Monday, 26 January 2015

Charybdis and Scylla

Alone among the PIIGS (Portugal, Ireland, Italy, Greece, Spain), Greece was running a massive structural deficit before the crisis. Ireland and Spain in particular were torpedoed by the financial crisis, despite running prudent fiscal surpluses in 2007, which was the only bubble-cooling option available to their governments in the absence of monetary levers. The Irish and Spanish were not partying on Germany's tick, but were instead trying to manage the structural flaws in the Euro. The Greeks on the other hand were using Germany's credit card to pay the settlement of their civil war.


Since the 2008 crisis, the Greek right has, inflicted enormous pain on the population, removing graft and non-jobs which had become a birthright for many, and tried to deal with the widespread tax-evasion (evasion probably isn't strong enough. Many Greeks simply ignored the need to pay much in the way of taxes). Tax rises (for that is what making people accustomed to not paying cough up is) and cutting spending (for that is what dealing with graft and non-jobs is) represents a fundamental re-structuring of the Greek economy, which is now 25% smaller than it was before the crisis. This is beyond depression, and looks more like an economy emerging from a major war.

However, on its own terms, Greece's austerity has worked. The population now has a GDP per capita more appropriate to their actual productivity, and the country is running a primary (ie before debt service) surplus. More taxes are paid, and public sector jobs mostly exist and require their holders to turn up. This is an appropriate time to default as the smoke can clear before the country needs to tap the bond-markets again. The Greek right will take the opprobrium for the pain of the last few years, the left the plaudits for the recovery. Ain't it ever thus?

Germany, for its part, will have to wave goodbye to the money it lent Greece, and muse on the fact that it has the European empire the desire for which has burned in the Teutonic heart since the country was unified under the Hohenzollerns, and that means it must sometimes pay others' bills. Think of it as payback for living under the US security guarantee, which costs American taxpayers 4% of GDP, when Germany spends 1%. With power, comes responsibility.  

Greece should default. Germany should pay. Greece cannot default unilaterally, as they lack the resources to stand behind their banks, so they need Troika co-operation to do so. There's ultimately no need for Greece to leave the Euro, even though this would probably be better in the long-run for everyone; this would allow the Greeks to default, devalue and move on. However there is no political will for this amongst the players that matter (Greece and Germany), however much British anti-EU types yearn for it. Grexit won't happen. The default and devaluation would probably mean another 2 years of economic uncertainty, and Greek society may not be able to cope without descending into violence, and it's probably not worth that risk.

Syriza will not be able to deliver promised spending increases, though the austerity is probably going to be a lot less severe from now on. This is going to leave a lot of people very disappointed. The non-jobs, the state pensions paid for life to siblings, the fictional tax returns Greeks used to enjoy are not coming back. The only certainty is whatever happens, Alexis Tsipras is going to get a very sharp lesson in economic reality and power politics when he sits down in front of Frau Merkel.

Muddling through with a Grumpy German taxpayer picking up the bill for a Battered Greek economy, leaving the fundamental structural flaws of the Euro in place is probably the least bad solution all round.



Friday, 2 January 2015

Politicians with their own views, whatever next?

The normally excellent Tim Worstall (who is a UKIP supporter, see comments) succumbs here to one of his party's central idiocies: That it is the job of the politician to reflect the views of the electorate.

I’m pretty sure, in this democracy thing, that a political leader is supposed to reflect the desires of the electorate, not mold them.
This is, for example why Douglas 'Judas' Carswell voted against gay marriage, despite being personally in favour. I am not accusing UKIP here of hypocrisy, just being wrong.

Running a country is complicated. The control levers available to Government are only loosely connected to the machine of Government. Much of the day to day control is in the hands of a cadre of long-term civil servants, whose job is to implement policy and who act as dampers on any control input. I think of it like a rowing galley, where the tips of the oars are hidden from the captain's view. He's trying to steer the galley by guessing the movement through the soles of his feet. Some of the the galley's rowers can't be bothered, and many of the rest, don't want to go where it's going, and so pull in the direction of where they want to go anyway, and the other half who are pulling in the direction the captain wants to go, aren't much good. Ultimately the captain can barely see what difference his changes to the beat of the drum and nudges to the tiller make (especially as everyone's free to choose their own tom-tom drum, and progress through the water is barely steering-way) until long after he's been ousted by mutiny.

I like this metaphor, because the command economy, where the rowers are chained and incentiveised with whips, go much faster through the water to some direction chosen by the management, but the Captain still can't see to the tips of the oars, and they inevitably hit the rocks.

Sometimes the people on the watch-tower (think-tankers, philosophers, policy analysts, economists) see a looming shape in the fog off the prow of the galley. They shout to the captain who's only just in earshot. If he's lucky, the captain can, with almighty heaves of the tiller and a bit of cajoling of the rowers down below (those who can be persuaded to agree with him anyway) avoid the rocks (Thatcher) Sometimes not (Blair).

This metaphor can be extended indefinitely.

Politicians are the people to whom we outsource political economy. This is every bit as sophisticated, with arcane knowledge as being a Gas engineer or Lawyer. And when a Gas Engineer starts looking at political economy, he's staring at a fog of unknown-unknowns at least as complete as were Ed Miliband to have a go at servicing his own boiler. The difference is Ed Miliband KNOWS he doesn't know what he's doing. But EVERYONE thinks they've got the political answers. Everyone thinks their politics are "common sense".  But if you don't know what's been tried, you're going to come up with some 'common sense' which is already proven wrong. Rent control, for example which is the great, unflushable turd of political ideas, or Free Parking.

