The Wright stuff

It was on December 17th, 1903 that Wilbur and Orville Wright took to the skies in a heavier than air machine at Kitty Hawk, North Carolina. They were originally into bicycle manufacture and repairs, but were very gifted engineers. They had to design new propellers from scratch, since previous ones had only been used in water. They had to devise a method of steering, and invented a way of warping the wing to alter its presentation to the air. Their flight was for a smaller distance than the wing span of a Boeing 747. But it did the job, and they went in to improve and refine their craft until it pioneered the modern aviation industry.

It seems astonishing in retrospect that it was only 65 and a half years later that humans put their footprints on the moon. Such is the accelerating pace of modern progress.

It was also on December 17th, this time in 1935, 32 years after that first hesitant flight, that the Douglas DC3 Dakota first took to the skies. It was one of the most successful and widely produced planes, the first to be valid as a passenger-only plane, and one that saw extensive military service as the C47. I was surprised on one of my early rips to the Florida Keys in the late 1980s to find myself in a DC3 passenger plane that was probably older than I was, yet still in commercial use.

Exactly one hundred years after the Wright brothers first flew, Burt Rutan’s privately built and financed SpaceShipOne went supersonic for the first time. The following year it went on to win the X-Prize for taking passengers into space. To appreciate the pace of change, reflect that the smart phone, the indispensable and ubiquitous gadget of today, was not launched until four years later. And those who claim that we cannot go on “using up” the planet’s resources, should reflect that the iPhone in today’s pocket uses a tiny fraction of the resources that went into the room-full of junk needed a couple of decades earlier to fulfil the functions that it achieves.

The point to appreciate is that the Industrial Revolution has taken us out of the world of Parmenides, in which everything is constant, and plunged us into the world of Heraclitus. We step and do not step into the same river, for new waters flow ever about us. The technology present at our birth seems like ancient history as we mature, and older people find it hard to keep pace with it.

There are those who want us to stop, who yearn for constancy, and who want to live in a predictable world that we can shape. It is not going to happen. The pace of change is accelerating. Lab-grown meats, autonomous cars, people-carrying drones, and genetically engineered organisms are just a handful of the technologies that will make the future unrecognizable from the past.

We can cope with this by staying flexible and adaptable, using our creative skills to solve the problems that developments bring with them, and using the new technologies to solve the problems that have eluded us thus far. It is possible to look to the future in terms of the hazards it might present, or to look to it in terms of the opportunities it will offer. In virtually every measure of the human condition, the present is better than the past, and the future will be better still.

Actually, this would work

Larry Elliott tells us that Boris must now do something for the North. Perhaps so, one nation conservatism does mean that all in the nation should benefit. The thing is though, why wouldn’t this work?

Boris Johnson now has to deliver for voters in his newly won seats in Wales, the Midlands and the north. He is unlikely to do so with an agenda of labour market deregulation and spending cuts.

In the medium to long term, as Paul Krugman has pointed out, it’s pretty much all about productivity. And labour market deregulation aids in boosting productivity simply because it makes the adoption and deployment of new technologies easier. Thus more of it is done.

We can look back into our own past history of rigid and union defined labour markets to see the truth of this, British industry did not cover itself in glory in the manner it adopted new ways of doing things now, did it?

There is also the more theoretical point that we know what boosts productivity - market competition. Wages do indeed follow productivity therefore we need the competition to drive them up over time. This being true of labour markets too.

Oliver Cromwell, who protected Britain from freedom

Oliver Cromwell was declared Lord Protector of the Commonwealth of England, Scotland, and Ireland "and of the dominions thereto belonging" on December 16th, 1653. He had been one of the Parliamentarians opposed to the rule of Charles I, and had distinguished himself as a commander in the civil war that ensued. He had signed, with others, the order to execute King Charles in 1649, and served in the so-called Rump Parliament until he forcefully dissolved it, sending soldiers to overwhelm its independence.

