Matthew Lesh on Radio 4 on zero tariff free trade

This morning our Matthew Lesh took to Radio 4’s Today Programme to explain why zero tariffs in event of no deal, might actually be a good thing. Of course you all knew that, but it appears that Mercantalists are still out there, fighting the bad fight.

Why is the health of Public Health England not assessed?

You will have noted that the Secretary for Health and Social Care is promoting the notion that the NHS books can be balanced by keeping citizens fit, well and away from hospitals, doctors and nurses.  That would be a good idea if it worked but, if it does not, NHS costs will keep rising and the new budgets for Public Health England (PHE) will be wasted. Meanwhile public health activities at local authority level, where the real work is done, continue to be stripped of resources, leaving the NHS actually worse off.  The DHSC must be aware of the contradiction but this is their usual Management by Press Release.

PR and financial shuffling apart, the big question is whether spending more money on prevention, i.e. “health”, actually saves having to cure people, i.e. the NHS.  How effective is the generalized spending by PHE as distinct from their essential research and prevention of epidemics?

Since 2012, the “outcomes” from public health spending, at national and local levels, have been formally measured. We should therefore have good idea by now of where value for money lies. Needless to say, it is not that simple.  The measurements have, mostly, been taken but no one has added them up or drawn any conclusions. Every three years or so, the goalposts move: the consultation on the latest such exercise concludes (after a computer glitch) on 19th February: “Proposed changes to the Public Health Outcomes Framework from 2019/20: a consultation”. Join in and share the wonder.

“The PHOF [Public Health Outcomes Framework] consists of 66 high level indicator categories which include 159 individual indicators” (p.5).  It is immediately obvious that even if there was measurement consistency and expected or planned outcomes with which to compare them, the sheer number of probably contrary indicators would make overall performance impossible to judge.  It would appear that no thought has been given to defining what PHE is supposed to achieve.:

“The indicators are grouped into overarching indicators and 4 supporting domains:

• overarching indicators (high level outcomes of life expectancy)

• improving the wider determinants of health

• health improvement

• health protection

• healthcare public health and premature mortality.” (p.6)

This looks a bit more plausible; life expectancy and certainly healthy life expectancy (i.e. before one needs permanent health or social care) are valid ways to measure public health. But once one gets down to the details, it transpires that almost every aspect of life is being measured and included in PHOF, irrespective of whether improvements in those indicators can be attributed to PHE, for example, readiness of children for school, their performance in school, “Percentage of people aged 16-64 in employment”, crime, first time offenders, complaints about noise, children in low income families, road fatalities, re-offending rates, and homelessness.

Clearly quite a few, probably the minority of, metrics are relevant to PHE but the main thrust here is that no distinction is made between health and other social measures. Ironically, despite all the publicity given to the “Five a Day” promotion to restrain obesity, the listed metrics (2.11i) were not collected.

One major issue amongst the lists of outcomes is loneliness which “has been identified to be a serious public health concern, as harmful as smoking and obesity, At the beginning of 2018, the Prime Minister highlighted the issue of loneliness, announcing a Minister for [sic] Loneliness and committing to develop a national strategy to help tackle loneliness and a national measure for loneliness. The national strategy was published on 15 October 2018.” (p.18). The first Minister for Loneliness, who was also the Minister for Sport, quit after her first month and does not appear to have been replaced. The Strategy boils down to saying loneliness is a big social problem, too big for government so everyone must pitch in and sort it.  It’s hard to see how PHE can be accountable for it.

The metrics that most illustrate the division of PHE from reality are those for inequality in life expectancy (0.2ii,  iii and vi). It is well known that the more affluent tend to live longer. In the mind of PHE this is unfair and PHE should work to increase life expectancy for the less affluent.  No one would argue with that but the performance measures selected look only at reducing the gap, i.e. the level of inequality, which can be more easily achieved by reducing the affluence of the wealthy than by increasing the affluence of the poor as the study of any left-wing government shows.  In any case, that is a matter for the Chancellor of the Exchequer, not PHE.