There is a particularly UKIPish line of thinking which runs thus:

  1. I am reasonable
  2. Therefore my views are shared by reasonable people
  3. Everyone I know thinks [x]
  4. Therefore everyone who doesn't think [x] is by definition, not reasonable
  5. A not reasonable belief can only be held for malign reasons
  6. Therefore the Government fails to agree with me because of conspiracy or incompetence.
Go on. Go to a pub in London, and ask the punters whether rents should be controlled or whether parking should be free. Then go and find an economist who agrees. 

Of course 
  1. Everyone think's they're reasonable, but not everyone's got the same information to be reasonable about. Even twins disagree on stuff.
  2. People seek out like-minded souls and avoid controversial subjects such as politics with people who's views you don't already know. Tories particularly sociable around the "sound".
  3. This is called selection bias.
  4. This is an incorrect but common logical inference (the mistake, if you will in this chain of reasoning)
  5. Attribution of motive is pure projection, and particularly common on amongst the stupid, particularly by Labourites, who cannot grasp the more subtle cause and effect of  'right wing' economics, and by UKIPpers who cannot grasp the right end of a shit-stick, let alone a political argument.
  6. This is the crowning idiocy of UKIP the sheer lack of belief that a reasonable person might not be in a frothing frenzy about EU fish quotas or the Bulgarian who moved in next door. The belief that policy is run for "their mates in big business" or the despicable EU cabal.
But there is no British Political Elite. It's true the sons of politicians find it easier through name-recognition and nepotism to get a foot in the door, but they also have the benefits of experience gained through osmosis in how the controls to the galley work. This is why people from all walks of life often end up doing what their parents did. But if you really, really want to be Prime Minister, you need the talent, luck, charm, skill and so forth, and you go for it. No-one will stop you. It's easier for sure, if you read PPE at Oxford, but there are plenty of MPs who didn't.

If there was a British Political establishment, you'd expect to see it represented at the top.

David Cameron's dad wasn't an MP he was a stockbroker. Neither was Gordon Brown's who was a minister of religion. Nor, for that matter Tony Blair's who cavorted in fire with little horns on his head, a black cape and goat's feet (Leo Blair was an actor - but he may have been cuckolded by Belezebub). Or John Major's who was also on the stage. Margaret Thatcher's dad was a Grantham shop-keeper. Jim Callaghan's dad, also Called Jim, was a Chief Petty Officer in the Royal Navy. All of these people entered politics, not because they wanted to join a self-serving elite (anyone think someone like Cameron would settle for a measly £142,500 a year in any other job?) but because they thought they could do it, it interested them, they got the skills and qualifications and they took their chances. They sought a safe-seat. Then they waited for an opportunity, building a reputation, getting to know the means to climb the greasy pole, until there was a leadership election in their party. Then they went for it. Then we voted for them by the million.

That's not to say everything's perfect. I even agree with your average UKIPper on many individual issues. But the job of the Politician is to apply his judgement, experience and knowledge of his electorate, to try to be a man FOR them in the job, even if he doesn't always do what a simple majority of the noisiest ones want. Representative democracy isn't a tribal headcount, and it is not majoritarian tyranny. It's at least as much about what the majority can't do to a minority as it is reflecting 50%+1's views. 

Worse: there was no local referendum that say Carswell vote against equal marriage rights for homosexuals, but rather by his own admission, a look the contents of his letter bag, from a collection of angry, poorly educated bigots living in his god-forsaken, depressing retirement home at the end of the line, and who've now gone over to UKIP with him. The people who write letters are not the cheerful, sound fellows you sometimes meet down the pub, but the sour and bitter old bags who complain about the noise. 

Is that who you want running your country, or do you want to have people who've at least tried to work out cause and effect before they pull on that tiller?



Wednesday, 31 December 2014

2015 Is Going to be the Best Year in Human History

Last year I wrote some predictions How did I do?

The FTSE100 will reach an all-time high, for the first time since 1999, and will continue the bull-run. 7,000 will be left behind. Thanks to tightening money, The Oil Price will fall below $100 and stay there. The Brent/WTI spread will narrow from 99/111.
Yup, I spotted the fall in oil price. But I didn't bet on it, nor did I expect so precipitous a fall. I think the FTSE will break out in 2015
The Labour lead will fall from 6-8%. UKIP will win popular vote in the European parliament elections, then their support will drift back to the Tories thanks to a strengthening recovery. Scotland will vote 'No' to independence. Ed Miliband will remain a worthless union stooge. The voter-repelling and emetic Ed Balls will remain shadow Chancellor, because his boss is a spineless dweeb, with shit for brains and "Red" Len McClusky's hand up his bum. Tories will post a lead, but I doubt it will be done consistently.
Labour's lead has fallen, UKIP did top the poll in the Euros and are now fading. Scotland voted 'no'. Ed Miliband's utter unsuitability for Prime Ministerial office continues to be displayed every day.
The Syrian civil war will not end, but Assad will regain control of much of the country, leaving an islamist insurgency. The world will continue to look the other way. China's growth will slow. The rumblings of dissent new riches have smothered will start to grow louder. The Communist Party may seek to use Sabre-Rattling with Japan to detract domestic opinion from the looming economic crisis. Something dramatic will happen on the Korean Peninsula.
I didn't really predict anything specific, nor was I far from consensus. But Korea? Was I prescient?