Britain had given up its monarchy to be ruled under a military dictatorship. Cromwell thought he was guided by God to implement his will on Earth, and was ready to do so without pity. He was fervently anti-Catholic. Indeed, the Long Parliament he dominated passed an ordinance in 1647 confirming the abolition of the feast of Christmas, which Cromwell believed was an abhorrent and sinful vestige of 'popery.' His troops slaughtered Catholic civilians in Ireland in their thousands.

After Cromwell became Lord Protector, he took to signing himself "Cromwell P." with the 'P' standing for Protector, mimicking kings who put an 'R' for Rex after their name. He set up local groups of 'triers' to vet potential ministers for their purity of thought, and 'ejectors' who could dismiss 'impure' clerics and teachers.

Just like a monarch, he was succeeded when he died by his son, Richard. Cromwell, but the latter was soon forced from office, and the monarchy restored under Charles II. Cromwell had been given an elaborate state funeral and a burial in Westminster Abbey, but after the Restoration his corpse was dug up, displayed, and then beheaded.

Cromwell was regarded by some historians as a liberator who saved Parliament, but subsequent judgements have been harsher. It is now regarded as absurd that Parliament has a statue outside it of the only man who abolished it. An influential children's novel, "The Children of the New Forest," published in 1847 by Frederick Marryat, helped turn the tide, portraying Roundheads as dour killjoys, and Cavaliers as dashing and romantic.

Many people today see in Cromwell a prototype of the 20th Century dictators, so convinced of the rightness of their cause that they would slaughter people in their millions to advance it. And even today, some see a reflection of Cromwell in people gripped by an ideology that tells them that it alone embodies justice, and that the rightness of their cause allows them to engage in any behaviour that supports it, even if this involves renouncing basic human decency.

Cromwell was a fanatic, and those who today think that their self-convinced virtue justifies any behaviour share that fanaticism.

Equalising wealth is more difficult than it looks

A report claiming that the great diminution of wealth inequality in the 20th century didn’t happen. Or rather, didn’t happen quite as much as people think it did. The reason being that people lie, especially about taxes:

The answer? Lots of it goes awol, not being declared when members of the dynasty die. For individual families this could be the result of incompetence, but overall that can’t explain the scale of what is going on. The richest 1,500 dynasties of 1892-1920 had at least 20%-32% of their wealth hidden by their descendants in the second half of the 20th century, with richer families hiding more of their wealth.

The research is here. We’re not entirely sure we believe the argument itself. Because there’s a certain fact about how great fortunes used to be held - agricultural land was the thing. And the great stylised fact about wealth is the plunge in the relative value of agricultural land over the past 150 years. The steamship opened the American prairies as food sources, the refrigerated ship the pampas, the railways the Ukraine. As each change worked through the system British land prices fell - relatively that is, not necessarily in nominal, money, terms. As we’ve noted before time was that 3,000 acres would finance the building of a baronial manse, today the same estate wouldn’t cover the maintenance bill for the roof.

But such quibbles aside the paper is of great interest.. Firstly, if true, then the seeming rise in wealth inequality in recent years isn’t true. Further, if the decline in it didn’t happen then all those good things ascribed to the reduction also can’t be so allocated. Something else must explain those claimed glories of the mid-last century and so too must it be true that the taxation of wealth won’t bring them back.

The largest lesson though is about the power of the state. If the panopticon can’t actually tax such things effectively then perhaps we should be seeking solutions to our varied problems that don’t involve the state being that panopticon?

Eiffel – symbolic engineer

Gustav Eiffel, one of the 19th Century's significant engineers, was born on December 15th, 1832. He became one of the leading figures in France's Industrial Revolution which, for economic, cultural and political reasons, developed much later than its English counterpart. France was building infrastructure such as railways, and needed creative engineers to build the bridges and viaducts it needed.

Eiffel pioneered many innovative design features, including prefabricated bridges that could be transported in sections to remote areas and then assembled with nuts and bolts rather than welding, and thus needing less skilled labour. He built bridges across Europe, showing a talent for combining the aesthetic with what the function required and what the materials allowed.

