the Rolls Royce government, which is expensive but capable then we will have a government that is empowered to tackle social problems and is something to be proud off. Spending more on our government should be viewed the same as buying a luxury car. That the price tag is part of the appeal because only with an expensive product can we achieve satisfaction from our spending.
Thirdly, social democrats should remind the public that it is their government’s duty to look after them and not simply get out of the way of private businesses. It is the role of government to embody the values of altruistic medieval kings. To clothe the naked, feed the poor, provide shelter for the homeless. Those who have the least are the most vulnerable to the problems created by wealth inequality and the basic safety net provided by the state ensure that the needs of the very worst off are not forgotten. The state may intervene in our lives to protect us from letting the selfishness - which the free market uses to drive economic growth - from entering our social conscience and thus kicking aside the poor, the vulnerable and the politically weak.
The values at the heart of socialism and big government will resonate with voters once framed within the right context. The argument of big state verses small state is not the right context. The argument of Rolls Royce against a budget banger is the right context. It is important that social democrats across Europe defend these values less society become deeply divided between rich and poor. The core values behind socialism are important in building a fairer society and there is still merit to the argument that big government can help to achieve this.
Ed Miliband would do wise to bare this in mind during his review of Labour’s policies - rather than listening to the supposed wisdom of his older brother. Many on the left hope the results of the policy review will bring the Labour party out of inertia and back into the business of providing a genuine alternative to the methods of the coalition government. Until that time we should remember that we get back from our government what we put in. If we give it scepticism and starve it of funds it will be ineffective at protecting our core values. If we view government spending as an important step to having a fairer society then we can empower government to tackle the root causes of social ills.
Wednesday, 8 February 2012
Facebook’s IPO: Are those adds worth $100bn
In the eight years since Facebook first appeared online, the site has gone from a way to waste time to a social necessity. Today (especially for younger users) not having a Facebook account is akin to not having a mobile phone, in that you are likely to be left out of the loop by friends and work colleagues. Now the internet giant’s recent IPO suggests that this social necessity could be worth up $100bn as a company.
Facebook was founded in 2004 by Harvard University undergraduate Mark Zuckerberg, and since then has taken the internet by storm. First it became the world’s largest social network with over 800 million users. Then the site replaced Google in its position as the internet’s most visited site. Now Zuckerberg and his team have earned a new record after raising over $5bn from an initial public offering, the largest ever for an internet firm. More than just a commercial success, Facebook has added new terms to the popular lexicon such “to friend” and has redefined the use of the verb “to like” online. Brands large and small have rushed to establish fan pages on the website and entire real world conversations focus on events which took place in the entirely virtual social network.
What is interesting about Facebook’s petition to be partially floated on the Stock Exchange is that the information they have released has given us a rare glimpse at the numbers behind Facebook’s success. Facebook and other internet companies that offer a free service lack a traditional revenue stream upon which to draw. Most fall back on the tried and tested method of advertising. The value of an advertisement on a website is determined by the “click through rate” in other words the percentage of users who click on an advertisement to be taken away from the page which they were browsing to one which they had not intended to visit, prior to seeing the advert. Research has suggested that click through rates for most websites are very low as most users are resistant to the idea of following links online. This is partially due to a legitimate concern about internet security but also a response to the degree to which users are saturated with banners and links tempting (often unsubtly) users to leave behind what they were interested in the first place. This has prompted concerns that that this revenue model has become out dated and that many internet firms might be overvalued.
Facebook has relieved that a substantial amount of their $1bn annual net revenue comes from advertising, leading to speculation that intelligent internet advertising is having a degree of success in tempting users. Firms like Facebook use the personal information supplied to them to customise their advertising space to a user’s tastes, and thus boost the click through rate. This in turn makes advertising space on Facebook more valuable, not simply because of the larger audience but because of a greater degree of success. Try, for an experiment, changing your relationship status to “engaged” and witness the barrage of wedding goods and services that will come out of Facebook’s proverbial woodwork to tempt you to their pages. Often the advertising is more subtle than this, and usually it is from a trusted website. It is this clever use of Facebook’s greatest asset (its members’ data) which makes it a viable company.
However, all is not rosy in Zuckerberg’s world. Internet users are becoming increasingly aware about how their data is being used. The wealth of information which Facebook has built up is also a liability as the public demand restrictions on how this data is used. Facebook’s privacy settings are becoming increasingly complex, which is creating an incentive for uses to switch to a network that is more mindful of privacy.
