UK PLC: Britain's debt time bomb

The ASI has a new paper out today, analysing the government's liabilities other than the national debt—liabilities that we as taxpayers are eventually on the hook for.

Read the press release here.

And read the paper here.

The howling immorality of zero hours contracts

We've all recently been subjected to yet another of those campaigns. Zero hours contracts, where someone is trained and ready to work but no hours of work are guaranteed, were just the immoral exploitation of labour by the plutocratic capitalists and their lackey running dogs. Apparently: although one of the journalists who made this claim was really very put out when we pointed out that she, as a freelance journalist for a number of publications, was on a number of zero hours contracts herself. And indeed are several of us when we write for various places, chat on the radio and all that. 

So, McDonald's probably the country's largest user of such contracts has been offering more secure ones:

Paul Pomroy, the boss of McDonald’s UK, said the company was revamping its employment policy after staff told him they were struggling to get loans, mortgages and mobile phone contracts because they are not guaranteed employment each week.

As a result, the company has started offering staff the option of moving to contracts guaranteeing a minimum of four hours a week, 16 hours or 30 hours.

Pomroy said a trial in St Helens, Merseyside, had been very successful and McDonald’s is now looking to roll it out across the country.

About 80% of workers in the trial elected to stay on zero hours...

We certainly wouldn't decry people being offered more choice. But it does rather look like the screaming chatterati were wrong on this one too, doesn't it? Far from zero hours contracts being something which the workers hate as exploitation they exist because the vast majority of the workers are entirely happy with them, prefer them, actively choose them. How rare it is for that howling about a fashionable issue to be wrong, eh? 

As we've said before, if zero hours contracts are just fine for us, if we actively choose them in our own working lives, then why aren't they just fine if other people wish to make the same choice? After all, it's not as if every newly minted and left wing (but we largely repeat ourselves) graduate wouldn't cut their left leg off for a chance to freelance for one of the national papers, is it? And if that is fine then why one earth should the hoi polloi be excluded from a choice that we're allowed to make?

George Monbiot says we're to blame for everything. Perhaps he's even right

George Monbiot's latest tome gets an airing in The Guardian. And we're specifically fingered as being some of the evil ones who imposed neoliberalism upon the world. From Mises and Hayek, through the Mont Pelerin Society, leads us directly to the Adam Smith Institute and the condition of the world today.

We think that's rather overdoing our contribution to be frank but we are willing to accept responsibility all the same. As a point or argumentation that is: assume that the charge is correct, we really have been plotting all these decades to make the world as it is today.

OK, so what is it that our pushing of neoliberalism has done? You could look at that chart above from Max Roser. This last generation of globally applied neoliberalism, all that free trade, globalisation, that application of the Washington Consensus (that list of stupid things that governments should not do), what has been the effect? The greatest decline in absolute poverty in the history of our entire species. That decline has been so great that global inequality has been falling.

Or if you prefer it in words, from 2013:

The number of people living on less than $1.25 per day has decreased dramatically in the past three decades, from half the citizens in the developing world in 1981 to 21 percent in 2010, despite a 59 percent increase in the developing world population. However, a new analysis of extreme poverty released today by the World Bank shows that there are still 1.2 billion people living in extreme poverty, and despite recent impressive progress, Sub-Saharan Africa still accounts for more than one-third of the world’s extreme poor.

Or 2015: 

The number of people living in extreme poverty around the world is likely to fall to under 10 percent of the global population in 2015, according to World Bank projections released today, giving fresh evidence that a quarter-century-long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030.

The distribution of the economic growth that has been happening. Yes, certainly, the global 1% have been doing well (that global 1% is just about everyone a bit over median income in the rich countries. Over about £30,000 a year in the UK and you're the 1%) but look at Branko Milanovic's chart to see what has been really happening elsewhere:

The top 1% of the global income distribution has seen its real income (adjusted for inflation) rise by more than 60% over those two decades.

What is far less known is that an even greater increase in incomes was realized by those parts of the global income distribution that now lie around the median. They achieved an 80% real increase in incomes.

