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In Brief: Lying by omission, punishing ourselves, hot air

Lying by omission

Among the biggest failings of modern media is a growing inability to check a story.  In large part, this is simply because the modern multi-media landscape is so competitive that only a handful of media giants are able to employ sub-editors to check stories before they are published.  The result is that most of what we are fed as “news” is merely a re-hashing of corporate press releases designed to put a positive spin on the corporations behind them.  In these circumstances, it is incumbent on those media organisations which can still afford to employ journalists and sub-editors to at least do some basic checking before publishing a story.  But that’s not how the media environment is configured these days.

So it is that the once-trusted (and increasingly despised) propagandists at Pravda provide “the party line” rather than the news.  And the party line on matters economic here in the UK is that the only news must be good news.  So it is that Noor Nanji, who purports to be a “business reporter,” tells us that:

“Retail sales rose in August as customers ‘splurged on self-care’, new figures suggest.  Sales of non-food items had their best month since February, helped by higher spending on health and beauty…

“Taken as a whole, the value of retail sales increased by 4.1% in August, compared to a year earlier…”

To the casual reader, this sounds like some good economic news in what has otherwise been a difficult couple of years… except for that one word – value.  Since I am not a casual reader the word “value” appeared like a red flashing light (prompting me to write this critique).  Because if the value of sales had risen by four percent at a time when inflation is running at nearly seven percent, the real story was that people are buying less but paying more for it… something a publicly funded and supposedly impartial news outlet ought to have made clear at the start.

Nor can the folks at the BBC blame time pressure or staff shortages for merely parroting the British Retail Consortium’s press release, since it begins with this qualification:

“Sales figures are not adjusted for inflation. Given that both the August SPI (BRC) and July CPI (ONS) show inflation running at higher than normal levels, the rise in sales masked a likely drop in volumes once inflation is accounted for.”

It used to be that reputable news outlets would never publish on the basis of a single source.  On an economic story like this, a second source would be expected to be an economist or statistician who would have spotted and been able to correct the discrepancy between sales volumes and sales values.  And fair reporting would have put this in the second paragraph.  Instead, the BBC manages a slight corrective from Esme Harwood at Barclaycard, pointing to a 1.2 percent fall in credit and debit card spending in August… and even this is at the end of the story, where many readers will not have bothered looking.

One can understand why a broadcaster which relies increasingly on not upsetting the government to the point that it abolishes the license fee entirely, would not want to cast the economy in a negative light.  After all, its misreporting of petrol queues in September 2021 led to a nationwide fuel panic.  They probably wouldn’t want to be seen as the cause of a recession in 2023.  But this is only swapping short-term advantage for long-term trust, because the experience of the majority living in ex-industrial, rundown-seaside, and small-town rural Britain is a world away from the narrative that the BBC would have us believe.

Half-a-century ago, when the BBC was the most reliable of a tiny number of news outlets, they might have been able to get away with this (although, ironically, they would have run a thorough critique back then).  But in an age of mass multi-media, there are too many alternative sources – particularly those documenting British life beyond the gated communities where the salaried class – including BBC managers – have retreated.

In any case, the British economy is in dire straits, with stagflation looming.  UK retail has yet to recover from the battering it took during lockdown.  And with most people now making economies in the face of stubbornly high inflation, happy-clappy retail stories simply jar against most people’s lived experience.  Indeed, in a sense, August’s actually poor retail figures may well be as good as it gets, as some 1.4 million mortgages along with thousands of lockdown business loans have to be rolled over from an interest rate of 1.5 percent to more than 6 percent between now and next summer.  Indeed, if I was a gambler, I would put money on both retail volumes and retail values being down considerably by August 2024.

Punishing ourselves

Britain’s shit-spreading water companies are back in the news this week, as it turns out they have been quietly pumping shit onto our beaches just as holiday makers head for the coast to make the best of what has been an almost absent summer, despite the lack of heavy rainfall which is the usual justification for allowing shit to enter the storm drain system.

The news has been met with the usual round of pearl-clutching and something-must-be-done-ing from politicians, regulators and the salaried classes.  But the truth is that nothing will be done, because nobody has an incentive to do anything meaningful.  At best, the water companies will be fined, and the cost of paying the fines will be added onto customers’ bills.  And since water is what economists refer to as an “inelastic” commodity, boycotting is not an option.

The problem runs much deeper though, and is a design feature (not a bug) in the neoliberal quasi-market structure used to flog off the water infrastructure to the highest bidder back in 1989.  As with all of our critical infrastructure, regulators and newly privatised companies were set several not necessarily aligning objectives.  In the case of water, these included:

  • Improving and cleaning up the UK’s antiquated water and sewage infrastructure,
  • Conforming to EU environmental regulations on river and sea water cleanliness,
  • Building resilience to avoid a repeat of the 1976 drought,
  • Flood management,
  • Maintaining low prices for consumers,
  • Maximising profits to shareholders.

A quasi-independent regulator was required because each water company has a de-facto monopoly in the area where it operates.  A disgruntled Thames Water customer, for example, could not choose instead to purchase water from the publicly owned Scottish Water or the non-profit Welsh Water.  This though, gave rise to a possible unforeseen but definitely understated conflict of interest.  While the ministerial appointees charged with overseeing the activities of the regulator may have been relatively diverse, the mangers and employees couldn’t be because they had to come from the industry they were regulating.  So that the regulatory bodies were populated with people whose informal interest was in securing a career path within the industry.