For now Facebook retains its dominant market position, and the necessity of having an account means this situation is unlikely to change soon. The site has seen off competition from a variety of other social networks seeking to challenge its dominance, and even Google entering the fray with their Buzz and later Google+ services have had little effect on the state of the market.
Facebook should be applauded for changing the way we relate to one another. Upon meeting a new friend at a party it is easier (and seems less forward) to connect with said person via Facebook than to ask for a phone number – mainly because it is also easier to remember a name rather than an 11 digit number.
However, Facebook would do well to consider an alternative revenue model as users become more concerned about privacy. It is also worth considering that the click through rates of intelligent advertisements will eventually fall as users become tried of their saturation, just as we all became tired of banners atop websites in the early days of the popular internet.
This week Facebook’s founders and executives will be congratulating themselves after their IPO sets another record for the company – but if the site’s meteoric rise proves one thing, it is how quickly the internet can change and how complacency is severely punished. For further proof of this, simply ask anyone who still has a MySpace account.
Facebook was founded in 2004 by Harvard University undergraduate Mark Zuckerberg, and since then has taken the internet by storm. First it became the world’s largest social network with over 800 million users. Then the site replaced Google in its position as the internet’s most visited site. Now Zuckerberg and his team have earned a new record after raising over $5bn from an initial public offering, the largest ever for an internet firm. More than just a commercial success, Facebook has added new terms to the popular lexicon such “to friend” and has redefined the use of the verb “to like” online. Brands large and small have rushed to establish fan pages on the website and entire real world conversations focus on events which took place in the entirely virtual social network.
What is interesting about Facebook’s petition to be partially floated on the Stock Exchange is that the information they have released has given us a rare glimpse at the numbers behind Facebook’s success. Facebook and other internet companies that offer a free service lack a traditional revenue stream upon which to draw. Most fall back on the tried and tested method of advertising. The value of an advertisement on a website is determined by the “click through rate” in other words the percentage of users who click on an advertisement to be taken away from the page which they were browsing to one which they had not intended to visit, prior to seeing the advert. Research has suggested that click through rates for most websites are very low as most users are resistant to the idea of following links online. This is partially due to a legitimate concern about internet security but also a response to the degree to which users are saturated with banners and links tempting (often unsubtly) users to leave behind what they were interested in the first place. This has prompted concerns that that this revenue model has become out dated and that many internet firms might be overvalued.
Facebook has relieved that a substantial amount of their $1bn annual net revenue comes from advertising, leading to speculation that intelligent internet advertising is having a degree of success in tempting users. Firms like Facebook use the personal information supplied to them to customise their advertising space to a user’s tastes, and thus boost the click through rate. This in turn makes advertising space on Facebook more valuable, not simply because of the larger audience but because of a greater degree of success. Try, for an experiment, changing your relationship status to “engaged” and witness the barrage of wedding goods and services that will come out of Facebook’s proverbial woodwork to tempt you to their pages. Often the advertising is more subtle than this, and usually it is from a trusted website. It is this clever use of Facebook’s greatest asset (its members’ data) which makes it a viable company.
However, all is not rosy in Zuckerberg’s world. Internet users are becoming increasingly aware about how their data is being used. The wealth of information which Facebook has built up is also a liability as the public demand restrictions on how this data is used. Facebook’s privacy settings are becoming increasingly complex, which is creating an incentive for uses to switch to a network that is more mindful of privacy.
For now Facebook retains its dominant market position, and the necessity of having an account means this situation is unlikely to change soon. The site has seen off competition from a variety of other social networks seeking to challenge its dominance, and even Google entering the fray with their Buzz and later Google+ services have had little effect on the state of the market.
Facebook should be applauded for changing the way we relate to one another. Upon meeting a new friend at a party it is easier (and seems less forward) to connect with said person via Facebook than to ask for a phone number – mainly because it is also easier to remember a name rather than an 11 digit number.
However, Facebook would do well to consider an alternative revenue model as users become more concerned about privacy. It is also worth considering that the click through rates of intelligent advertisements will eventually fall as users become tried of their saturation, just as we all became tired of banners atop websites in the early days of the popular internet.
This week Facebook’s founders and executives will be congratulating themselves after their IPO sets another record for the company – but if the site’s meteoric rise proves one thing, it is how quickly the internet can change and how complacency is severely punished. For further proof of this, simply ask anyone who still has a MySpace account.
