The thing is, this is actually true
The Guardian treats us to a jeremiad about how political appointees in the Trump Administration are damaging the environment by being political:
“There’s too much dead and dying timber in the forest, which fuels these catastrophic fires,” Zinke said. “Proper management of our forests, to include small prescribed burns, mechanical thinning, and other techniques, will improve forest health and reduce the risk of wildfires, while also helping curb the carbon emissions.”
The thing about that is that it’s true. As with the Australian fires. Both environments have developed and evolved in the presence of frequent fires. The attempts to entirely curtail fires over the past few decades have thus built up the fuel and made the fires, when they do happen, worse.
The point being that frequent fires are low level fires, burning underbrush. If they are very occasional, with a significant fuel load, then they burn the canopy too. No one seriously doubts this basic point.
Well, except all those who want to blame the fires on climate change of course. That being politics just as much as anything the Administration is being charged with.
恭喜发财 — Gung Hei Fat Choi.
Happy New Year to our Chinese readers!
The Year of the Rat has begun. The rat is typically associated with yang, the beginning of a new day. It is also associated with wealth and surplus in Chinese culture. Chinese people have achieved immense success as great traders, as builders of creative and culturally stunning societies in China, in Taiwan, Hong Kong, and Macau — as well as settled migrants to countries right across the world, including fortunately the UK and the USA.
But China itself continues to be ruled by the dictatorial Chinese Communist Party. As we enter the Year of the Rat, the first first of all zodiac animals, China is at a crossroads.
China’s population is on the cusp of shrinking, while its economy continues to be much smaller than the global superpower of the United States of America. An expansionist foreign policy meeting global opposition, an aging population, a leader that has designated himself ruler for life, overreach in Hong Kong, belligerence towards Taiwan, the ongoing trade war with the Trump administration, questions in the West about security concerns with Chinese technology and state-involved enterprises, environmental concerns, the increase in debt of public firms. That’s before talk of organ harvesting, questionable treatment of prisoners, political imprisonment, the destruction of religious sites, a social grading system based on the moral judgements of the Chinese Communist Party, the mass internment camps for the Uighur people.
It’s not a pretty picture, and it’s getting worse. From decades of increasing economic freedom being the predominant story of Chinese success, we can seemingly only look forward to further retractions in personal and civic freedoms — in exchange for nationalism abroad and subservience to the state at home.
In Hong Kong, China’s grip continues to dominate debate — despite Carrie Lam’s best attempts to get away from it all at Davos this week — and its as good a time as any to remember that Britain has a special responsibility to act as guarantor for the liberties and way of life in the territory.
As part of our obligations under the Sino-British Joint Declaration we guarantee until 1947 the right to free assembly, the right to a free press, freedom of religion, free expression, the move to universal suffrage for officials, and the right for Hong Kong arms of government’s operations in the territory to not be controlled or coerced by the Chinese mainland.
We have failed to uphold these rights against the slow mission creep of the Chinese Communist Party in recent years, we have failed to give Hong Kong’s citizens an alternative to Communist rule, and we have failed to stand by those that British in nationality in the territory.
It’s not too late to stand up for is right, and this Chinese New Year is a wonderfully auspicious moment to do so.
It is customary to offer gifts of red packages at Chinese New Year. Might I suggest the British government looks, as we leave the EU, to give ethnically Chinese British Nationals (Overseas) a red, white and blue package instead? One filled with a blue passport, that can guarantee their freedoms and turn the tide of the debate in Hong Kong from one of fear to one of hope.
If people have an out, they must be given a reason to stay. China would be forced to do better.
The Chinese people deserve better than their current Communist masters on the Mainland but we’re limited in what change we can affect. In Hong Kong that’s not the case. We have a duty to speak out and stand up for those clamouring for the freedoms we all enjoy every day.
This country has the ability to do this and the responsibility under law to do it too. Importantly, Boris has the majority.
It’s imaginative, cunning, adaptable, and a success just in the nick of time. All the best attributes for the year of the Rat.
恭喜发财 — Gung Hei Fat Choi.
