Simon Kuznets and his curve

Simon Kuznets was born on April 30th, 1901.  He received the Sveriges Riksbank Prize in Economic Sciences (which everyone calls the Nobel Prize in Economics) in 1971 "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development."

What he did was to bring the real world into economics by incorporating empirical data into its findings. He approached a priori and speculative conceptions with deep skepticism, preferring statistical methods of research instead, and in doing so, created quantitative economic history. He was the first, perhaps, of a strain of economists who regard the only valid data in economics as historical data.

He collected data from 14 countries in Europe, the U.S. and Japan over a 60-year period, and used it to determine how economic growth happened differently in different countries. He looked in detail at how growth involved a complete change in many aspects of production, employment, incomes, capital flows, and the make-up of the population. In doing so, he rejected the idea that there is a simple, universally applicable pattern of economic development.

He is most famous for the Kuznets Curve, an observation that when countries develop, income inequality follows an inverted U-shaped graph. It first increases as a shift takes place from agriculture to industry, then levels off and declines as society becomes wealthier.

There is another Kuznets Curve for environmental quality. As a poor country begins to develop, pollution increases because at that stage food on the table to avert starvation matters more than environmental quality. But as the country becomes richer, it can afford to attend to environmental matters and afford cleaner methods of production and measures to improve the quality of its air and its water.

There is a Kuznets Curve for population, in that modern hygiene and medicine lead to a population increase in poor countries as more people survive death in infancy. But as the country becomes richer, fertility declines because families no longer need children to contribute to the family budget or to support parents in old age. They can now afford education and pensions instead, so population levels off and declines.

The Kuznets Curve, founded in empirical, real-world data, is a powerful antidote to the doom-mongers who see only the upward slope of the graph and project it to disastrous heights that take no account of the way it levels off in practice and then declines.

But does this mean the NHS is efficient or inefficient?

Apparently the National Health Service provides fewer inpatient beds for young mental health patients than many other European countries:

Child mental health: UK provision 'worse than in much of eastern Europe'

That’s not actually what has been shown. Rather:

Britain has one of the lowest numbers of hospital beds in Europe for young people struggling with serious mental health problems, EU-funded research has found.

It is lagging far behind the level of provision in many much poorer countries in eastern Europe, such as Latvia, Estonia and Slovakia, according to a study of care for troubled under-18s across the EU.

Britain has 9.4 specialist inpatient beds per 100,000 young people for those who are suffering from conditions such as anxiety, depression, psychosis, self-harm and suicidal thoughts. That places it 18th in a league table of the 28 EU countries, researchers say.

Germany has the most, at 64 beds per 100,000 young people, and Sweden has the least, at just 1.2 beds. Latvia, Lithuania and Estonia have 39.5, 31.5 and 21 beds per 100,000 under-18s.

How well we deal with child mental health problems is determined by how well we deal with child mental health problems. Not by the resources we use to deal with them.

Inputs into a process are just that, inputs. It is the result, the output, which is what we want to have a measure of for this tells us the efficiency with which we are dealing with these problems.

Say, just as an example, that Britain uses 94,000 tonnes of steel to make a railway bridge that works and works just fine. Germany uses 640,000 tonnes of steel to make a similar railway bridge that works just as well. Who is doing better in the provision of railway bridges? Well, obviously, the UK. For we either have 546,000 tonnes of steel to do something else with or even, haven’t burnt more of the dead dinosaurs to produce the steel in the first place.

If we are solving child mental health problems as well as those with more inpatient beds then we’re doing better, not worse.

We are entirely open to the idea that we’re not so solving better. Equally that we are. The insistence is just that our measure should be that output, that result, not the resources devoted to inputs.

Consider that Swedish result of some one tenth of the NHS provision. Catty remarks about climate change activists aside, is Sweden doing better or worse?

In the absence of this proper measurement we’ll have to fall back on some sort of rule of thumb. Perhaps Polly Toynbee’s cry that we should be more like Sweden is the one to use here? Or, you know, we could go and measure what it is that actually matters?