He is most famous for two projects that became cultural icons. He designed and oversaw the construction of the Eiffel Tower, erected for the Great Paris Exposition of 1889. He also designed the internal structure of the Statue of Liberty, and had the entire statue erected at the Eiffel works in Paris before it was disassembled and shipped to the United States. Both of these works became symbols of the nations in which they were located.

One project he was involved in that went wrong was the early attempt to build a canal across Panama. After he'd been involved for a year, the company building it went into liquidation and there were court cases that followed. Charged with raiding money under false pretences, he received a fine of 20,000 francs and two years in prison, although both sentences were quashed on appeal.

His nearest counterpart in the UK was probably Isambard Kingdom Brunel, also French by origin. It was an age when engineers could conceive and build massive prestige projects, taking on challenges hitherto thought impossible, and astounding the world with virtuoso achievements. The successful ones tended to combine a creative imagination with secure knowledge of the forces and stresses at work on the materials, and an attention to the details of every part of the project.

It was also an age in which people of talent could raise money from backers to fund such ambitious projects as these, projects that left their mark on the world and still inspire admiration for the beauty and practicality with which they combine form and function. Few of today's engineers are household names, and few stamp their individual personality on projects that are more likely in modern times to be constructed by teams without public presence, and often funded, at least in part, by public money.

Gustav Eiffel was one of the larger-than-life figures who strode across the 19th Century, role models who inspired others to aim at greatness. The world is poorer by the relative lack of such figures in modern times.

If you're worried about economic rents why not reduce economic rents?

The latest attempt to justify eyewatering tax rates is to insist that high incomes are largely gained from economic rents. Thus we should tax high incomes because economic rents.

For most of the last four decades, the gains from economic growth have flowed overwhelmingly to the rich. Much of those gains to the rich weren’t “earned” in any traditional sense, but rather extracted, excess profits squeezed out of a system designed to favor those who already have power, position and wealth.

The justificatory paper is here and looks at, as it should, the manner in which American doctors, lawyers, financiers and the like make high incomes.

Well, call us Mr. Picky if you must but we do tend to think that if you’re worried about the unfairness of economic rents then the solution is to reduce the ability to claim income from economic rents. That does seem to, rather neatly, deal with the problem.

We thus find ourselves agreeing with Milton Friedman in arguing that the American Medical Association should be abolished, or stripped of licensure powers, because its existence, or perhaps licensure powers, protects those economic rents earned by doctors.

We might even go on to agree with the Cato Institute and observe the manner in which the American labour market is infested with such requirements for licensure. Some one third of all jobs require a highly restrictive licence - membership of a guild in effect - for it to be legal to perform that labour. Strip those requirements away and we reduce that ability to collect economic rents on labour income.

We’d also add our own solution. Such licences are near always state based - moving across the state line requires the acquisition of a new one with the new restrictions placed upon who may have one. Thus there is an obvious solution, use the Commerce Clause to impose Federal recognition of each state licence in every state. Given that there are 50 states then at least one of them can be relied upon to issue a licence to do whatever for $25 or the like. Licensure then becomes a boring collection of cheap documents, not an actual barrier leading to the creation and appropriation of those economic rents.

Perhaps that solution doesn’t appeal. But back to us being Mr. Picky. If you wish to complain about economic rents then you should be proffering solutions to economic rents. Not using their existence as an excuse to tax the bejabbers out of everyone. For without your offering a solution to the thing you’re actually complaining about we might think it is just an excuse to doing that taxing of the bejabbers.

And that would never do, would it?

Andrei Sakharov

We said goodbye to Andrei Sakharov on December 14th, 1989, 30 years ago. He lived just long enough to witness the total collapse of the evil regime he had spent much of his life in opposition to.

As a PhD physicist, his primary interest was initially in cosmic rays, but he was assigned to the postwar team that developed the first Soviet atomic bomb. They were able to produce one rapidly because Soviet spies had stolen the technology from the US Manhattan Project. Sakharov researched a possible way of making thermonuclear weapons in a way that was totally original, however, and produced a device radically different from the US Teller-Ulam design. Although the US exploded the first H-bomb, Sakharov's design for the Soviet Union was in many ways more practical, and gave them a brief lead in thermonuclear technology.