So onto 2015.


  • I think 2015 will be the year the FTSE breaks 7000. One day it will, one day I will be right.

  • Oil will fall to $40, and maybe below and stabilise in the $40-60 range. USA becomes the world's swing producer
  • The Conservatives will win a thin majority in GE2015. There maybe 2 elections. Don't ask me how. no polling backs this up. But the country doesn't want Miliband, and Cameron's actually done a pretty good job under difficult conditions and doesn't deserve to be sacked. UKIP to win 3-5 seats, Farage to fail in Thanet, the party's national vote share in the 10-12% range.
  • China's growth over the past few years will prove to have been overstated. China's slowdown to get worse. India to continue to develop rapidly. Modi proving his critics wrong: He may be the man to get India working and taking its rightful place as a major economic power.
  • Russia will try to save whatever face it can for Putin, as it withdraws from Ukraine in response to the falling oil price and continued sanctions. Russia will be set up to rejoin the world financial system in 2016.
  • IS will be reduced to a rump by the end of the year, as having been stopped in their tracks on a number of fronts, they will find the supply of jihadis will dry up.
  • Darfur will be the international flash-point to watch.

We live in a time of miracles. 3-D printed lungs, and people landing space probes on distant orbiting rocks. The benefits of these miracles are unequally distributed. But they do eventually benefit everyone. Luxuries once unthinkable even to Louis XV such as the world's knowledge at the touch of a button, are available to most, through the miracle of stable institutions, and the creative destruction of free-market capitalism.

This provides opportunity for self-improvement, but also can be a productivity-sucking distraction. Who manages to make the most of the opportunities will set the agenda. Wars end, elections happen. The relentless search for better ways to do things however doesn't stop. Nations hold elections. But policies can be reversed, or turn out to be right all along. But people keep passing on knowledge, which is accumulating at an ever-accelerating rate. We will work stuff out. In time.

Meanwhile a billion people still subsist by patchy subsistence agriculture. Between the relentless march of new miracles, and the acquisition of already acquired technology by new users, there's centuries of improvement in the human condition, economic growth, right there. Meanwhile Britain is climbing UP the economic rankings. Real wages appear to be growing sustainably and the growth returns.

Signal to noise ratio, people. Neither the world, nor Britain is 'going to the dogs', there's no need to vote UKIP. 2014 was the best year in human history. 2015 will be even better.



Friday, 19 December 2014

Women in the Front Line

Women do a fantastic job throughout the Army. On the operations the Army has undertaken over the past twenty years, women have been vital. There are things a woman can do - dealing with survivors of rape for example - where a man would be inappropriate. And they are in harm's way while they have been doing their jobs; nearly every job in the military is open to women, and rightly so. An army should reflect the society it protects. But I don't think women should be allowed  to serve in the infantry or Royal Armoured Corps.

This is certainly not a slur on the female soldiers' courage, or desire to fight. But it is a simple fact that women are not as strong as men. The job of a combat infantryman involves carrying weight, fast, over rough ground. The loads are enormous, especially in these days of Osprey body-armour.

Despite the TV fantasy of 8-stone martial arts-trained women hurting fit 16-stone men, in a fight, a good big-un beats a good little-un. I am nearly 18 stone. I know of no woman who could lift me out of a fire-trench, let alone carry me, were I wounded, to a Company Aid Post. A woman in the platoon would always be the weakest link, because she would always be the weakest.

Women's bodies do not respond to training in the same way as men's. Women lay down muscle slower, and never get as strong. I went through basic training when "gender neutral" tests were in force. Less than 10% of the intake were women, yet they made up well over half of those back-squadded through injury. The vast majority of women strong enough, will not be fast enough over the ground when carrying kit. The vast majority of women fast enough over the ground will not be strong enough to carry the kit. There will be a tiny number, both fit and strong enough to keep up with the boys, but too few to make it worthwhile building the barracks and facilities to house them separately.

Do women's rights trump those of the big boys to have comrades capable of lifting them when they catch a bullet for queen and country?

There is a reason adult women don't play rugby with adult men. Combat is tougher than rugby.




Friday, 12 December 2014

Kill All Drug Users?

I don't know if any of you are on the YouGov site. But it is addictive. A bit like twitter, but with 500 characters. I wrote an Opinion on the Legalisation of Cannabis.

Why do we gift the most profitable industry in history to criminals? Successful Interdiction of supply is incompatible with a free society, so why bother? Legalise. Enjoy the benefits of police no-longer alienating swaths of the population enforcing ridiculous prohibition, who can be deployed elsewhere. Tax the trade. Enforce quality standards, Treat problem users medically rather than criminally. EVERYONE is better off.
I received the following comment
EXTERMINATE once the users , dealer and growers are suitably dead there will be no further problem And anyone calling for legalisation MUST be tested one trace and its guilty
So there we have it - some people getting high is more of a problem than a murderous state executing people without due process. That's the level of idiocy we're up against, people. And for the record, I suspect this is what he genuinely believes. I have come across plenty of police who think like this.

You cannot stop people desiring to get out of themselves chemically. Whether it's booze or narcotics. And in a free society, you cannot meaningfully interdict supply of psychoactive chemicals. To some people such as my correspondent above, that means a free society is the problem. Perhaps he needs some time in the salt-mines to learn the value of freedom?