Farewell to John Kenneth Galbraith

On April 29, 2006, John Kenneth Galbraith died at the age of 97. Canadian born, but a Harvard economist for a half century, he was the epitome of an educated leftwing intellectual. He was a prolific writer, read by a popular audience rather than by academic economists. His best-selling books included “American Capitalism (1952),” “The Affluent Society (1958),” and “The New Industrial State (1967).”

Like other liberal (in the US sense) intellectuals of his day, Galbraith disdained the free market because it allowed people to choose what they wanted, rather than what enlightened intellectuals thought was best for them. He argued that control of production had passed from consumers whose choices told corporations what to produce, to corporations, which now exercised control over consumers by advertising, marketing and salesmanship.

He described this as artificial affluence, and contrasted it with what he called a neglected public sector. Thus Americans, he said, were able to buy luxury items, while their public spaces were degraded and their children attended poorly-maintained schools. Other analysts, however, have put the poverty of American education down to other causes than any lack of funding.

Galbraith was lavish in his praise of the socialist countries he visited. His 1984 New Yorker article, for example, claimed that: “Partly, the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.” This view was presumably based on an uncritical acceptance of the bogus statistics the Soviets published.

In his 1973 account of his experiences in “A China Passage,” Galbraith wrote that there was "no serious doubt that China is devising a highly effective economic system," "Dissidents are brought firmly into line in China, but, one suspects, with great politeness," he wrote. This was just after the peak of the Mao terror in which as many as 3 million may have been killed. He thought that Chinese industrial and agricultural output was expanding annually at a rate of 10 to 11 percent, again taking as fact the wildly implausible official statistics.

Paul Krugman, in many ways a latterday successor to Galbraith’s position as an all-purpose leftist intellectual, disparaged Galbraith as a “media personality” not taken seriously by fellow academics, an inclined to come out with over-simplistic answers to complex problems. Krugman was awarded a Nobel Prize in Economics, not for his partisan columns in the New York Times, but for earlier work on New Trade Theory and the New Economic Geography. Galbraith sold more books, but was never in the running for A Nobel Prize.

As Adam Smith pointed out, slavery simply isn't economic

The point here is one made by Deepak Lal. We can think of varied forms of economic growth, perhaps Malthusian say. Where, over time, there is no rise in the general living standard, just a rise in the number of people doing the living. Smithian growth, where the division and specialisation of labour create that growth through greater efficiency. And then Lal talks about Promethian growth, where we substitute other energy sources for human and animal muscle.

Which leads us to this:

Based on the amount of energy expended per average American for residential electricity, heating, cooking, and transportation, and for industry and commercial purposes, how many full-time “energy equivalent human servants/workers” would the average American’s energy use represent?

An interesting question. The answer?

Now putting the two parts of the analysis together, we can calculate that a typical American has the energy equivalent of “138.7 human energy servants (or domestic energy workers)” laboring for them 24 hours every day, during each of the 365 days of the year (10,350 constant watts of annual energy per American / 74.6 watts of energy per human). Over a full year, that would be the equivalent of 1,215,362 hours of work (24 hours per day X 365 days X 138.7 workers), which if divided by the annual number of hours for a single full-time worker working 40 hours per week for 52 weeks per year (2,080), would be 584.3 individual full-time workers. In that case, each American today has the energy equivalent of nearly 600 “human energy servants” providing around-the-clock energy services.

Which is an interesting number given how many people currently say we’ve just got to have society using less energy. The services of which of these 600 are we to lose? Or, even, which of us will have to become, physically, part of those 600 if we reduce that Promethian use of energy?

Venezuela Campaign: Shortages are a feature, not a bug of the system

Despite a near-total economic collapse and against expectations, the Chavista regime in Venezuela endures. How so? In a centrally planned economy, the ruling class can use goods in short supply as a political instrument of control. In Soviet times, party members could get access to special shops where they could buy goods unobtainable elsewhere. The same is true of Chavista Venezuela, where elites benefit from the profusion of shortages. This principle is ingrained in the Venezuelan system so deeply that even currency is subject to the same manipulation and control.