It is there — between the 50th and 60th percentile of global income distribution, which in 2008 included people with annual after-tax per capita incomes between 1,200 and 1,800 international dollars — that we find some 200 million Chinese and 90 million Indians, as well as about 30 million each in Indonesia, Brazil, Egypt and Mexico. These 400 million people are among the biggest gainers in the global income distribution.

The real surprise is that those in the bottom third of the global income distribution have also made significant gains, with real incomes rising between more than 40% and almost 70%. (The only exception is the poorest 5% of the population, whose real incomes have remained about the same.)

Monbiot namechecks Milton Friedman, of course. And there's an interesting comment that has been made about Friedman. Which is that he wasn't right wing at all (his railing against the monopoly of the AMA should be enough for people to see that) but was a very left wing extreme utilitarian. The goal is to make the poor richer. What is to be done is what works in making that happen. We rather share that goal and outlook.

So, back to Monbiot's accusation. We're, in part at least, responsible for the state of the modern world, for the way things have gone these recent decades. What has happened is that the greatest curse upon humanity, that absolute , peasant, poverty has been alleviated as never before and looks as if it's well on the way to extinction.

We're really very happy indeed to be blamed for that. We'll celebrate, in fact we do celebrate, that it has happened and might even suffer from that warm smug glow of knowing that a plan has worked. 

At which point a question or four for George himself. What's wrong with wanting the global poor to be richer? What's wrong with advocating policies that promote that goal? And what on Earth is wrong with the application of policies which have, largely, achieved that goal?

Just what is it we are supposed to be ashamed of?

We should have a party with lashings of ginger beer

We should celebrate, in our very British manner, this victory over a societal problem:

Britain’s biggest food bank network has warned that reliance on charity food is in danger of becoming “the new normal” for low-income families in financial crisis.

The Trussell Trust, which oversees 424 food banks in the UK, said it gave out enough emergency food to feed more than 1.1 million people in 2015-16, a slightincrease on the previous year.

The main reported reasons for food bank use were problems with the welfare system, such as slow processing and payment of benefits, and benefit changes including sanctions. Together they accounted for 42% of all referrals.

Our societal problem being that, despite taking 40% of everything that is produced annually, the State is incompetent at one of the major tasks it itself has undertaken: to stop people starving in the streets.

Some part of Burke's little platoons were able to work out how to solve this particular problem. Let's mobilise both the charitable impulses of the people and also that food waste out there so that people with no food will have some food. We call this a victory.

We also know what we British do with a victorious unit. We form up the platoon and march it down to the Palace where gongs are given, followed by that after party with lashings of ginger beer for all. This is a victory, one we should celebrate.

What we don't understand is why people are not calling for this. Instead we keep being told that, having solved this problem without the State instead the problem should be handed back to that very State which failed the hungry. And we know very well from personal experience that there never was a time when there were not these gaps in the State provision of benefits. It's not that the State did once manage this process, it never has, not effectively.  And we don't think it ever will.

Why is it that evidence of a problem having been solved is being used as evidence of there being a problem which needs to be solved?

The media-academia complex

You may have seen a BBC News story that reported that half of Britons hold ‘authoritarian populist’ views, perhaps a prelude to the rise of a British Donald Trump. It was covered on the Today Programme and given a long, uncritical article on the BBC News website.

But the paper wasn't very good. Its definition of ‘authoritarian populism’ was this:

The study … measured the sentiment by assessing respondents' ideological sympathy for the market and rolling back the state; a "strong and tough" foreign policy; a negative emotional response to immigration; a critical attitude to human rights and disapproval of the European Union.

To quote Ed Miliband, that’s just totally wrong. Ideological sympathy for the market and rolling back the state, as readers of this blog presumably know along with almost anybody who has thought about it for more than two seconds, is not an authoritarian belief. Indeed given that the state can be reasonably described as an ‘authority’ it would not be inaccurate to call these beliefs ‘anti-authoritarian’.

Most of the other categories are hardly ‘authoritarian populism’ either. One can favour a ‘strong’ foreign policy that nevertheless does not kill innocent people needlessly. My grandmother sometimes has a ‘negative emotional response to immigration’, but does not actually want to restrict it. I guess our internationalist Liberal Case for Leave counts as ‘authoritarian populism’ by this study’s metrics, as would Jeremy Bentham for daring to take a critical attitude to human rights.

