Political diplomats

You might think that the term "political diplomat" is an oxymoron, but it is not one in the United States. Ambassadors representing that country are often chosen, not on the basis of any diplomatic experience or skills, but because they are friends and supporters of the current President. Joseph Kennedy, who died 50 years ago on November 18th, 1969, was such an appointee, representing President Roosevelt and US interests in Britain in the run-up to the Second World War, and during its early stages.

His qualifications for this highly important post were that he was an investor and businessman who had supported and contributed to the Democratic Party, and helped to bring Roman Catholic voters onside, as a high-profile Catholic himself.  He was also very rich. He made a fortune in the 1920s bull market, often by what today would be called illegal insider trading. Famously he decided to quit the market in 1929, deciding it was over-extended when a shoe-shine boy gave him investment tips.

His wealth vastly increased when he invested in property during the Great Depression. He also invested in the newly-emergent movie industry in Hollywood. Allegations that he profited from bootlegging during Prohibition were never substantiated. President Roosevelt rewarded his massive financial backing and fundraising by making him Chairman of the new Securities and Exchange Commission, then Chairman of the US Maritime Commission.

In 1938 Joseph Kennedy was appointed US ambassador to the UK, and he hoped to succeed Roosevelt as President in 1940. However, he supported appeasement, and tried to arrange meetings with Hitler. He opposed the US giving military and economic aid to Britain. He sent back reports saying Britain was finished, and was looked down on for his defeatism. When the Royal Family and the government stayed in London during the blitz, Kennedy retreated to the countryside, prompting a Foreign Office official to say, “I thought my daffodils were yellow until I met Joe Kennedy."

Joe Kennedy wanted to be the first Catholic President, but it was not to be. Roosevelt stood again in 1940, and Kennedy’s influence declined. He resigned as ambassador. British MP Josiah Wedgwood described him as “a rich man, untrained in diplomacy, unlearned in history and politics, who is a great publicity seeker.” He was also thoroughly unpleasant, virulently anti-Semitic, saying of the Jews that “as a race they stink. They spoil everything they touch.” When he learned of Nazi assaults on Jews. Kennedy’s comment was, "Well, they brought it on themselves."

His wealth brought him political alliances, and it was alleged that he bought the Presidency for his son, JFK, by paying the notoriously corrupt Democratic Chicago machine to rig the votes in Illinois. Of the three sons who went into politics, two were assassinated and the third was disgraced when he crashed a car off a bridge and was too concerned to set up a false alibi that he left a girl to drown in the back.

There was nothing remotely diplomatic about the former ambassador. On the contrary he was a fixer and a crook, but he had money and used it to buy political favours. UK ambassadors are usually those who have worked their way through the Foreign Office and shown or learned the diplomatic niceties. Occasionally political appointments happen, but they are rare. On the whole, the UK system works. It is more low-key and more mannered. It doesn’t always appoint urbane and skilful diplomats, but it never appoints charlatans.

An amusement about Labour's nationalisation of the country's broadband system

Leave aside everything else being said about Labour’s surprise announcement that, given election victory, they’d nationalise the country’s broadband system. Then offer the service, over fibreoptic cabling, for free, to every household. Think just on the one point to follow:

Only 8% of the UK has access to ultra-fast broadband. McDonnell said: “The development of our new technology infrastructure has been held back as a result of the failures of government to invest, and BT itself obviously can’t marshal the resources government can, and that’s why we’re intervening.”

We’re just about to take the next step in mobile telecoms technology, to 5G. This is rolling out in 20 UK cities so far. One of the advantages of this 5G being that it’s possible to use it for the “last mile” for a broadband internet link.

That is, it is no longer necessary to put fibre to every household in the nation.

Which is precisely the point at which we’re promised government action to put fibre to every household in the nation.

If nothing else this election promise is an excellent example of why we shouldn’t use politics and government as a method of organising technological advance, no?

Global trading

The Suez Canal opened on November 17th, 1869, and it was on the same date 44 years later, in 1913 that the first ship sailed into the Panama Canal. The Suez Canal connected the Indian Ocean to the North Atlantic via the Mediterranean, and the Panama Canal joined the Atlantic to the Pacific. The Suez Canal eliminated the need for ships to round the Southern tip of Africa, and the Panama Canal cut the need to pass the stormy seas off the Southern tip of South America.

Both were stupendous engineering projects, and both facilitated global trade, making freight and passenger transit times both shorter and safer. Both were early pioneers of measures to speed up worldwide trade, and both lowered not only the time it took to convey goods internationally, but also the cost of doing so,

The construction of the Suez Canal was easier, but the Panama Canal required a vast system of locks to allow for the different sea levels of the two oceans. The French engineer, Ferdinand de Lesseps, who built the Suez Canal, was thwarted by the challenge of the Panama project, and saw his construction firm go broke, and have the undertaking later taken over by the United States.