However, shortages only work as a political tool when goods remain available. When Chavista managers control a nationalised factory, they can sell goods at high prices on the black market and generate extra personal income. But this is only possible while factories remain in operation. Now most Venezuelan factories lie idle, shutting off a vital source of patronage for the regime. For example, in 2010 Hugo Chavez expropriated the steel company Sidetur and handed over control of its facilities to the military. At one facility, the Barquisimeto Steel Mill, production declined until reaching 7.5% of installed capacity in September 2015, at which point it closed. The company’s other six plants have also been shut and the workers sent home. While steel was in short supply the military managers could sell scarce stock for profit on the black market. Now the plants are shut they get nothing at all, a worrying concern for a regime that needs to keep its military onside.

The regime also uses petrol smuggling to channel money to its military supporters. Petrol is almost free in Venezuela, conservatively it may be as little as $0.01 per litre, although due to the ongoing devaluation of the Venezuelan bolivar it is probably much less. However, it is almost impossible to find petrol in Venezuela, there are great shortages of petrol and one often has to queue for days. One of the primary reasons for the shortages is that vast quantities of petrol are smuggled out of Venezuela to Colombia or the Caribbean, where petrol sells for 3,700 times more than in Venezuela. This smuggling is run by gangs either controlled by or in partnership with the military. The value of the fuel smuggling business is estimated at $18 billion per annum, and a good chunk of this ends up in the hands of Venezuelan military officers.

Food shortages have provided similar opportunities for elite control and corruption. Members of the population who acquiesced to regime control were given access to subsided food boxes through “Local Supply and Production Committees” (CLAP).  But the scheme itself was exploited corruptly by the Chavistas running it, as described by Alonso Israel Lira Sala, Mexico’s Deputy Attorney General, who investigated the corruption at the Mexican end. He said their approach was to “acquire low-quality products, export them to Venezuela at marked-up prices, resell them through the CLAP to the Venezuelan population at 112% more than the real cost”.

Moreover, once in Venezuela, some of this low quality corruptly acquired food is then smuggled by the distributors to neighbouring countries where it is sold at market prices, netting a hefty profit for the smugglers.  But as the funds available to the regime decline in tandem with the continuing collapse of the country’s oil industry, the ability of regime insiders to make much money from food shortages is also diminishing. Petrol smuggling is also decreasing due to the petrol shortages caused by the collapse of oil production and refineries as a result of inadequate investment and maintenance.

This leaves the regime with two means of paying off its military support base – asset sales and drug smuggling. Most realisable assets, such as gold reserves, have already been sold. Drug smuggling, on the other hand, is booming. A recent investigation estimated that 240 metric tons of cocaine were shipped through Venezuela to western markets in 2018, and detailed how the smuggling is run by the Venezuelan military. But is it raising enough money to enable Maduro to keep his regime running?

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

Charles de Gaulle retired with honour

It is not often that a country’s leading statesman chooses to retire gracefully without having been defeated in office, but it happened in France on April 28th, 1969. Charles de Gaulle had been propelled to office by the Algerian crisis of 1958. Postwar France had been weak and divided, with a succession of short-lived and unstable governments. In a French lesson in school, I once cheekily asked, “Qui est le premier ministre de la France cette semaine?”

When the Algerian generals staged a coup in 1958, it was clear the Fourth Republic in France could not last, and General de Gaulle was called from retirement to save his country again. He tried, in the Fifth Republic, to restore France’s honour by withdrawing from NATO and making France an independent nuclear power. He gave independence to France’s colonies, including Algeria. He twice vetoed UK accession into the European Economic Community, thinking the UK would be an American Trojan horse, although he favoured a Europe of nations, rather than a united Europe.

When left-wing revolutionary students seized the universities and the streets in 1968, and were joined by striking workers, de Gaulle flew to a French military base in Germany to secure the army’s support, and returned to call a general election, ringing Paris with armed force. The violence evaporated, the election went ahead, and the Gaullists won handsomely. De Gaulle had re-energized the French middle class against the leftist revolutionaries.

A year later he held a constitutional referendum that would have decentralized much of government. When it was defeated with 52.5 percent voting against it, he resigned office and retired to his home in Colombey-les-deux-eglises (which had only one church). He had held power for 11 years.