Obviously this is a crap bit of research and it should be ignored. But what’s frustrating is not just how unquestioningly the BBC reported it, but that the paper itself does not seem to be publicly available, even to other academics. I cannot find even a working paper online and it doesn’t seem to have been published yet. The BBC say it was ‘shared with BBC Radio 4's Today programme’ so I think it’s fair to presume that we can’t look at this unless we contact the authors directly and ask nicely.

This is irresponsible. It just doesn’t do to give airtime to an unpublished paper that describes centre-right and liberal views as quasi-Trumpist authoritarianism – not just because it’s unfair to people like me who don't really want to be thought of as authoritarian populists, but because it’s misleading and false. I guess the authors don’t realize how wrong they are, and think that the only reason you might be ‘right-wing’ is because you’re an angry authoritarian – not because you think markets make people better off, or the EU doesn’t work as well as we’d like.

The last decade or so has seen academia become increasingly open to scrutiny and criticism, and that’s a good thing. Open access journals and the use of ‘working papers’ to get round publishing restrictions in gated journals allow people from outside academia to use and challenge existing research. The more freely-available work like this is, the better.

But much of the media hasn’t caught up. It’s common to cover research papers from think tanks, consultancy firms and academics that haven’t been made publicly available – take this FT article, based on unpublished research, that claimed that building more houses didn’t drive down house prices (because it only looked at prices in small areas where houses were being built). At least a dozen times in the past twelve months alone the ASI has been asked to comment on some new study that hasn’t been made available yet – as if we can criticise something without seeing it first.

The practice of reporting on research that is not open to scrutiny by others has to stop. At best it holds back the progress the world is making towards more open access to academic research. At worst it leads to bad research being reported without being challenged properly, and people who trust the news they read being misled.

This is NOT a Conservative government

If you thought the nation elected a Conservative government in May 2015, you would be wrong.  A Conservative government would have simplified and reduced taxes, as Nigel Lawson did in every budget.  Instead George Osborne has copied Gordon Brown, packing his budget with trivial interferences with no overall goal or vision, and making more tax changes per budget than Gordon Brown did.

David Cameron's EU policy copies Harold Wilson's.  The Labour PM negotiated a few token 'concessions,' hailed it as a 'major change' in the relationship, and campaigned for a referendum yes vote.  He, too, spoke of an economic relationship, lulling the nation into remaining in an increasingly political union.

Because Conservatives support the spontaneity of society, a Conservative government should preserve that spontaneity, allowing people to decide how to live and to interact, producing a different outcome to one dreamed up in the mind of a central planner.  This government, however, wants to make society conform to a preconceived idea of how it thinks people should live.  The sugar tax is the latest in a long line of similar interferences.  We now have 'plain packaging' for cigarettes, and recommended levels for alcohol and dairy products low enough to be a laughing stock. Yet this is what the government's paid officials try to foist on us as an acceptable lifestyle.

We have a 'living wage' that secures more equality among low-paid workers at a cost of perhaps 60,000 jobs and higher prices in industries such as catering and entertainment.  It is not Conservative to compel employers to pay their employees more than the economic worth of their labour.  It is a Labour outlook to regard business and industry as there to provide jobs and wages.  A Conservative attitude sees their role as one of providing goods and services for consumers, with jobs and wages coming as a welcome consequence of that role.

If this government does have any goals at all, they seem to be political rather than economic or social.  It aims at a day-to-day management that directs society in ways that win today's headlines without heeding long-term consequences.  They seek to justify their mandate each day, rather than over the lifetime of a Parliament.  This, too, was originally a Labour policy and is what Peter Mandelson turned New Labour into.  It is not Conservative.

Conservatives are supposed to protect people's ability to live according to their values and aspirations, not to expose them to every pressure group wanting to ride its hobby horse roughshod over how they might choose to live.

This government wants to micromanage our lives, telling us how much energy to use, how much garbage to discard, and not even trusting us to dispose of plastic bags responsibly.  It is not Conservative by any definition.