His work made Sakharov a leading figure, a position he used to campaign for civil liberties and human rights, to the increasing concern of the authorities. He was also concerned by the implications of his scientific work, and opposed both nuclear proliferation and atmospheric testing. He was involved in the 1963 Partial Test Ban Treaty.

Sakharov broke with tradition by publicly opposing the election of Nikolai Nuzhdin to the Soviet Academy of Sciences, citing his responsibility for "the defamation, firing, arrest, even death, of many genuine scientists." When he succeeded in preventing the election, the KGB began to compile a dossier on Sakharov.

From 1968, he emerged as the leading dissident figure, publishing calls for civil liberties and staging vigils outside closed courtrooms. He made public appeals on behalf of over 200 prisoners he thought were unjustly detained. He was in 1970 a founder member of the USSR's Committee on Human Rights. With others he wrote petitions and established contacts with international groups campaigning for human rights.

He came under increasing pressure and, when awarded the 1975 Nobel Peace Prize, was not allowed to leave the country to collect it. His wife did, though, on his behalf. Sakharov wrote publicly that the state he had once thought of as a breakthrough to a better future for mankind, was now corrupted.

"Yet our state is similar to a cancer cell – with its messianism and expansionism, its totalitarian suppression of dissent, the authoritarian structure of power, with a total absence of public control in the most important decisions in domestic and foreign policy, a closed society that does not inform its citizens of anything substantial, closed to the outside world, without freedom of travel or the exchange of information."

After he opposed the Soviet war in Afghanistan, he was exiled to Gorky, off-limits to foreigners, in 1980, and was held in internal exile until 1986. When his wife was arrested, he went in hunger strike to demand her release, and to allow her to travel abroad for heart surgery. He was detained in hospital and force-fed. The Politburo, under international pressure now, allowed her to go for surgery in the US, but sentenced her to Gorky on her return. Finally, in 1986, Gorbachev told them they could return to Moscow.

There are many Sakharov prizes now to recognize those who campaign for human rights, including the European Sakharov Prize for Freedom of Thought. There are also streets named after him and statues to honour his contribution. He was a brave man, enduring innumerable seizures, searches and detentions, but ultimately he won. He shamed his country, and in doing so, helped bring about the demise of one of the most corrupt and poisonous ideologies that ever held sway.

Amazingly Polly Toynbee does manage to ask an interesting, even correct, question

We are not, around here, enamoured of Polly Toynbee’s political perspicacity. And yet she manages to ask an interesting question. Even, the interesting question:

Why should we not tax and spend the same as similar north European countries?

Quite so, why not?

Not that we agree with the idea, we’re not in favour of more state, more governance. But it is the interesting and important question. Why shouldn’t we? Either why shouldn’t we agree with the idea, or why shouldn’t the polity do exactly that?

The answer being in what exactly it is that those other countries do.

Polly is really referring to the Scandinavians here, her perennial cry of why can’t we be more like Sweden? Which we could be of course, sure we could. But to do so we’d have to understand what it is that Sweden does.

Which is be more free market, more capitalist than we are. Then they slice a larger chunk off the top of the economy to redistribute. This being what the Nordic Way actually is.

Sweden has no inheritance tax, you pay a fee to go and see a GP. The school system is a pure voucher one. Denmark’s fire and ambulance services have been privately provided since the 1920s. All of the Nordics come high in those measures of economic freedom listed by Heritage and Fraser.

We could indeed do the same if we so wished. Capitalism and markets red in tooth and claw soothed by the balm of redistributionary taxation.

No, we don’t think it a good idea but it is one of the two sociopolitical models that works. The other being capitalism and markets red in tooth and claw without so much redistributionary soothing balm.

The ones where we don’t use markets and we don’t use capitalism don’t work in producing the desired end goal, which is that the people gain more of what the people desire, that measure of their becoming richer over time.