Sunday, 29 January 2012
Capital Conscious Socialism
The state intervention versus free market argument has been raging for a while. It is an old debate about whether a large public sector chokes economic growth or whether there are issues of such importance that they should be decided by government and not left to private businesses. In the UK the three main political parties have adopted a lassie fair free market approach to capitalism but recently they have all been discussing the idea of ‘socially conscious capitalism’.
This is partly in response to the gross excesses of the financial services sector which lead to the several of the world’s largest banks having to be bailed out by their respective governments. Many feel that the banks owe us a debt for this beyond the amount of money spent propping them up. A lot of voters believe that there needs to be a change in corporate culture so that large companies become more aware of their debts to society and to their shareholders. Socially conscious capitalism appears to be the method of achieving this
Socially conscious capitalism takes many forms but in general it entails giving shareholders more power to set board room pay and bonuses, the curtailing of bonuses for underperforming firms and greater transparency in terms of pay and bonuses for top earners. There are also general murmurs about working conditions and pay for those at the bottom of the pay scale but these are less and frequently ignored. Generally the later issues effects supermarkets more than banks as they have more employees earning minimum wage but a macro level it scales but to rising concern about business practices and noises from politicians that firms should be respectful of their stake in society.
David Cameron and the coalition government maybe in favour of socially conscious capitalism but I feel there is still a case for ‘capital conscious socialism’. This in essence is the case for government intervening in the market to prevent excesses, rather than encouraging companies to voluntarily behave in a socially responsible manner. Whilst the government is doing this it must remember that the private sector employees the majority of the people in the UK and is responsible for the lion’s share of our GDP. Therefore any inventions or legislation must also be in the interest of protecting jobs and growth.
In essence moral standards should be left to the government to enforce (who is accountable to their citizens) and private business should be responsible for providing employment and wealth to the citizens. This is similar to the means by which the government enforces safety standards. Would car companies have voluntarily agreed to seat belts and air bags were these measures not legally binding? The thought of simply encouraging car companies to include safety features or suggesting that the makers of house hold cleaning products put warnings on the packaging seems painfully week. Surely laws are the only way to protect the public and to ensure that we have the necessary information to look after ourselves. Implying that firms should be aware of their social obligations will have little success as firms are not compelled to alter their behaviour and there is no incentive for them to do so.
State invention is a harsh phrase that echoes back to the days of lumbering nationalised industries. I prefer to the use term ‘government planning’ to describe what is needed. The government should use its ability to legislate industry to plan our national finances to prevent economic collapse. This works on a micro scale, business and families plan their finances and set necessary controls to make sure they do not suffer financial ruin. However, the government’s planning of the economy must always be mindful that private business must thrive if we are to achieve a low level of unemployment.
A good example of government planning the economy is the proposed Tobin or Robin Hood tax; a small tax on finical transactions (that firms will not impose on themselves) the proceeds of which can be used to bail out companies that get into trouble and not leaving the bill to the tax player. The tax must be expectedly levied with the consultation of firms so not to cause harm to firms - which would restrict the amount of revenue generated by the tax.
Planning the roles of supermarkets in our economy would also offer a better social outcome. Supermarkets employee many poor and unskilled workers and offer a minimum wages which is far below what is needed to raise a family on. Reminding a supermarket that it has an obligation to consider wider society and the poor will do little or nothing to raise the wages and improve the working conditions of those at the bottom of the social pyramid. Government planning is needed to legislation a living wage that will ensure that families have enough money to afford essential. I do not see any provision or this in the coalition’s plan for socially conscious capitalism.
Placing the maintenance of society in the hands of private companies will not lead to optimisation of social goods. Socially conscious capitalism will not compel firms to be respectful of their stake in society. Capital conscious socialism will give government the mandate to intervene to the benefit of all whilst protecting private enterprise and our jobs.
This is partly in response to the gross excesses of the financial services sector which lead to the several of the world’s largest banks having to be bailed out by their respective governments. Many feel that the banks owe us a debt for this beyond the amount of money spent propping them up. A lot of voters believe that there needs to be a change in corporate culture so that large companies become more aware of their debts to society and to their shareholders. Socially conscious capitalism appears to be the method of achieving this
Socially conscious capitalism takes many forms but in general it entails giving shareholders more power to set board room pay and bonuses, the curtailing of bonuses for underperforming firms and greater transparency in terms of pay and bonuses for top earners. There are also general murmurs about working conditions and pay for those at the bottom of the pay scale but these are less and frequently ignored. Generally the later issues effects supermarkets more than banks as they have more employees earning minimum wage but a macro level it scales but to rising concern about business practices and noises from politicians that firms should be respectful of their stake in society.