As the Edinburgh schools show, PFI is a rather good idea

There're most certainly possible arguments to make against the Private Finance Initiative: there's more than a suspicion that it was used to allow large amounts of spending without having to trouble the government books with it for example. And yet there's still an obvious value to it:

Edinburgh council is refusing to pay the latest private finance initiative charges for the 17 schools shut down because of safety fears in a sharp escalation of the controversy over the potentially dangerous buildings.

With thousands of schoolchildren and teachers facing weeks of further disruption, council officials said on Wednesday they were withholding the latest £1.5m instalment of the private finance charge, invoking their legal rights under the PFI contract.

“We will not be paying them that this month,” a council spokesman said. “We’re applying all the contractual terms, and those include deductions for non-availability [of the schools].”

Someone, somewhere along the line, messed up. We're not really au fait with technical building terms but from what we've seen we assume that it was builders not being very good builders. And of course not very good builders not building very well is not a great advertisement for any scheme let alone the PFI.

However, we do need to consider that most important part of capitalism: bankruptcy. One of the reasons the system is so vibrant is that when the inevitable mistakes are made the mess is rapidly cleaned up. Your idea didn't work out? Oh dear. So, shift those potentially productive assets, the buildings, machinery and labour over to somewhere, someone, else who may be able to use them to add value.

That is, one of the joys of the system is how it springs into action when things go wrong. As here with the schools: those financially responsible for providing school buildings are now going to lose money for not providing school buildings. 

Good.

Proper enforcement of that contract is going to lead to people being very much more careful in future: exactly what we would like to happen.

The advantage of the PFI is therefore that we have clarity of responsibility.

The IMF's Misdiagnosis

The International Monetary Fund has downgraded its world growth forecast for this year by 0.2 percentage points to 3.2%. That is the fourth cut in a year, and not much more than the 3% rate that the IMF has previously regarded as a ‘technical recession’.

So why the downgrade – particularly when the IMF is predicting slightly higher than forecast grown in China, of 6.%? They cite many factors. Chinese growth is still a lot slower than it was a few years ago. Europe and Japan seem stuck in low growth despite their central banks' expansionary policies. A strong dollar has caused America to make less and import more. Then there is Greece and doubts about the Eurozone.

And the IMF solution? The world has been growing too slow for too long. It needs a boost. Central banks should keep down interest rates, print money and spend taxpayers’ money on infrastructure improvements.

Wrong diagnosis, wrong. Things always change: economies go up and down, exchange rates fluctuate, markets rise and fall. And easy money, cheap credit and government overspending is what got us into this boom-bust cycle in the first place.

What’s happening is perfectly simple. The eclipse of communism saw countries – like China – joining the world trade system and developing their production markets. Technology helped the globalisation of world trade. So stuff got a lot cheaper. But Western governments still stuck to their generous inflation targets, their central banks pumping out money and keeping down interest rates. It was a huge boom – some of it down to trade making things cheaper, right enough: but more of it down to the continuing, misguided expansionism.

So consumers bought luxuries like crazy, government built new motorways, bridges, schools and hospitals, and people invested in the land, plant, equipment and workers needed to produce these things. When the music eventually stopped, our productive assets were in the wrong places, producing the wrong things for our post-crash economies.

It might have been right to palliate that with an immediate monetary expansion. But should interest rates have stayed at ‘emergency’ levels for the past five and more years? That just perpetuates the artificial boom and means we get by, without doing much. If you want to know why productivity is falling, look no further. If we want to return to economic growth, we have to recognise that the 2000s boom made us malinvest on a huge scale. And we need to grit our teeth and write off those malinvestments. Not perpetuate them with further expansions.

Here's why we're so in favour of a carbon tax

Every time we mention climate change we get a certain amount of stick from people who insist that it's not a thing, or that catastrophic isn't, or that the temperature numbers have been fiddled and so on. All of which rather means that we've not managed to get across our point and why, thus, we argue for a carbon tax.