The bottom line of all this is that, despite the much publicised collection of data to assess the productivity, i.e. health, six years ago of PHE, no one has attempted to add up the numbers or draw conclusions. Until the government does that, it will continue to chuck our money away.

Happy birthday, Singapore, a prosperous high achiever

On February 6th 1819, 200 years ago today, Singapore was founded by Sir Stamford Raffles on behalf of the British East India Company. The islands became a crown colony in 1858, achieving independence as part of Malaysia in 1963, and as an independent nation two years later.

Under Lee Kuan Yew’s free market, low tax governance, Singapore made the transition from developing country to developed one in a single generation. Although it consists only of a group of islands lacking natural resources, Singapore became an Asian ‘tiger’ economy, relying on external trade and the talents of its peoples. It is now one of the richest countries in the world, and scores highly for the quality of its education, healthcare, life expectancy, quality of life, personal safety and housing. Income inequality is high, but 90 percent of homes are owner-occupied.

It is very business-friendly and enterprise-friendly. Its top income tax rate is 22 percent, and its top corporate tax rate is 17 percent. It has no capital gains tax and no inheritance tax.

Its spending on social welfare as a percentage of GDP, is among the lowest in the world. There are no unemployment benefits. Healthcare in largely financed by Medisave, a compulsory national medical savings account system that covers about 85% of the population, and public hospitals make independent management decisions, and compete for patients. A subsidy scheme helps low income people. Singapore has the world’s lowest infant mortality rate, a high vaccination rate, a low obesity rate, and life expectancy is 80 for men, 85 for women.

Singapore has been an economic success story, and one based on sound policy. Other nations, rich in natural resources, have been ruined or held back by inappropriate, anti-business policies, but Singapore has moved up the world rankings of economic freedom to be among the top few. It has been, and still is, an example to the world of what can be done. It is a pity there are not more like it.

Do we want new and better cystic fibrosis drugs or not?

The is a little campaign - campaignette perhaps - arguing that one of the newer and few that are effective cystic fibrosis drugs should be cheaper for the NHS. That seems fair enough, we’d like to be able to treat disease at least cost. Sadly, this least cost is to be gained by killing the patent on that newish and effective drug. This will kill off, in turn, future drug development to deal with cystic fibrosis.

That’s perhaps not a good deal:

The government could make the drug Orkambi affordable for the NHS. Until then, people will suffer unduly

Certainly the government can. The power exists to simply say that the patent won’t be upheld for terribly important reasons of state and that’s that. Except, of course, that isn’t that.

With our lives being punctuated by such worry, it’s no wonder that news of an effective treatment to cystic fibrosis meant so much. A drug called Orkambi, developed by Vertex Pharmaceuticals, is licensed to treat cystic fibrosis in patients, from two-year-olds to adults, who have a specific genetic mutation causing the disease (called the F508del mutation). Orkambi can slow progression of the disease, improve lung capacity and reduce the frequency and severity of lung infections. For Luis it would be life-changing. Orkambi is the first of a series of drugs that are being developed, with forthcoming ones expected to be even more effective.

But there’s a snag. Though the drug is available and on the market, the NHS can’t afford it. Of course, a health service that’s already under extreme financial strain will always have difficult choices to make – but when the drug company is charging an exorbitant £105,000 per year for a drug taken every day for life, it’s no surprise that the NHS isn’t able to pay. After three years of fruitless negotiations, Orkambi is still not available for cystic fibrosis patients in the UK.

The crucial part of this is “being developed, with forthcoming ones expected to be even more effective”. Those who developed this drug have spent $1 to $2 billion on doing so. Those who are developing the next will spend around the same amount again for each of them. That’s just what it costs to get a new drug through the approval process and into use.

If drug development were only a one time, one iteration, process then we could stiff them. Hey, you’ve developed, at your own cost, this lovely drug. Now we’ll allow anyone to copy it and you’ve just lost your billions.

Har Har you capitalist pigdog.

Except it’s not a one iteration process. Not even just for the one disease. The moment we vitiate patents, thus removing the major support of the financing process, then we’ll find a definite paucity of people willing to invest $1 to $2 billion in developing the next drug for either this disease or any. You know, fool me once, shame on you, fool me twice, the shame’s on me.