David Cameron and the coalition government maybe in favour of socially conscious capitalism but I feel there is still a case for ‘capital conscious socialism’. This in essence is the case for government intervening in the market to prevent excesses, rather than encouraging companies to voluntarily behave in a socially responsible manner. Whilst the government is doing this it must remember that the private sector employees the majority of the people in the UK and is responsible for the lion’s share of our GDP. Therefore any inventions or legislation must also be in the interest of protecting jobs and growth.
In essence moral standards should be left to the government to enforce (who is accountable to their citizens) and private business should be responsible for providing employment and wealth to the citizens. This is similar to the means by which the government enforces safety standards. Would car companies have voluntarily agreed to seat belts and air bags were these measures not legally binding? The thought of simply encouraging car companies to include safety features or suggesting that the makers of house hold cleaning products put warnings on the packaging seems painfully week. Surely laws are the only way to protect the public and to ensure that we have the necessary information to look after ourselves. Implying that firms should be aware of their social obligations will have little success as firms are not compelled to alter their behaviour and there is no incentive for them to do so.
State invention is a harsh phrase that echoes back to the days of lumbering nationalised industries. I prefer to the use term ‘government planning’ to describe what is needed. The government should use its ability to legislate industry to plan our national finances to prevent economic collapse. This works on a micro scale, business and families plan their finances and set necessary controls to make sure they do not suffer financial ruin. However, the government’s planning of the economy must always be mindful that private business must thrive if we are to achieve a low level of unemployment.
A good example of government planning the economy is the proposed Tobin or Robin Hood tax; a small tax on finical transactions (that firms will not impose on themselves) the proceeds of which can be used to bail out companies that get into trouble and not leaving the bill to the tax player. The tax must be expectedly levied with the consultation of firms so not to cause harm to firms - which would restrict the amount of revenue generated by the tax.
Planning the roles of supermarkets in our economy would also offer a better social outcome. Supermarkets employee many poor and unskilled workers and offer a minimum wages which is far below what is needed to raise a family on. Reminding a supermarket that it has an obligation to consider wider society and the poor will do little or nothing to raise the wages and improve the working conditions of those at the bottom of the social pyramid. Government planning is needed to legislation a living wage that will ensure that families have enough money to afford essential. I do not see any provision or this in the coalition’s plan for socially conscious capitalism.
Placing the maintenance of society in the hands of private companies will not lead to optimisation of social goods. Socially conscious capitalism will not compel firms to be respectful of their stake in society. Capital conscious socialism will give government the mandate to intervene to the benefit of all whilst protecting private enterprise and our jobs.
Thursday, 19 January 2012
Internships and Wealth Inequality
Internships have long been blamed as a means by which wealth remains concentrated amongst the upper classes. Most of the positions available at some of the UK’s largest and most prestigious firms to young people starting out on their careers are unpaid or come with a bare minimum of transport fees reimbursed. For young people looking to gain the vital experience necessary to secure a job, an additional source of income is needed to pay their cost of living during an internship which could last for several months. Firms expect an intern to be present during normal office hours which rules out most forms of employment and the long hours and demanding timetables frequently placed on interns also makes evening employment difficult. Generally interns rely on what has become known as ‘the bank of mum and dad’ meaning that only the children who have parents wealthy enough to pay their way can afford to take up an internship.
To a firm, having an internship is not only a desirable characteristic in a prospective new recruit but is increasingly become essential. In a government survey, one third of British firms said they would only hire a new recruit who already worked for them. The most obvious illustration of class perpetuation through internships is an annual Conservative Party fund raiser to which Mayfair based capital and equity firms donate internships which are then bid for by part donors, the proceeds going to the party. At this event, those who can afford to spend several thousand pounds to secure their child an internship at a top finical firm (as well as paying their children’s living cost during the internship itself) spend their money to guarantee one of their children will have a well-paid career.
The incentive for parents who can afford this for their children is clear. Not only is it a good way to give your child an advantage over the competition in beginning their corporate career but by ensuring your child has a well-paid position, parents are preparing for the retirement by providing their children with financial success. The net effect of the recruiters relying on internships to vet candidates at the beginning of their careers is the concentration of wealth amongst the privileged class. Only the wealthy can afford to furnish their children with the internships that are necessary to secure well-paid jobs.