Tuesday, 9 December 2014

The Oil Price Collapse, & why No-One Starves in the West.

Two years after the fall of Soviet Communism, a visiting Russian official seeking to learn about how free market systems worked, asked the Cambridge economist Paul Seabright "Who is in charge of Bread Supply in London. He was astonished by the answer: "No-One".

No-one has starved in a free market system since the Potato Famine in Ireland in 1740-41, which happened because of the failure of a staple crop, and despite significant Government initial efforts to alleviate it. The free market failed there, for a huge number of reasons but that remains the only example, and much has been learned since. Many of the other famines in what were nominally free-market systems, like the Bengal Famine of 1943 can be put down directly to interventions in the markets such as the (democratically elected) Punjabi Government preventing the export of food to Bengal, whose other major source of food, Burma, was having a little local difficulty which became known to history as World War 2. Because of this intervention by the Punjabi government in the market in response to shortages, and subsequent inaction by the Indian Government, over a million people died.



The oil price rose throughout the '00s in response to the rise of Chinese demand, lower interest rates and increased car use in the developed and developing world. Then people started to hurt. Oil price protests rocked the world. The cost of maintaining subsidised petrol in the non-petro-state middle-east is one of the sparks that lit the 'Arab Spring'. In the west, cars got more efficient as the price (and taxes on petrol) rose. People bought smaller and more efficient cars. Highway speeds fell, as cars started to have 'fuel economy' displayed on the dashboard and people realised how much more it cost to drive at 90mph than 70. People changed their behaviour and drove less: 'Peak car' was in 2005 in the USA.

Meanwhile, engineers went looking. We had long known about 'Tight oil' (oil soaked into porous shale or tar-sands), but it was expensive to produce, and uneconomic to extract, until the prices rose. And when they did, engineers sought means to improve production efficiency. And they were successful. The spike of Oil prices in response to cheap money and the recovery from the credit crunch led to an enormous explosion of production in Texas and North Dakota in particular. The USA became the world's largest oil producer in 2013. Cost of tight-oil production in Texas is around $40 and falling. In much of the traditional reserves in the North Sea, it's $35.

There is the equivalent of five Saudi Arabias worth of reserves in the Eagle Ford shale in East Texas alone. (1.25tn Barrels of Oil Equivalent vs 255bn BOE) . And it is ALL economically viable to extract so long as oil remains above $50 per barrel. And there's the Bakken in North Dakota and others. Peak Oil? Um... no.

So the response to a temporary shortage of Oil was for people to use gradually less in response to a price signal, and for people to go looking for more, in response to the same price signal. And the result is the glut of Oil the world is currently enjoying as oil that was prospected when the price was $120 is now hitting the market. My guess is we can expect $45 or so and then stabilisation around $50-70. Having got used to Oil at twice that price, it will feel like a tax cut for the world. (Except Nigeria, Venezuala, and Russia...).

What is true of Oil - the price goes up when demand exceeds supply - is true of wheat, and pork bellies, and olive oil, and corn or Tea. And the substitutes, barley, chicken, rape-seed oil, Sorghum, coffee, and so forth get used instead. People economise and substitute. So long as the market remains, it will become increasingly profitable to move stock from places of low value to places of high value where things are scarce.

Even the much-maligned speculation, or what used to be called 'hoarding' helps, by creating a reserve  in anticipation of higher prices to come, to be released onto the market in response to shortages. Hoarding ensures the commodity is always available at a price. And so no-one starves.

And the lessons: how to grow crops or burn fuel more efficiently, cannot be unlearned. So when supply returns, prices often collapse, the speculators often get badly burned, but the economy as a whole is richer as a lot is being done more efficiently.

Ah... I hear you say... but what about Africa: how can Africans pay the same prices as Europeans? But 21st century famines in Africa are almost never SUPPLY problems, but DISTRIBUTION problems. This isn't about cash-crops being removed even as people starved, like Ireland in the 18th Century. We in the rich west are not taking African food because we can pay more, indeed quite the opposite. There's often plenty of food, grown in the region or supplied as Aid, but due to poor infrastructure or more often, war and banditry, it cannot get to where it is needed. Where the rich west is holding Africa down is by preventing much of the continent from developing a cash-crop economy. The Africans are actively prevented from supplying our markets with cheap food by rich-world Farm subsidies, So roads aren't built, and when the crops fail, food cannot get in from outside, either in response to rising prices or even Aid. Aid which often as a by-product, destroys the livelihoods of local farmers by undercutting them.

The European Union, USA and Japan, to name the most egregious examples have their boots on the face of Africa, keeping him down, but not in the way you'd think. African farmers cannot compete against our heavily subsidised farmers and so cannot invest or develop their production, even if they wanted to. The market for the end product isn't there. Without that bottom rung, the rest of the development ladder is much harder to climb. Then, by demanding Africa opens up their economies to everything, except the one thing they have a comparative advantage, African economies struggle to compete and struggle to develop.

The fact Africa now contains some of the Fastest-growing economies on earth is a testament to the triumph of the human spirit in the face of adversity. Imagine how much better it'd be if we'd not retarded African development by to appease French farmers' selfishness. Every famine since 1740-41, everywhere in the world is BECAUSE, not despite a Government somewhere intervening in the market. And the same is true of poverty. The African governments and their trade partners who've worked this out are doing well. But it took millions of lives, and is still not widely understood.