Both canals have enjoyed a chequered political history, since they represented strategic choke points that different powers sought to control. They represent a determination to make the world smaller, and to make travel easier. Since their construction, this drive has continued with projects such as the Channel Tunnel joining Britain and France, and the Oresund Bridge connecting Sweden and Denmark. Later still came the $20 billion Hong Kong-Zhuhai-Macau Bridge, the world's longest sea-crossing bridge.

Perhaps the ultimate will be a link across the Bering Strait, establishing a land link between the United States and Russia, most likely built as a combination of a bridge and a tunnel. The point of these endeavours is that surface links, either by sea or land, make for much less costly transport than air transport provides. They also enable pre-packaged containers to be loaded onto different vehicles without goods needing to be off-loaded and reloaded at various stages of their journey.

Ventures such as these represent projects of international co-operation, as well as means of facilitating transport. They call to mind the view, attributed to Claude-Frederic Bastiat, that when goods cross frontiers, armies rarely follow. Nations that trade with each other grow used to negotiating with each other and tend to settle disputes peaceably, by agreement or by legal settlements.

A globalized world, trading across frontiers, and aided by the shortcuts that bold engineering projects can make possible, is more likely to be a peaceful world. It is also guaranteed to be a richer world, creating the wealth that international specialization and exchange makes possible. We thus have every reason to applaud and thank the bold engineering pioneers who made the world smaller, who made it closer, and who helped to make it richer.

A distinct failure of logic - why must utilities be publicly owned?

There is that PJ O’Rourke comment to consider, that if you think health care is expensive now wait ‘till you see how much it costs when it’s free:

Labour’s plans to renationalise part of BT to offer free broadband to all has sparked warnings that the plan would suffocate competition, bankrupt rivals and cost as much as £100bn.

Jeremy Corbyn said on Friday at Labour's policy launch that the party would buy Openreach, the network infrastructure arm of BT, from shareholders.

“What was once a luxury is now an essential utility. That’s why full fibre broadband must be a public service,” the Labour leader said.

Offering free broadband would save households £30 per month on average, Mr Corbyn said.

The contention that a government behemoth will cost each household less than £30 a month seems dubious, at best, to us.

But it’s the free to households that looks to be the deeper economic problem. Bandwidth is a scarce resource. Access to it has to be controlled in some manner. The best way of rationing any scarce resource is through the price of it.

After all, we don’t want everyone to be Hillary and running their own servers at home, that’s going to overpower the network - make it vastly more expensive that is - in no time at all.

There’s also that problem of an essential utility. Why must that be a public service? After all, if something is truly essential for a civilised life why would we turn over provision of it to the more inefficient method of doing so, bureaucratic control?

Oswald Mosley - a man who embraced evil

On November 16th, 1896, Sir Oswald Mosley was born. The title was inherited, not awarded, via a baronetcy. He saw service in the First World War, and was elected as MP for Harrow in his early 20s, serving there from 1918-24, initially as a Conservative, then as an Independent. He subsequently joined the Labour Party and became MP at a Smethwick by-election in 1926.

He served in the Labour Government of 1929-31, and was regarded as a possible future prime minister. He was described as “strikingly handsome,” “probably the best orator in England,” and “with great personal magnetism.”

However, he resigned from the government because he didn’t think it was doing enough on unemployment. He founded ‘The New Party,’ admiring what was being achieved in Europe by Mussolini and Hitler. The party became the British Union of Fascists, and aped its continental counterparts by having black-shirted thugs to commit street violence against opponents.

This largely and rightly discredited him, although it was the outbreak of the Second World War that saw his support evaporate, since the fascists were now the enemy. Mosely himself was interned in 1940 on the orders of Winston Churchill under regulation 18B, and was not released until 1943, and even then placed under house arrest.

After the war he attempted to return to politics several times, but was by now a marginal and discredited figure who had no impact on events. He went to live in Paris, and finally died just outside it at Orsay, at the age of 84, having achieved nothing of consequence since he was 35.

He is an example of an immense talent, fatally flawed by poor judgement. Looking at history’s ‘what ifs,’ had he not resigned he would almost certainly have held high office, perhaps even rising to become Prime Minister. As it turned out, though, he provides an example of those who, had they known where the road would lead, would never have set their first foot upon it. In wanting efficiency to address social problems, he ended up embracing evil.

In a more sinister ‘what if,’ had Hitler succeeded with his Operation Sea-Lion and conquered Britain, Sir Oswald Mosley might well have emerged as his puppet Prime Minister, as Vidkun Quisling did in Norway. Like Quisling, he might have engaged in, or acquiesced in, war crimes, including the murder of Jews and political opponents. Had Nazi Germany been ultimately defeated by the combined might of the USA and the USSR, Mosley might, like Quisling, have met his day of reckoning by facing a firing squad.