Recently Nick Clegg and the coalition government have announced plans for major companies to offer more starting positions to people from less well-off backgrounds and to offer payment or living expenses to interns while they are working. Although this is noble in intent it fails tackle the root of the social inequity caused by the internship system. It is impressive that Nick Clegg has managed to convince so many large companies to agree to a scheme which offers firms little more than a PR boost, but by making the proposals opt-in rather than legally binding there is no incentive for most firms to alter their behavior at all. An outright ban on internships would force firms to at least offer minimum wage to those gaining work experience which would go some way towards leveling the cost barriers to most young people taking up internships.
The plans are welcome news to those with an eye on becoming a senior corporate executive but hint at a fundamental flaw in the collation government’s approach the issue of wealth inequality; in that they expect private business to tackle the issue with government only very gently prodding the companies in the directing of socially conscious capitalism. Making internships more accessible to those who dream of vast corporate wealth is one thing but the issue at the heart of capitalism is the fact that regardless of how level you make the playing field, the majority of people will end up owning a small percentage of the wealth mean while a few people will own the majority. The question is what can be done about this and the answer the government suggests is ‘nothing’.
Reforming the internship mechanism may make it easier for those from poor backgrounds to get internships but will do almost nothing to tackle wealth inequity. It will also have a negligible effect on social mobility as there will remain a finite number of internships and even smaller number of people who reach the higher echelons of the corporate hierarchy. The people at the top of pyramid may vary slightly but this does nothing to comfort those at the base or those who question the virtues of a pyramid structure.
Hinting to large companies that they should be more socially aware will not solve the problems of a widening gap between the rich and the poor. Most of the coalition government’s austerity program is cutting the services that the poorest members of society depend upon. The government needs to do more to tackle wealth inequality rather than smoothing off the edges or implying that large firms should be readdressing the wealth balance themselves.
To a firm, having an internship is not only a desirable characteristic in a prospective new recruit but is increasingly become essential. In a government survey, one third of British firms said they would only hire a new recruit who already worked for them. The most obvious illustration of class perpetuation through internships is an annual Conservative Party fund raiser to which Mayfair based capital and equity firms donate internships which are then bid for by part donors, the proceeds going to the party. At this event, those who can afford to spend several thousand pounds to secure their child an internship at a top finical firm (as well as paying their children’s living cost during the internship itself) spend their money to guarantee one of their children will have a well-paid career.
The incentive for parents who can afford this for their children is clear. Not only is it a good way to give your child an advantage over the competition in beginning their corporate career but by ensuring your child has a well-paid position, parents are preparing for the retirement by providing their children with financial success. The net effect of the recruiters relying on internships to vet candidates at the beginning of their careers is the concentration of wealth amongst the privileged class. Only the wealthy can afford to furnish their children with the internships that are necessary to secure well-paid jobs.
Recently Nick Clegg and the coalition government have announced plans for major companies to offer more starting positions to people from less well-off backgrounds and to offer payment or living expenses to interns while they are working. Although this is noble in intent it fails tackle the root of the social inequity caused by the internship system. It is impressive that Nick Clegg has managed to convince so many large companies to agree to a scheme which offers firms little more than a PR boost, but by making the proposals opt-in rather than legally binding there is no incentive for most firms to alter their behavior at all. An outright ban on internships would force firms to at least offer minimum wage to those gaining work experience which would go some way towards leveling the cost barriers to most young people taking up internships.
The plans are welcome news to those with an eye on becoming a senior corporate executive but hint at a fundamental flaw in the collation government’s approach the issue of wealth inequality; in that they expect private business to tackle the issue with government only very gently prodding the companies in the directing of socially conscious capitalism. Making internships more accessible to those who dream of vast corporate wealth is one thing but the issue at the heart of capitalism is the fact that regardless of how level you make the playing field, the majority of people will end up owning a small percentage of the wealth mean while a few people will own the majority. The question is what can be done about this and the answer the government suggests is ‘nothing’.
Reforming the internship mechanism may make it easier for those from poor backgrounds to get internships but will do almost nothing to tackle wealth inequity. It will also have a negligible effect on social mobility as there will remain a finite number of internships and even smaller number of people who reach the higher echelons of the corporate hierarchy. The people at the top of pyramid may vary slightly but this does nothing to comfort those at the base or those who question the virtues of a pyramid structure.
Hinting to large companies that they should be more socially aware will not solve the problems of a widening gap between the rich and the poor. Most of the coalition government’s austerity program is cutting the services that the poorest members of society depend upon. The government needs to do more to tackle wealth inequality rather than smoothing off the edges or implying that large firms should be readdressing the wealth balance themselves.
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