Rising prices are merely the means by which no-one starves and the pumps still have petrol. Would you rather we ran out occasionally?



Wednesday, 3 December 2014

Gordon Brown's Legacy is Perpetual Austerity. Good.

"Why are you so ANGRY?", I am often asked. I don't mind people who disagree. But what I cannot stand are people for whom the managerialist, high-spending government IS THE ONLY WAY. These are the people who will, with graphs and "facts" confidently tell you that because investment fell while Brown was spending all the money, then Brown had to spend all the money BECAUSE THERE WAS NO CHOICE. The other option, that there was no investment, because Brown was hoovering up all the money and people which might have been used to invest, doesn't occur at all to them. They are dangerous because they are plausible. They sound reasonable. They are confident of their analysis. Many of them are extremely well respected, and they often have the weight of academia behind them.

They all tell you the deficit doesn't matter, that "austerity" is not necessary or self-defeating and we should instead be spending more.  And like Maggie's 364 economists, they are wholly, ridiculously wrong. They may be right in every detail. But they were still wrong - the German Army of WW2 can plausibly claim to have lost no tactical engagements. They too were right in detail. They still lost. The 364 economists' descendants defending the Blairite, last hurrah of the post-war welfare state are wrong because they're extensively trained in the status-quo, and can see no alternative.

The state is too big. It spends 50% of GDP, and takes 45% or so in Taxes. Before WW2, this was around 25%. The state now seriously considers the contents of school lunch boxes, how much middle-class people drink of an evening or the font on a packet of fags a reasonable part of its remit. We are over-governed.

It's trivially true, as the managerialists claim that Austerity's ideological, that deficit fetishism is silly, but that does not make the coalition's spending cuts insane. What was insane is testing the proposition that public services improvement was simply a matter of fire-hosing money. Most of the money spent went on wages - headcounts went up, and pay (especially if you include pensions) outstripped the private sector. "Austerity" is merely the bleating of a well-paid client state being forced to live within the country's means once more.

Some spending makes sense: Road and infrastructure building for example - borrow at low rates to build things which generate real economic return. It's a no-brainer to turn the A1 into a motorway or upgrade the A303 by Stonehenge. Deficit fetishists whinge. But there is no equivalent need to have public sector workers paid more than private sector workers. They enjoy better pensions and greater job security, so pay them less! Freeze their pay till they get the same as their equivalents in the private sector, whose wages are set by productivity, informed by markets.

There needs to be fewer public sector workers, doing less, and paid about the same as those whose salaries are not guaranteed by the tax-payer. No tax-funded salary should be more than the Prime-ministers'. The problem is the state is trying to do too much, and only a slow, continued squeeze on it will bring the public finances back on track. It is only when you come across the public sector at work - four hour meetings with eight people paid over £30,000 a year, in which no-one goes away with any actions, that you realise how much fat there is to cut. It's not a trim that's needed. A saw needs to be taken to whole arms of the state, giving PEOPLE back control of their own lives, for good or ill.

If you blew up every Sure-Start centre and fired their staff tomorrow, is there anyone who wouldn't be able to cope? How many people would be immediately worse off without the attentions of social workers? Of course some would miss it. But many would be better off - think of happy families ripped apart by over-zealous enforcement of state-employees' decisions. Victoria Climbe and Peter Connelly's murders happened despite the tender ministrations of the state in these families' lives. Ministrations which may encourage others in society to 'look the other way' in the face of horror, as someone's paid to think about that sort of thing. Too many people have persuaded themselves "vital" services are vital, when in fact they're part of the infantilisation of a population which is losing the ability to look after or make decisions for, itself.

On the day after Gordon Brown announced he's to step down, his legacy is a British public carrying a burden of a state he built, which achieved little, and at enormous cost. The private sector is getting on with doing what it does, creating wealth, and coming up with new ideas, but it is shackled to a imbecile obsessed with box-ticking, and getting in the way. Oh, and the lumbering imbecile is very, very powerful, armed to the teeth, and can pick the private-sector's pocket at will. Worse, the imbecile actually believes it runs things.

We need to find ways to reduce inequality which don't involve hundreds of thousands of civil servants. Luckily, there are good solutions: a Citizen's basic income (or similar ideas like a negative income tax) achieve redistribution, but don't need a huge bureaucracy to administer. The Coalition's universal credit is a baby step in the right direction, and very popular with the people to whom it so far applies. Do not be thinking this shrinking of the state will leave poor people out in the cold: on the contrary, it will FREE the poor FROM the social workers and benefits officers who blight their lives with forms and stress, just as the private sector needs to be freed from onerous regulation, which do little but create a vulnerable oligopoly where a chaotic but resilient market once existed.

The only thing we can thank Gordon Brown for is that no Future Chancellor will ever think they've abolished "Boom and Bust"; and he tested to destruction the idea that all that was wrong with public services is they had insufficient money or staff. That's it. Done. The high-point of the post-war welfare state was reached under Brown and Obama. Bless him, Hollande in France is right now demonstrating what happens if you continue dancing when the music stops. The next revolution is that radical idea that the state should be leaving people alone. "Austerity", in reality the self-interested bleating of people whose jobs to interfere in other people's lives, has only just begun.