We don’t have drug patents and thus high prices for approved and new drugs because it is just, righteous nor even because capitalists should make a return. We have them to get the next generation of capitalists to risk their money on curing us in the future in the hope that they might make a return. Stealing that from past investments doesn’t create that incentive for the future.

Sir Robert Peel – the first Conservative

On February 5th in 1788, Robert Peel, the son of a mill owner, was born. He went on to become one of the most significant figures of the first half of the 19th Century, and oversaw the transformation of his country. He was a natural free trader, and abolished or substantially reduced over 1,000 tariffs. Most famously he repealed the Corn Laws that had protected landowners by raising the price of imported crops. This was done in response to the Irish potato famine that started in 1845, but the landowning classes in Parliament never forgave Peel, and it brought down his government.

Some historians have seen this as a clash between the traditional landowning class that profited from agriculture, and a rising class of merchants and industrialists who wanted cheap bread for their workers. But Peel also passed legislation many industrialists opposed, bringing in laws such as the Mines Act of 1842, banning the employment of women and children underground and the Factory Act of 1844, which limited working hours for women and children in factories.

Peel's legacy includes the foundation of the Metropolitan Police in 1829, with 1,000 constables employed to patrol the streets and curb crime. They did so successfully, and were copied in other cities, earning the popular nicknames of 'Peelers' and 'Bobbies,' both derived from his name.

He also set out the principles of the modern Conservative Party in his 1834 Tamworth Manifesto, now regarded as the party's first emergence.

In one of his last speeches he wrote an epitaph that was later inscribed on his monument in Bury:

"It may be that I shall leave a name sometimes remembered with expressions of goodwill in the abodes of those whose lot it is to earn their daily bread by the sweat of their brow, when they shall recruit their exhausted strength with abundant and untaxed food – the sweeter because it is no longer leavened by a sense of injustice."

The historian A.J.P. Taylor summed up his achievements: "Peel was in the first rank of 19th century statesmen. He carried Catholic Emancipation; he repealed the Corn Laws; he created the modern Conservative Party on the ruins of the old Toryism."

If only we had any evidence that the NHS was a planned, integrated, health care service

A usual and typical argument against the idea of increased marketisation in the National Health Service - That Wonder of the World - is that it would fracture it. Only an integrated service can be a planned one and planning is what makes for efficiency in the use of resources. We had rather thought that 1989 and a look east from the Brandenburg Gate had killed that idea of planning efficiency but the national religion dies hard.

But we’ve not exactly got great evidence of the contention that the monolithic NHS is in fact a paragon of planned efficiency:

An extra 300,000 operations could be carried out in England if surgeons planned their holidays in advance and managed their time better, watchdogs have suggested.

Regulators said better scheduling of surgery, and planning ahead could mean around 290,000 more operations carried out annually.

NHS Improvement on Monday urged hospitals to use a simple model, which means surgical staff agree their annual leave six weeks in advance and plan their surgical lists afterwards.

The watchdog is concerned that patients are being forced to suffer needlessly long waits - and suffer cancellations - because of haphazard planning, late starts and early finishes.

In particular, it is concerned that too often surgery lists are planned without knowing if there are sufficient staff on duty to carry out the work.

This is something that the private sector industry of Lancashire had worked out by 1906, scheduling work and holidays so as to maximise capacity. For that’s just what Wakes Weeks were.

That the NHS is a little inside the technological envelope, say offering proton beam therapy a decade after other systems, might be a reasonable price to pay for the system’s greater equality of bad treatment. We don’t think so but it’s possible to do so.

But to find that it’s well over a century behind in such a simple thing as holiday scheduling does seem a bit much and not a great piece of evidence that central planning even manages the planning bit.

Ludwig Erhard – a bonfire of restrictions

On February 4th 1897, Ludwig Erhard, a pivotal figure in 20th Century political economy, was born. As an untainted anti-Nazi, Erhard was appointed Director of Economic Administration of the joint British and American zones of postwar Germany. The country was in a state of devastation. Its cities were bombed-out ruins, its people emaciated, its shelves empty, its currency worthless.