It never happened. And we fortunately never found out the consequences of his opinions in practice.

Labour's broadband plans - there's a reason we don't do tax hypothecation

It can be somewhat depressing to continue to make the same point for a decade and more but that’s where we find ourselves with this latest little plan from the Labour Party. Hypothecation of tax revenue is simply a bad idea. But they’re trying it again:

A Labour government would nationalise Britain’s broadband network and offer free internet access to every household and business in the country, the party will say today.

That idea contains its own foolishness of course. We are not, to put this mildly, in a state of technological certainty over broadband. It’s still a developing technology that is. We’d rather like to have market competition therefore, the one thing that any nationalisation and free provision is going to kill stone dead.

We do all, after all, recall how wondrous the GPO was at extending coverage and advancing technology back in those pre-privatisation days?

But more than that there’s this:

Mr McDonnell told The Times that a new Labour government would make a priority of establishing the new state-owned entity, British Broadband.

The running costs, estimated at £230 million a year, would be funded from a new tax on multinational companies. They would be charged a percentage of their profits, according to a calculation of what proportion of the assets, staff and turnover was located in Britain, he said.

Hypothecation is the idea that this tax, raised on this activity over here, will be spent upon this, different and unrelated, activity over there. It’s an idea that is more than just foolish. For what is the connection between the profits of companies and the costs of broadband?

Say we have a horrible recession - apply your own odds of that with McDonnell in office - and thus corporate profits drop substantially. Does that mean we wish to spend less on broadband? Say that the glory days of the 1970s return and the profits made in the economy fall below even the costs of depreciation, as they did. Does that mean we wish to spend nothing on broadband?

Equally, say that the Indian subsidiary of a company that also trades in the UK - this tax is to be on global profits allocated proportionately to Britain - profits from that swiftly growing economy. Why does this mean that we in Britain should righteously put more of our own GDP into building broadband?

Which is the problem with hypothecation. Whatever the formula used there simply is no connection, whatsoever, between the amount that can or should be raised in tax over here and what should, or could, be spent on this other activity over there. Which is why it has been, for centuries now, a basic rule of fiscal policy that we don’t do hypothecation of taxes. We don’t even reserve national insurance to pay for the welfare state it is meant to fund.

Yes, of course the nationalisation of broadband is a bad idea, it’s election season. But the method of paying for it is even worse.

Nye Bevan fathered the National Health Service

Aneurin Bevan was born on November 15th, 1897. As Health Minister in the 1945 postwar Atlee Labour government, he was instrumental in founding and shaping Britain’s National Health Service.

He was born in Tredegar, a Welsh town where 90% of the population relied on the coal mines for their income. He left school at 13 and worked as a miner in his teens, involving himself in union politics. At the age of 32 he was elected as MOP for Ebbw Vale, a safe Labour seat. He was a firebrand, overcoming a boyhood stammer to become an eloquent orator, and made passionate speeches against Lloyd George and Winston Churchill. He was expelled from the Labour Party at one stage for sharing platforms and publications with the Communist Party.

He was highly critical of Churchill’s wartime government, saying he would have preferred a class war to a world war. He said of the 1945 postwar election:

“We enter this campaign at this general election, not merely to get rid of the Tory majority. We want the complete political extinction of the Tory Party, and twenty-five years of Labour Government."

When Labour won, he was appointed Minister of Health and set about creating a totally tax-funded healthcare system. He faced opponents within his own party and from the medical profession, and had to make concessions such as allowing doctors to keep their private practices. He famously said that to get the deal through, "I stuffed their mouths with gold." The Act was passed in 1946, nationalizing over 2,500 hospitals within the UK.

Following the party’s defeat in 1951, Bevan’s influence declined, though he led a group of hard-left MPs called ‘Bevanites.’ He was beaten by Hugh Gaitskell for the Labour leadership when Atlee quit, though he later served briefly as deputy leader. He remained controversial, saying:

“No attempts at ethical or social seduction, can eradicate from my heart a deep burning hatred for the Tory Party that inflicted those bitter experiences on me. So far as I am concerned they are lower than vermin.”

The Tories responded by forming ‘vermin clubs’ and proudly wearing furry vermin badges. His colleague, Herbert Morrison, said the speech “had done much more to make the Tories work and vote than Conservative Central Office could have done.” It was reckoned to have cost Labour more than two million votes.