Thanks to Gordon Brown' complete and total failure as Chancellor, as Prime-Minister, and as a man, "Austerity" is permanent. Good.



Monday, 1 December 2014

What Libertarians can learn from Antonio Gramsci and Why they Should Join the Tories.

I describe myself as a Libertarian, mainly because the traditional labels of 'left' and 'right' don't fully fit. As P.J. O'Rourke remarked "Turn right at Economics, Take a left at sex and drugs, straight ahead to paradise"*. The right are largely economically liberal, but socially authoritarian, and the left, the opposite. And this varies by time and place, influenced by history. Swedish neo-nazis for example are strongly in favour of that kingdom's generous welfare state. But I don't want to 'smash the state'. Shrink it, gradually, for sure. But I don't want a revolution. Nor do I see much fundamentally wrong with representative democracy.

Libertarians too often have an intellectual jump-off point at their state-free utopia. This isn't libertarianism, but anarchism, but these anarcho-capitalists hurl abuse at any libertarian whose ideas include working with existing institutions: not "real" libertarianism. There's no coherent plan to get from a state which takes 50% of GDP and thinks it reasonable to control the font on cigarette packets, or the contents of Children's lunch-boxes, to one where the state keeps to its reasonable functions. Thus libertarianism is a philosophy for spotty herberts, ranting in pubs, mainly to each other. And the An-caps are to blame.

Unless your intellectual jump-off point is our society and government, complete with problems, here and now, you will be ignored. This is why Labour was out of power for nearly two decades until they abandoned their marxist fantasy. The Tories fell into the trap of imagining an Elysium somewhere around 1953, which saw them out of power while Gordon Brown laid waste the economy. The party that wins power is the one with a clear solution to the problems of the country now, and an optimistic vision for the future sufficient to encourage people to vote.

The problems faced by the UK government are a deficit requiring spending cuts, and preventing tax-cuts. A population which appears to be obsessed by immigration (especially in the kind of places where there is little). This means the solutions are extraordinarily unpopular, as the left hate spending cuts, as the right thinks not giving tax-cuts is tantamount to socialism. Social liberalism, gay marriage for example seems to have brought out the right-authoritarians out in full-scale culture war. Immigrants are the first casualty, as they seek their fantasy '50s Britain.

Despite extraordinarily difficult political headwinds, the coalition's doing a good job. Taxes have even been cut, especially on the low-paid. In-work benefits are about the same or more generous, increasing the returns to work, and out of work benefits have been frozen or squeezed. This tax-cut, and benefit rise has been largely responsible for the missed deficit targets. But the effect has been profound. Added to the incentive effects, supply-side reforms, mainly making it easier to fire, and less costly to employ, have seen something of a jobs miracle. Despite a weak economy, millions have found work, and the coalition has mostly achieved this by increasing incentives to the out of work, and by reducing obstacles to jobs being provided. Even the jobs miracle is grotesquely unpopular. Ranty rigties and "libertarians" bemoan the increased in-work benefits bill. The left are having a right old froth about "zero-hours" contracts or the rise in self-under-employment.

But everywhere you look, the coalition's been shrinking the state's influence over economic life, and seen a flourishing of private sector economic activity. State headcount, the bean-counters and box-tickers of Gordon Brown's expensive client state, has been pared back to pre-1997 levels. The debate about the deficit has been comprehensively won - even Labour has abandoned its punk-keynsianism in rhetoric at least.

Ranty twitter libertarians often ask how I can stomach being a Conservative. It's simple. They do a good job in day-to-day government, and they do shrink the state overall. It is true Conservatives are not libertarians. The clue is in the name. But they are fellow-travellers, at least as far as they want to go, and especially so in matters economic. The Cameroons are also reasonably socially liberal. They do want to get the state out of the bedroom, and pursue a more reasonable set of drug laws. The Tory party has lost its ranty, EU-obsessed authoritarians to UKIP, who, one suspects, mostly hate the EU because it prevents bringing back hanging. And the Tory party looks a whole lot better without them.

Libertarians should offer a vision of a freer, richer, stronger UK, starting with the rich, free and strong UK we have now. We should do so by infiltrating the existing parties and making arguments for policies that work mainly by freeing people from state dependency and control. Citizens' Basic Income, protections to civil liberties, freedom of expression and association. If there were more libertarians making the arguments rather than stomping off in great huffs like David Davis, or Douglas Carswell, we might get somewhere.

But Libertarians are too selfish, immature and self-centred to compromise. We do have the answers. Libertarianism is right, good and helpful to people. But we are absolutely rubbish at making the arguments to those who matter because we couch the arguments in such absolutist terms. Libertarians need to get their shoulders to the wheel of debate, instead of standing at the sidelines shouting incoherent abuse to people trying to come up with solutions to problems faced by people in the here and now. Otherwise we leave policy-making in the here and now to Gramscian marxists who've already completed their long-march through the institutions.

Libertarians should join the Conservative party. Not because the Conservative party fully agrees with us, but because it should.

*if anyone can find the source for, or correct me on this quote, I'd be grateful.



Monday, 24 November 2014

Why the NHS is like a Porsche 911.

The Porsche 911 suffers a fundamental design flaw: it's engine is in the wrong place, over the rear axle, leaving the car struggling for grip at the front, and tail happy. Decades of development have seen the engine's weight move towards the middle (where it should be), and by the 1990s Porsche was successfully keeping stockbrokers from going backwards through hedges, while keeping the overall shape that people seem to like.