Ministers – from all of the mainstream neoliberal parties – meanwhile, had no desire to have to step in and manage – still less renationalise – the utility companies.  And so, having ministers and regulators do no more than mouth words before handing out fines to water customers has become the way of handling stories like today’s for the best part of 34 years… the result being that the UK still has droughts and floods, water mains across the country still burst, water security is worse now than it was in 1989, water companies continue to dump shit in the rivers and seas, and the only winners are the shareholders who walked away with a cool £52bn.

Given what lies ahead of us as the economy shrinks, the renationalisation of public utilities is probably inevitable.  But in the interim, one potential way of reversing the warped incentives is to change the people who get to pay the fines for breaches of regulations.  Instead of fining the companies – and allowing them to pass the fines on to customers – levying fines on the dividends paid to shareholders, the bonuses paid to senior managers, and the pension funds of employees would go a long way to focussing them on all of their objectives.

Hot air

The UK is about to do huge damage to the global net zero project.  Under successive governments since the late 1980s, the UK has positioned itself as a world leader in the deployment of non-renewable renewable energy-harvesting technologies (NRREHTs) while rapidly phasing out its old coal power stations.  Given the location of the British Isles, in the northeast Atlantic directly in the path of both the jet stream and the gulf stream, if anyone was going to make a success of wind power, it was the UK.

Critics quite rightly point out that this amounts to virtue signalling on a grand scale – the UK produces less than two percent of the world’s greenhouse gas emissions, while China has burned more coal in the last two decades than Britain has since the beginning of the industrial revolution.  If, critics argue, Great Britain was to sink beneath the North Sea tomorrow, it would have pretty much no effect on climate change.

This is not true once we factor in the carbon emissions released elsewhere to produce the many resources and goods that the UK imports.  But the broad point stands – even if the UK could somehow figure out how to run entirely on NRREHTs, it would have no effect on the climate.  What it would do, however, is to set a pathway to a renewable energy future for other countries to follow.  But this can only happen if the pathway is viable… and the gathering evidence is that it isn’t.

The storage problem has yet to be solved, leaving Britain dependent upon expensive gas along with imported nuclear electricity to plug the gaps when the wind isn’t blowing.  The UK hasn’t even begun to figure out how to de-carbonise transport.  And three resources essential to the manufacture of NRREHTs – concrete, steel, and plastic – depend upon coal and oil to manufacture, transport, deploy, and maintain.  Building wind turbines to generate electricity, it turns out, was the easy bit.

There was though, always an issue with cost.  While the wind is, for all practical considerations, both free and permanent, the technology used to capture and focus it is anything but.  And the idea that wind turbines are cheap was largely the result of German factories manufacturing them using cheap Russian gas.  Indeed, the German wind turbine industry was one of the first casualties of the self-destructive sanctions imposed on Russia.  Now that European energy costs have spiralled – accounting for most of the inflation we have been experiencing – the price of NRREHTs has spiralled accordingly.

This is about to throw a big spanner into the workings of the UK’s net zero program, since to have any chance of succeeding, the UK needs to deploy terawatts of new wind and nuclear capacity.  As became clear last winter, however, there is an economic ceiling above which the price of electricity cannot rise without causing major economic disruption.  And that price turns out to be too low for NRREHTs generators.  As Simon Jack at Pravda reported earlier today:

“An upcoming auction for seven UK offshore wind projects is set to flop, according to industry sources.  The results are due to be announced on Friday, but the number of bids will be close to zero, or none at all…

“Energy firm SSE and Swedish firm Vattenfall have already ruled themselves out of the bidding, saying that the government had failed to allow for sharp rises in the cost of steel and labour when setting the electricity price.

“Industry sources have told the BBC that if big, experienced and well-financed firms cannot make the sums work, it is unlikely that others will be able to.”

The “Contract for Difference” auctions are supposed to provide the government with a means of setting a maximum price for electricity – balancing the need to keep consumer prices low while ensuring that energy companies remain profitable.  Under the CfD process, energy companies bid to build and operate new offshore wind projects in the expectation that they can supply electricity for less than the government price – keeping the difference between the two.  But in the event that the price of electricity goes above the government price, the government takes the difference.

The latest auction had a price of £44 per megawatt-hour – far lower than last year’s £128.93 per megawatt-hour average from all sources but reflecting the huge increases in energy prices since 2021.   So, it should come as no surprise that none of the energy companies wants to have anything to do with it.  The auction failure reinforces the conundrum set out by professor Helm in the government’s 2017 energy review:

“It is not particularly difficult to set out what an efficient energy system might look like which meets the twin objectives of the climate change targets and security of supply. There would, however, remain a binding constraint: the willingness and ability to pay for it. There have to be sufficient resources available, and there has in a democracy to be a majority who are both willing to pay and willing to force the population as a whole to pay. This constraint featured prominently in the last three general elections, and it has not gone away.”

The economic process that we find ourselves in today is a play in two parts.  Act one was rising costs – which have been exacerbated by lockdowns and sanctions.  In the UK, because of its heavy dependence on imports, these costs continue to rise even as they are slowing elsewhere.  And, of course, rising interest rates compound the problem by making the cost of currency itself more expensive.  It is Act two – falling incomes – however, which will deliver the killer blow.  As demand crashes across the economy, businesses and consumers will no longer have the income needed to sustain expensive construction projects of any kind, whether wind farms, nuclear power stations or high-speed railway lines.  Indeed, it is highly unlikely that the UK government will be able to raise the tax income it needs if it is to avoid a run on the pound which will exacerbate the crisis by further increasing the cost of imports.

Net zero is going to fail because the UK example is rapidly turning into a dystopian eco-austerity program.  The inability to deploy the NRREHTs infrastructure at a price anyone can afford is further proof of this.  And as the UK economy crashes and burns, people around the world will draw the obvious conclusion that, whatever else you might do to address climate change FFS don’t follow the British example.

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