Erhard decided upon a bold course of economic freedom. The price controls put in place by the Allied military administration forbade any price to be changed without their consent, but in 1948 Erhard abolished the whole system in a day. One story has it that he chose to do this over a weekend when the Allied generals would be away playing golf. He also abolished production controls, and implemented the famous “bonfire of restrictions” that did away with most of the detailed regulations that were hamstringing any prospective recovery. He also introduced the Deutsche Mark as West Germany’s new currency.

He certainly exceeded his authority, but he got away with it. Another story tells that General Lucius Clay, head of the American military government, called him up and told him that his own economic experts all warned that what Erhard had done was very dangerous. “So do mine,” replied Erhard. Fortunately, it worked.

Prices rose, but the shelves filled as food poured in. With the new stable currency, trades could be done and factories opened. Germany got back to work. It was called the “German economic miracle” as West Germany rapidly became Europe’s most flourishing economy, and its currency the strongest. The German economy went from being a basket case to a world leader, and the German people enjoyed an unprecedented improvement in their standard of living.

It was economic liberalism that made this possible. It showed what people could do, once liberated from the government restrictions and controls that held them back. And it was Ludwig Erhard who had the wisdom to understand this, and who had the courage to give it the chance.

Journalists not quite understanding this market stuff

This would be just terrible if it were true:

What 2,000 job cuts tell us: the free market kills digital journalism

We can’t quite see that ourselves. Following those job cuts we can still see a plethora of sources of news available to us on this ‘ere internet thing. For something dead it seems in remarkable health.

The future of journalism will generally be smaller and more challenging in the short term and remains uncertain in the long term. However, the problem now is so clear that even the most advanced digital thinkers can see it: a digital free market for journalism doesn’t work.

What the market is actually doing is its job. Which is to sort through the available and possible plans for doing something and telling us which do work. The value to us all of this service being greatest when technological change is happening - the technological change being what presents the new available and possible plans which need to be sorted through.

That we’re getting a lot of shouting about journalism in crisis is because it’s the professional shouters, the journalists, who are being sorted through, nothing more than that.

But then the author here, Emily Bell, has been involved in running the Observer and Guardian for some decades. Just the institutions we’d go to for advice on profit in journalism, aren’t they?

Venezuela Campaign — 10 fallacies about the situation in Venezuela

1 — The Americans have wanted to topple the Chavista Regime for Years

The 2002 coup against Chavez collapsed because of a lack of American support. Americans have been the main customer for the Venezuela’s only significant export, oil, paying the Chavista regime over US$1 billion a month in hard cash. It was only earlier last week that sanctions were applied to the oil industry as a whole.

2 — The problems of Venezuela are all down to western sanctions

It is ludicrous to suggest that these minor restrictions had anything to do with an economic crisis that was well underway a decade earlier. The first sanctions in 2015 only targeted corrupt regime officials. In 2017 some minor sanctions were introduced preventing Americans from buying oil company debt, which almost no-one wanted to buy anyway.  By then, the borrowing capacity of the country had long since been exhausted. Domestic policy, not foreign intervention, has led to this crisis.

3 — The collapse of the economy has caused by speculators and hoarders

When businesses can’t operate because price controls have made them uneconomic and investors fear nationalisation without compensation, an economy will collapse very quickly. Shortages have occurred since 2005. Imaginary nonsense about the hoarding of items is no more than regime propaganda designed to distract from policy failure.

4 — Chavez and Maduro are on the side of the poor

The poverty rate is now 93%. Top Chavistas, on the other hand, are now extraordinarily rich. Chavez’s Minister of Finance has admitted to stealing US$1 billion. Chavez’s family now owns 17 country estates covering more than 100,000 acres and have liquid assets of $550 million. That’s not counting his daughter Maria, whose net worth is said to be over $4.2 billion.