That is, to answer Polly’s question, we can only tax and spend like our North European cousins if we do as they do. We’d have to carve government out of the economy in order to provide the room to be able to tax it at those levels. Once there’s a British left that understands this point then it might even be possible to have that social democracy Polly so desperately desires. Except, of course, that she doesn’t really because she doesn’t understand what it is that makes that Nordic model work. She’d be entirely horrified if we enacted the market and capitalism part which is exactly why she can’t have the tax and spend she claims to desire.

The last moonwalk

It was on December 13th, 1972, that Eugene Ceman and Harrison Schmitt, crew members of Apollo 17, stepped out onto the lunar surface on their final extra-vehicular activity (aka moonwalk). It had been an extraordinary mission, starting with a night launch and including three days on the moon and three trips in the lunar rover, the longest of which saw them 4.7 miles away from the lunar module, at the limit of the range they could have walked back if the rover had failed.

They collected more lunar samples than on previous landings, aided by the professional eye of Schmitt, a trained geologist. Before re-entering the module after their final EVA, Gene Cernan uttered the final words spoken on the moon’s surface: “… as we leave the Moon at Taurus-Littrow, we leave as we came and, God willing, as we shall return, with peace and hope for all mankind.”

No-one would have suspected, at that time, that over half a century later, humans would not have returned there. It was a hiatus in manned exploration, one only partly filled by the International Space Station circling in low Earth orbit. The American public and the politicians representing it had grown bored of the space race now they had beaten the Russians. Having achieved humankind’s greatest dream, the subsequent visits seemed like an anticlimax. The continuing cost was a factor, too.

We had all supposed that humans might establish a lunar base. and then go on to Mars. Few of us had realized how close to disaster those early flights had been, or the jump in scale that would have been needed to continue. However, there is now a renewed interest in space, and a renewed determination to continue manned exploration.

Private companies funded by tech billionaires are playing a key role, with SpaceX and Blue Origin out there among the leaders. But the US government’s own programme is ambitious, and looks not only to more manned lunar landings, but to Mars beyond, and perhaps the asteroids.

When we landed on the moon, I remember the huge sense of achievement that swept the planet, uniting us all in thrilling that ours was the first generation to visit another world and look back on our own from the far distance. It gives us a useful sense of perspective to appreciate how tiny we are, and how insignificant our problems are in the grand scheme of the universe.

It is a good thing if this encourages us to tackle and solve those problems instead of screaming in despair and prophesying ruin. When we make the first return since the Apollo 17 astronauts left, it will reassure us once again that we are the species that solves its problems and overcomes its challenges.

Economic growth is an odd little thing

As ever we’ve those around us insisting that if we put all the really bright people into government then they’ll be able to plan our economy for us. Leave aside that we never do get all the really bright people in government, that idea of the planning doesn’t work either. The world, the economy, is too granular for any central body to ever hope to plan it.

Today’s example is at Inditex, the people who own Zara etc.

The world’s largest clothing retailer has posted a surge in profits after an investment in stock-tracking technology made Inditex even more efficient.

What stock tracking is that?

It reduced stock levels by investing in radio-frequency identification technology, which means that clothes in stores can be tracked via microchips and moved between shops to cater to demand.

The effect?

As a result, Inditex’s inventory costs fell by almost £200 million to €3.4 billion.

An expanding firm actually lowers its inventory costs? That’s a pure increase in human wealth. We now get more retail services for less capital allocated to the provision of retail services. This is an increase in the Solow Residual.

This also isn’t the sort of thing we’re going to gain from a state led bureaucracy. Sure, we might argue that we could, but do we? Does MoD use such stock tracking, the NHS? And if not, why not? Or, even, if they don’t, as they don’t, then we’ve just found an argument in favour of that profit motive, haven’t we? The incentive to apply new technology to increase efficiency.

Not that this basic thought is entirely new of course. Sam Walton’s great insight was how to tie barcodes at the tills into the stock ordering system back at the warehouses. That grew into Walmart. This capitalism malarkey does rather provide the incentives to increase efficiency.