There have been similar instances of resignation. When Chile’s Augusto Pinochet asked a referendum to allow him to add 8 more years to the 16.5 years he’d already held in office, he resigned when it was defeated, with nearly 56 percent voting against it.

Usually, when a leader has held power for too long, and the people are restless for a new leader with new ideas, it precipitates a constitutional crisis. In rare cases where such a long-term leader holds an honest election, they can be defeated, but more often than not it takes a military coup, such as the one that finally deposed Robert Mugabwe of Zimbabwe.

There is a strong case for constitutional limits. After Franklin Delano Roosevelt had been elected four times, the US imposed the present two-term limit for its presidents. In the absence of binding term limits, which Vladimir Putin had amended after first circumventing them, there is a case for a constitutional referendum before extra years can be added. Making it as honest as the ones that retired de Gaulle and Pinochet is, however, more difficult to achieve.

How can Owen Jones tell us both these things in the same article?

For different people to grasp different parts of reality isn’t odd at all. None of us manages to understand it all - one of the reasons why planning doesn’t work as it assumes that impossible knowledge. But to manage to get two entirely contradictory ideas into the one piece of journalism is going some even for Owen Jones:

If only the Daily Express was right. That is not a sentence I ever expected to type. “Extinction Rebellion protests have WORKED as MPs succumb to calls for change”, bellowed the rightwing rag. Alas, the government has not capitulated to demands to declare a climate emergency, let alone to decarbonise the British economy by 2025. But Extinction Rebellion has retaught a lesson every generation must learn: that civil disobedience works. Amid the spluttering of obnoxious news presenters, it has forced the existential threat of climate change on to the airwaves and into newsprint.

So, until people superglued them to an electricity using public transport system, the DLR, no one had done anything about climate change. Gaia was just lying there being raped by capitalism. Then we’re told - and note again, this is in the very same article:

As Bill McKibben – one of the most prominent US environmentalists – tells me, the primary challenge now is not having the means but the will. “We have the tech we need,” he explains. “The work of engineers over the last decade in lowering the costs of solar and wind panels is quite remarkable. We can do what we need to do, or much of it.

We’ve just spent a decade doing the hard bit of working out the tech to beat climate change, that climate change that no one was paying attention to until last week’s supergluing?

Seriously, how can you believe both that we’ve directed humanity’s ingenuity to developing renewables and also insist that no one’s been paying attention to the problem?

Unhappy Sierra Leone

Things looked promising for Sierra Leone when it ceased to be a UK colony and became an independent nation on April 27th, 1961. Its first Prime Minister, Sir Milton Margai, was a popular moderate, neither corrupt not authoritarian. Unfortunately he died unexpectedly in 1964, and was succeeded by his half brother, Sir Albert Margai, who attempted to establish a one-party state. Siaka Stevens, the winner of a 1967 general election, was ousted within hours by a military coup.

From then Sierra Leone's history has been a depressing succession of coups and counter coups, of a brutal 11-year civil war, and of a succession of corrupt authoritarian regimes ruling by terror. From the 1990s its economic activity declined, and its economic infrastructure melted away. Over the next decade the formal economy was virtually destroyed in the civil war.

As so often in Africa, some of the problems were down to tribalism. Sierra Leone has about sixteen ethnic groups, each with its own language. The largest and most influential are the Temne at about 36 percent, and the Mende at about 33 percent. Each group vied for a share of power, and a stake in the looted riches this gave access to. When they were denied this at elections, they sought it militarily by staging or supporting coups. The factions had their weaponry and soldiers funded by "blood diamonds" looted from the countries vast reserves of them.

With the 20-20 vision of hindsight, the ex-colonies should not have been formed into big centralized nations, with tribes not used to living alongside each other forced together under unitary government.  It was almost a recipe for civil strife. But it was their own leaders, many of them educated in the West at places like the LSE, who demanded this. They opposed what they sneeringly called “the balkanization of Africa.” In retrospect, we might have looked at the Swiss model, with each tribe having its own cantons, virtually self-governing under a loose federal structure.