Bevan was part of a government that was ruinous for Britain. Central planning and nationalization simply didn’t work, whatever socialist theory might say. No other country has copied Britain’s National Health Service, which still faces crises every year. Bevan’s legacy is thus one of failure. It might have been well-intentioned failure, but it was ideologically driven rather than experienced based. History shows us that when you ignore the real world in order to construct fantasy worlds, that real world has a habit of coming back to clobber you.

But we've already got something that scares capitalism - markets

Aditya Chakrabortty is once again showing the perils of getting your economics reporting from a modern history graduate. The contention is that the existence of communism - OK, socialism attempting to build communism - led to capitalism being ameliorated. Given the absence of a socialism that works we need something else to scare capitalism.

The task of politics today is to scare the capitalists as much as communism did

In more detail:

The very presence of a powerful rival ideology frightened capitalists into sharing their returns with workers and the rest of the society, in higher wages, more welfare spending and greater public investment. By sending tanks into Prague in 1968, Leonid Brezhnev may have crushed the dream of “socialism with a human face”; but he and other Soviet general secretaries forced capitalism to become less inhumane. Conversely, the collapse of communism between 1989 and 1991 has left capitalism unchallenged and untempered – and increasingly unviable. The challenge of our time, whether in the UK’s general election or next year’s US presidential contest, is to build a political movement that can restrain a system spinning madly out of control.

What’s missing here is that we’ve already got the very thing to scare the bejabbers out of the capitalists - markets and their competition.

As William Nordhaus noted (here) it is competition which leads to 97% or so of the value created by entrepreneurs going to consumers, not entrepreneurs. As Karl Marx noted it is competition among capitalists for the profits to be made by employing labour which raises wages.

We’re perfectly willing to agree with the first contention, that we desire something to ameliorate capitalism. We do insist though that people have a little look around the world so they can understand that we’ve already got it. Markets.

The makings of Americans

The historian Frederick Jackson Turner was born on November 14th, 1861. At the age of 32 he published one of the most seminal papers of American history, “The Significance of the Frontier in American History.” It argued that the country’s Westward expansion had produced a culture and identity that was distinctive and different from that of Europe and the East coast.

Dealing with the challenges and hazards of the frontier, those of taming the wilderness, produced a new breed of American, one characterized by a rugged readiness to cope. It produced, said Turner, the can-do spirit that characterized the American spirit. As each generation of pioneers moved Westward, they relinquished the baggage of European culture and its ideas and institutions, and developed new practices shaped by their new environment. The frontier produced the characteristics recognized as distinctively American, the spirit of initiative, of informality, of a vibrant democracy, and even of crudeness and violence.

Turner’s frontier thesis was hugely influential. It has come in for a share of criticism, of course, but there is a strong feeling that persists that he had put his finger on something significant. Later historian have traced the development of political innovations such as the ballot initiative and the recall petition as ones that arose in the West as the frontier moved across the continent. It is the American West, not the East, that has given rise to the cultural and character differences that separate Americans from Europeans.

It is significant that in the wills left by American settlers, the lists of the books in their libraries are roughly 90 percent about self-help and improvement. Even today, the New York Times best seller list of non-fiction works feature far more self-help and improvement books that their European counterparts. “How to Win Friends and Influence People,” and “How I made $1 million in real estate,” are typical.

Since there is no longer a frontier there to be tamed, or a wilderness to be faced, some commentators have suggested that the character-forming influences they represented have gone, and that Americans will gradually become less “American.” Others have suggested that if humans do set off to explore and settle other planets, then space will represent a new frontier to be faced with courage and resolution. Science fiction writers have long clambered aboard this bandwagon. “Space - the final frontier,” is a theme common to many of them.

Some would argue that a settled and more civilized life is preferable to the rough ruggedness of a frontier culture, but there is a case for suggesting that humans as a species solve problems, and there will always be a need for the problem-solving mentality because humanity will always face problems. Frederick Jackson Turner was undoubtedly in the latter group.

We're already seeing the effects of minimum wage rises

That, at some point, high minimum wages cause job losses is both obvious and generally held to be true. The question, always, is when? And the truth of the matter is that we’re already seeing those losses at current levels of the UK minimum wage:

Young people and part time workers are bearing the brunt of the UK jobs slowdown,

The minimum wage is, obviously, enough, most bringing upon those with low wages. Who get lower wages than others? The young and part timers. So, who would we see losing out from a minimum wage that is “too high”? The young and part time workers.

From the ONS:

The number of part-time workers fell by 164,000 to 8.54 million in Quarter 3 2019, while the number of full-time workers increased by 106,000 to 24.21 million.

It’s not the same people either:

The decline in part-time workers was driven by women (down 106,000 in the quarter) and the increase in full-time employment by men (up by 93,000 in the quarter).

Thus, if we’re seeing the young and part time losing out to the older and full time then what might we conclude? That the minimum wage is already too high.