That point being that it doesn't actually matter whether any or all of those things are true. Because there's sufficient head of steam up that our government, global governments, governments globally, are going to adopt some policy or other over climate change.  Even proof perfect that every thermometer on the planet was being steeped in a nice cup of hot tea before being read would not and will not change that. It's thus necessary to argue for the least bad alternatives out there of what that policy is going to be. And that's the carbon tax.

As rather shown by this:

Taxpayers have been left with a £17,000 bill for every household that signed up to the Government’s failed flagship energy efficiency scheme, the Green Deal.

Ministers wasted a total of £240 million on the ill-fated programme, which was launched in 2013 with the intention of upgrading Britain’s entire housing stock, a damning National Audit Office report found.

Even by government measures £240 million is real money. And this isn't, at all, what was spent on actually alleviating any problem. This is just the administration:

Yet the scheme was eventually abandoned in July last year after just 14,000 households signed up, taking out loans worth just £50 million - on average less than £3,600 each.
By contrast the Department of Energy and Climate Change (DECC) had spent £240 million – more than £17,000 per household – on setting up, promoting and helping administer the scheme.

This is known as wasting money to no good end: more colloquially as pissing it away. We've expended £240 million of our collective wealth and got nothing for it, we are collectively poorer by £240 million.

So, let's not do this sort of thing. On two grounds, one that pissing it all away isn't a decent justification for anything and also that such waste means we have less to use to solve any real problems there might be with this or anything else. Which, given that we know that some policy is going to be introduced is why we continually call for a carbon tax.

The carbon tax being what all economists propose: Yes, the Stern Review, Richard Tol, John Quiggin, William Nordhaus, any- and every- one who has bothered to study the point. Even James Hansen is on board. More, they all also say that planning lovely little schemes is contra-indicated. Precisely because the carbon tax is the least cost method of dealing with the supposed problem. Thus any other plans or methods mean that we will do less to solve the purported problem as a result of our resources being, as ever, scarce.

And thus our support for said carbon tax. We know that the idiots are going to do something so let's persuade them to do the least idiotic thing.

Even the supposedly self-sufficient seem to be trading

A quite lovely little piece about that trend for people trying to be self-sufficient in the 60s and 70s. Quite why people thought they should do this we think we know. Nostalgia really, coupled with very rose tinted glasses. The people who actually had, properly, lived as peasants fled for the cities as soon as they could scrape up the three groats to do so. One of us has seen the same in Russia: villagers crying out for blocks of concrete flats instead of their charming wooden huts. Because, you know, running water, hot water, heating. But a generation or two later some will start to decide that society made a wrong turn and pine for the old, not quite understanding what that old was:

The group lived in an Edwardian mansion, which had 12 acres of land. Although full of enthusiasm they lacked the necessary knowledge to create a sustainable community.

"Our first potato crop turned brown - we were surprised because none of us knew about blight.

"There have been many challenges living here from working out the ancient plumbing to keeping the tractor going. We've had to learn everything we've had to do."

...

"We built our first goat pens using Seymour's books," Patrick says.

"We soon learned goats were cunning and agile. One time they got out and ate the rhododendrons, which are poisonous. I had to make them ill with warm oil and stay up with them all night."

Well, yes, that's an important lesson to learn. Peasantry is a technology and it's a complex one too. That it's a technology which doesn't use many machines is all that's different about it conceptually: and thus it's a technology that requires much more human time, or as we might also put it, more labour to reach a particular standard of living. Which is,. of course, why all of those with three groats fled it a century back.

But it's also, as Young Molesworth might put it, something of a swizz:

John Seymour's book, The Complete Book of Self-Sufficiency, provided welcome advice. Published in 1976, it covered everything from how to plough a field to how to kill a pig and sold more than a million copies.

We regard that, as should everyone else, as trading with one million people. Which is a very odd indeed definition of self-sufficiency.

We would not, of course, want to stop anyone at all pursuing such a lifestyle. But we do regard it as being of the utmost importance that those billions out there who do not wish to live like this get not to. Which is why, of course, we are so vehement about the benefits of trade. As Madsen Pirie puts it, buy things made by poor people in poor countries. The point being not that we should or should not disrupt some happy peasant paradise, but that those who find it not so happy get to get out of it. What anyone does with the choice is up to them but the choice must be there.