Adam Smith said that prosperity just needed “peace, easy taxes and a tolerable administration of justice.” Sierra Leone had none of these. The free market is so effective at creating wealth that you can do many things wrong with a country, and it will still work. There are, however, three things you cannot do: genocide, civil war and socialism. Alas, poor Sierra Leone had elements of all of them.

It is rarely too late, though, and even now Sierra Leone could tread that upward path, nearly 60 years after its early promise. If it gave local power to different ethnic groups, created conditions enticing for local entrepreneurship, and established an independent judiciary that could spotlight and punish corruption, it could prosper. After what its people have been through, it would be nice if it could.

There's an obvious truth in this - private schools save the taxpayer money

There is a slightly odd attempt at political rhetoric out there. If private schools don’t charge VAT on their fees - as charities they don’t - then this is somehow a cost to the taxpayer. And yet:

Private schools are saving taxpayers billions of pounds a year, their head teachers have said in a forceful defence of the sector.

The heads used their annual report yesterday to assert the financial benefits of fee-charging schools and the good they are doing for society.

The schools bring economic benefits and taxpayer savings totalling more than £20 billion a year by educating pupils who would otherwise need state places and by providing employment, community facilities and tax contributions, an analysis for the Independent Schools Council (ISC) has found.

We’re always very wary of these calculations. Add up all the economic benefits claimed by everyone and we get to a sum larger than our economy. Not how it should - or even can - work. However:

Oxford Economics found that private schools saved the taxpayer £3.5 billion last year because children were not taking up state school places.

It’s undoubtedly true that if children aren’t going to state schools then the state isn’t paying the bill for them to go to school. No one does get a rebate of their taxes, there is no voucher system that follows the pupil into that private sector.

Which does pose an interesting question for those who would abolish the private school system. Where are you going to get the money to replace it? Further, given this saving it seems a little odd to be wibbling over the comparatively marginal VAT bill, doesn’t it?

Of course there should be limits on what people can say online

If a private company decides to allow, or not, certain speech to take place on company property that’s up to the company. Private property does actually have a meaning, that being that it is private if you can determine its use. If the government decides what may be said that is censorship.

It’s entirely possible for there to be good censorship too. Not allowing immediate incitement to violence seems to us to be a pretty good rule and it’s one that has long been law.

However, we do rather insist that whatever rules - incitement, libel etc - must be general. The moment we start being specific about which speech is not allowed then we’re on that slippery slope. Yes, we know, slippery is a logical fallacy unless it’s inevitable that the next step follows. Which is what we assert, the next step is:

More than half a million British children are unvaccinated against measles, new figures show, as the head of NHS England challenged social media giants to block “grossly irresponsible” anti-vax propaganda.

Sites such as Instagram and YouTube should adopt “zero tolerance” regimes, Simon Stevens said as Unicef data revealed the UK to be among the worst high-income countries for uptake of the jab.

There is the argument that if people wish to be so gargantuanly stupid as to not vaccinate their kids against a killer disease well, good luck to them, that’s freedom. Equally we can argue that there’s a public problem here, the herd immunity, and anyway children shouldn’t suffer because of the mental deficiencies of their parents.

But either way that’s an argument for making vaccines compulsory or not so. It’s not an argument to restrict what people may say on either side. Because the moment the power to determine the specifics of speech - rather than those broad and general rules - becomes available it will be further used.

By analogy, Facebook has banned any white supremacists etc. As above their gaff, their rules. But note that they’ve banned people arguing for discrimination, even rejection and or violence, on the grounds of race. They’ve not banned those arguing much the same on the grounds of class. You know, the elimination of the bourgeoisie stuff. And we’re really very certain that being discriminated against because of social origin is no better - nor worse - than upon any other birth attribute.

To be more specific here “You can’t argue against medical treatment we approve of” is the claim that is being made. And when it’s put like that then it’s obviously not a speech restriction we can support, is it? Medical treatments generally approved of have included, over the centuries, clitorectomies, lobotomies, sterilisations, and that’s before we get to currently controversial subjects like child gender assignations, abortion and so on.

Sure, we support measles vaccinations, but curtailing speech about them isn’t the right thing to be doing. Simply because once that power is taken it will be further used.