The NHS is a lot like this car

"The NHS is being Privatised" is one of those perpetual political tropes, wheeled out by the hard left when Labour's in power, and everyone to the left of David Cameron when the Tories are. This is an example of 'the political class' (broad definition; which probably includes political obsessives like me, who're reading this blog) speaking a different language to the average voter.

What the NHS means to most people is a healthcare system, funded out of general taxation, free at the point of delivery, at which they can rock up when ill, no questions asked. Whether or not it is state-owned matters not a jot, so long as they don't have to pay when they're hurt. What the NHS means to a left-wing political activist on the other hand is 'the only thing on earth which is both state-run, and popular'. The NHS, following the triumph of Thatcherism, and the utter failure of traditional, trades-unionised municipal socialism, is all that is left of Atlee's post-war consensus and so critical to the left's image of itself.

But contrary to the Lefties' belief, the NHS has always made use of significant private business. Thankfully, even Atlee didn't nationalise the pharmaceutical companies. Most GPs are private-sector businesses which generate their business through NHS contracts. Services like cleaning and catering are often outsourced to private companies and have been for decades. And following reforms by the Labour party, some medical services are now run by for-profit businesses too. So the NHS is being privatised, a bit, by piecemeal and where appropriate.

But since the basic 'free at the point of use' structure of the NHS is not under threat (even the morons of UKIP don't want to fight the electorate over this), the ranty lefty screaming about 'profit' just seems ridiculous. I too support free(ish) at the point of use healthcare funded out of taxation. But I suspect private businesses competing to deliver services, especially if reforms can mean money follows patient choices, will deliver improvements in the standard, efficiency and responsiveness of care. I hope the reforms continue, backing success and learning from failure. Eventually, the state will control the spine of the NHS, guarantee the principles, and provide funding; but leave the actual provision to people and companies who aren't owned or employed directly by the state.

Which also brings us neatly to the Private Finance Initiative - something the left thinks is 'privatisation' too and the right thinks is state spending "off balance-sheet". The purpose of PFI is to deliver hospitals now, with the private sector bearing the delivery risk, and generating the financing. In return, the state offers a long-term delivery contract. The contract rolls up the cost of delivering, managing, maintaining and often cleaning a facility, so cannot be compared directly to build costs.

The PFI is delivered by a special purpose vehicle, a company whose shareholders might include a bank, a construction company like Balfour Beaty, a service company like Capita and various others. Investors typically bear the delivery risk should costs over-run. And this is why PFI projects have a good track-record, better than that of the state, in bringing things in, on time and on budget. This is why the ONS said they were good value, despite slightly higher financing costs. The state is a lousy project manager; the private sector, when it stands to lose big money if a project over-runs, has a good track-record of delivery. The rapid spread of PFI round the world (another successful British innovation in political economy, like privatisation) wouldn't happen if it didn't deliver benefits.

And the NHS will survive, and the left will still rant and rage about "privatisation", and the public will still raise an eyebrow, suspicious of politicians' motives; but so long as the NHS remains free at the point of delivery, the electorate will demonstrate their 'false consciousness' by studiously ignoring the silly, shouty people demonstrating and their Socialist Workers' Party placards.

The NHS is slowly being "privatised" and has been since it was founded. The Trans-Atlantic Trade and Investment Partnership may open the NHS to American healthcare companies, if they aren't already here. This is a good thing. Standards improve with the input of new ideas, and the abandonment of bad ones. Hospitals are built with the input of private capital and project management. An internal market improves responsiveness to patients' needs. All this is ultimately underwritten and financed by the state from taxation. The problem with the NHS is not "privatisation", it's the fact it was ever nationalised in the first place. Like the Porsche 911, the NHS's engine is in a fundamentally wrong place (Way out behind the rear axle, on Whitehall, rather than somewhere between the patient and the GP), but with decades of development and tinkering, that design flaw is being been overcome, as the engine is moved closer to where it should be. The NHS will remain Free at the point of use, just as the Porsche keeps its shape, but however good they are now, no-one's copied the underlying design of either.



Wednesday, 19 November 2014

Government and Mazlow's Hierarchy of Needs

Life, even after a few years of falling wages, is pretty good in the west. Whatever the idiots of the left tell you, you need to pretty comprehensively screw your life up to be homeless in any developed western economy. Some people fall through the net, but they're exceptions who're often on the streets because they reject help. Starvation in the west, is almost always a result of mental illness, not want. This is why shroud waving about 'the bedroom tax' has fallen flat. It's just contrary to what people can see with their own eyes.

So, unlike almost every society preceding it, the west delivers all the physiological needs of food and water to all of its people, with near 100% reliability. Most do a pretty good job of providing affordable healthcare too.

With the bare necessities of life secure, a place to live is fairly high on the list of requirements. And very, very few people have nowhere to live. Some fall through the cracks, and for too many it's far too expensive to live reasonably near work. We build too few houses, and prices are too high for sure. But that's a problem soluble within the present system. Unlike many economies on earth, however almost everyone in the west has access to a secure house.

Other elements in 'security' are amply provided by western societies. We enjoy secure property rights. Few of us die of violence. There is justice, imperfect to be sure, but there is a reliable dispute resolution process. We can travel freely, and seek to do business worldwide, and assume contracts are honoured. Regulations ensure our homes and workplaces are safe. None of these are perfect, but by with centuries of problem-solving, things get better, in fits and starts.