5 — Corruption happens in every country

In Venezuela corruption has been elevated to an art form, with a rigged currency exchange system enabling the regime to bestow millions on regime cronies at will.  State enterprises are run to create corruption opportunities for their Chavista managers through rigged contracts and sale of price controlled goods in the black market.

6 — The fall in oil prices in late 2014 caused Venezuela’s economic problems

Other major oil exporting countries were not forced into similar difficulties as a result of a price decline.  High oil prices before 2014 merely helped to disguise the disastrous path the country was taking. Venezuela had used the high prices to borrow huge amounts, which it then was stretched to repay.  It was also giving away over 200,000 barrels of oil per day – half of which to Cuba. The regime had destroyed the rest of the productive economy, so its dependence on oil was much enhanced. The main problem with its oil sector is not so much prices – which naturally go up and down – but the reduction in capacity through mismanagement. Venezuela now produces only a third as much oil as it did when Chavez came to power, the same level as in the 1940s.

7 — The Maduro government has survived because the people have been prepared to defend it — with their lives if necessary

The regime, its security forces and hired militias have been terrorising the people. This is particularly true in the poorest slums where ‘Operation to Liberate the People’ has claimed around 10,000 lives. The Organisation of American States has referred the Venezuelan Government to the International Criminal Court for crimes against humanity, citing 8,000 extrajudicial killings, 12,000 arbitrary arrests and the detention of 13,000 political prisoners. It is doubtful that many of the regime’s forces will be prepared to risk their lives defending it.  After all, the top military scattered when a malfunctioning drone appeared above a military parade. They’re in it for money, not their lives.

8 — Wasn’t Maduro democratically elected?

No he wasn’t.  The election itself was called by an illegitimate body, the “Constituent National Assembly” (created by Maduro to supplant the legitimate National Assembly) which barred many opposition political parties from taking part.  Many popular opposition candidates were jailed by the government, blocked from taking part in the election or forced into exile. The international community and the National Assembly rejected the results and have called for free and fair elections.

9 — National Assembly President Juan Guaido has just appointed himself President. Is this a coup?

The Venezuelan constitution provides for the National Assembly President to become interim President when there isn’t a President appointed according to the constitution.  It is the job of the interim President to organise free and fair elections to choose a new President. Juan Guaido is just following constitutional requirements.

10 — If the opposition takes power, it would mean the end of the social programmes that have provided free healthcare and education, not to mention eradicating malnutrition

What social programmes? The health system has now collapsed and few children go to school.  As for malnutrition, 7 million people suffer from malnutrition children are now dying of it, and the hunger rate has tripled since 2010. The opposition have pledged to introduce rational economic policies so that social spending can be restarted.

More information on the Venezuela Campaign can be found on their website. 

Paper money and taxation both have limits

On February 3rd, 1690, the Massachusetts colony issued the first paper money in the Americas. What was unusual about the Massachusetts issue was that this was the first paper currency not to be convertible. It was not backed by gold or silver, only by the assurances of the colony’s government. To thwart forgery, the bills were cut by hand with an indentation across the top, with the Treasury retaining the stub in case the bill subsequently needed to be authenticated. The lack of convertibility was attributed to a local shortage of specie down to the ongoing King William’s War in Canada. It set an unfortunate precedent that allowed future governments across the world to issue unbacked currency to pay their way, foreshadowing the hyper-inflation of the Weimar Republic, Zimbabwe and Venezuela.

On the same day in 1913 the US passed the 16th amendment to its constitution, allowing Congress to levy an income tax without apportioning it among the states on the basis of population. There had been earlier attempts at income tax, including one in 1861 that was repealed in 1872. When the Supreme Court struck down an 1894 Act that included one, the only option was an amendment to the constitution. The reasoning was that while most federal revenue was derived from tariffs, these were thought to bear too heavily on the poor, and that a tax on income would be fairer. All taxes change behaviour, however, and governments that have imposed excessive income taxes have found that they inhibit the creation of wealth and jobs, and rarely if ever raise the anticipated revenue.

On a more sombre note, February 3rd was in 1959, 60 years ago, “the day the music died,” with the deaths in a plane crash of Buddy Holly, the Big Bopper and Ritchie Valens.