This is the bread and butter of politics. The steady, patient accumulation of good ideas, and the abandonment of bad ones. Free market, democratic capitalism has delivered material wealth unimaginable to our forebears, and will continue to develop improvements, and hopefully find ways to distribute them better. Regulation, and robust institutions to enforce them, are necessary, in part so people don't have to re-invent the wheel every time they innovate. What works - from hard hats on building sites to banking capital adequacy is a reasonable function of government. And it's pretty dull. Much of this is supranational trade regulation, outsourced to bodies like the WTO and EU to enable bigger, and therefore more efficient markets. Too much regulation, of course strangles the golden goose. But that too is tested world wide and locally. Bad ideas like marking-to-market are abandoned, good ideas which seem to work, spread. This is only possible because people are allowed to question our rulers.

From Magna Carta in 1215 (and similar ideas in the Islamic world at about the same time) which put rulers under law, imperfectly, and with many retrograde steps, the idea that Government should obtain their people's consent gained traction. And because people are good at solving problems, the societies which governed by consent, and which broadened the stake in society, were far more successful than the autocracies with which they competed. We free people have seen off big, bad ideas: The divine right of kings, Bonapartism, religious absolutism, slavery, fascism, communism and we're having another competition with religious absolutism now, but no-one thinks seriously that Radical Islamists pose any existential threat to western democracies.

We, broadly if not universally, won. And if the Koreans or Japanese have caught up, it is by taking up our good ideas and applying them to their society. They now compete to generate the new ideas which help society improve. As more and more countries join us on the technological frontier - the former soviet Eastern Europe is catching up fast, as is China, and so more and more of humanity's creative endeavour will be applied to solving problems, creating solutions we can all share.

In politics, it's tempting for politicians to rubbish others' ideas and try to sell theirs as revolutionary. But because we've defeated all the really, really bad ideas, we're now arguing about ever smaller and smaller problems. This, in turn makes politicians look small and petty. We're no longer arguing about how to organise society, we're arguing about distributing success. This requires managers, not leaders. And so turnouts fall worldwide and people shift from parties of government to single-issue pressure groups. We hanker for the old, simple, black and white questions were WE could broadly persuade ourselves that WE were on the side of Angels, and THEY were the bad guys. And if you grew up with the cold war, in the democratic west, we were the ones outside the wall, asking the others to tear it down. And now, the Green movement is on the side of the planet against big, bad business, which is destroying the planet. Or UKIP blaming everything on the EU and the LIBLABCON Westminster clique.

Feeling part of something, especially AGAINST something self-evidently wicked, is more important in many ways than material and economic security. These are the social, love and esteem layers of Mazlow's Hierarchies of need. British elections in the 1980s were in part between those who sympathised with the communists, and those who identified with America. Parties were mass movements, and satisfying as a result. In success, politicians lost something to define themselves against, even as they maintain the forms of adversarial debate. When you're discussing potential nuclear holocaust, or how to defeat fascism, this is fine. But if you're trying to present £11 a week  off benefits as existential crisis, or a small change in tax-rates as a return to communism (guilty as charged...) you just look ridiculous.

While this was manageable during a long rise in living standards, it rapidly became less so when the great recession hit. Having got used to success, governments spent and spent to fund promises of ever greater services, and ever greater consumption. And eventually the money ran out. Insurgent parties then moved into the void across the world - UKIP, the Tea Party, Front National and others. Some more responsible than others, but each coming with their own comforting 'Them and Us' narrative.

Ultimately I think these parties, should they ever be confronted with the realities of Government will either end up looking exactly like the parties they claim to oppose, be absorbed by them, or will implode under the weight of their internal contradictions. The upper levels of the hierarchy of needs are not really deliverable by politicians. All they can do is promise to manage the ever shrinking portion of economies needed to deliver safety, security and possibly health to the people. It used to require the productive efforts of 95% of humanity just to provide food, a task delivered in the west by just 1% now.

People want to be listened to, as an inevitable consequence of having enough to eat and a place to eat it. But everyone wants something different. So we require a new politics, one that enables and facilitates, rather than seeking to impose a one-size fits all approach. Formal government needs to shrink, sharing, as David Cameron used to say in the good times, the proceeds of growth between tax-cuts and better services. This will leave people to seek the social, love and esteem without government interference, and with an ever-shrinking burden of taxation. You want freedom. Free people from want, let them feel secure, then watch our creative talents take man to the stars.

Yes, we (unfairly) despise politicians, because they have solved the major problems of life, and continue to do so. The answer isn't to return to them-and-us politics, but with smaller questions; Instead we must take more questions out of the politicians' purview. Their job is largely done, and they can recede, to be the people to whom we outsource the bin collections and sewage regulation. What they do is important. But it is now unglamourous.

One day perhaps we will give no more thought to the Government that delivers health services, organises some redistribution, funds education services and defends the realm than we do to the remarkable supply-chain that delivers our bread. Libertarianism will not come from destroying government, but by building on its successes something vaster and grander, and more satisfying to the people who live in it than any Government or bureaucrat could possibly imagine. Let us not despise democratic government, but reduce it over the next few centuries to the status of the monarchy in the UK now, a useful, decorative relic which doesn't get in the way much, while the free people get on with delivering what people actually want from each other.



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