But the NHS should cost less than other health care systems
It is a standard trope that cooperation is more effective, less costly, than competition. This is one of the reasons given as to why there shouldn’t be outsourcing or private provision in the National Health Service - it’s more expensive to do it that way.
We don’t agree with that contention in the slightest but we do have to deal with arguments as they’re presented to us. The NHS, precisely because it is the NHS, is more efficient than other methods of financing and providing health care. Well, if you say so:
We don’t have enough funding. For years, the UK has lagged behind other major economies in how much money we spend on healthcare. According to a 2019 study, when compared to other major western economies, we spend the lowest amount of money on healthcare per person and it shows.
If the NHS is the most efficient method then we should be gaining the same level of health care as other countries for less money spent than those other countries. In fact, the claim that we must be spending the same amount as them is an insistence that the NHS is not that more efficient method. Meaning that, if we are to accept the insistence upon level of spending then we get to examine the claims over the efficiency of structure. Perhaps, even, to include all those bits and pieces of private provision and competition that near all other health care systems include.
That is, despite the Prime Minister being all in favour of it, we must beware of cakeism. It is not possible both that the NHS is more efficient and that it needs the same amount of cash. Either or folks, either or.
Lady Nugee insists on lowering the top income tax rate
We’re a little surprised, if we’re honest, to find ourselves agreeing on tax policy with Emily Thornberry. In her attempt - no, stop giggling at the back there - to become leader of the Labour Party she has said that tax rates should be changed so that the rich pay the average tax rate that the rich do in rich countries. We think that’s a pretty good idea. Not perfect of course, because it’s hardly a matter of pride that the state steal more, but certainly better than the current situation:
Emily Thornberry will campaign to tax the wealthiest people in society more if she is elected leader of the Labour party.
The former barrister said it was only right the richest should take on the biggest share of the tax burden, claiming that under the Conservatives the wealthiest people and businesses have been paying less.
The UK does have a progressive taxation system, the rich do carry a larger share of that tax burden. The interesting thing though is this next demand:
“The people who own the most are actually paying less in terms of the percentage. Tax rates have gone down. I’d put them back up to make them the average of the rich countries around the world,” she told ITV’s Good Morning Britain programme.
A useful definition of rich countries is those who belong to the rich countries club, the OECD. Their top income tax rates are here. The mean of those top rates (unweighted by population) is 42.4%, the UK top income tax rate is 45%.
Thus the argument is that UK top income tax rates should be reduced - we agree.
This isn’t, of course, what Ms. Thornberry either believes or means to say. But then that just shows that Lady Nugee suffers from a certain haziness about reality.
So just why is Britain building wastelands of rabbit hutches?
A complaint in The Guardian about how modern housing estates are nothing but rabbit hutches jammed together:
Matthew Carmona, a professor at University College London, whose team has surveyed new housing schemes across the country as part of a major forthcoming report, says big developers are producing too many estates with serious design flaws. “At present we are just not meeting the basic requirements for civilised living that we should expect in a country like our own,” he said.
Seems an entirely fair complaint to us.
The worst new estates lack nearby amenities such as shops, pubs and cafes. They are unconnected to surrounding areas, with few public transport links. They lack enough green spaces and playgrounds.
Simply dormitories with none of the things that make up actual civilisation. They’re also the smallest new builds in Europe. So, why is this?
The design code for the development, which will eventually see 873 homes built across 32 hectares, specifies distinctive architecture and a high-quality, accessible environment.
We’re sure it does. But why in heck are so many houses being crammed on such a small amount of land? Because the government insists that houses must be crammed onto small areas of land.
That’s around 27 dwellings per hectare there. Until recently at least the national insistence was 30 or more dwellings per hectare.
Why is new British housing nothing but rabbit hutch dormitories in civilisational wastelands? Because that’s what government insists is built. And it’s worth noting that not one single person who legislates upon, designs nor builds these horrors ever actually lives in one. They’re always for people other than those doing the insisting.
The reason modern British housing is crap is because that’s what government insists is built, crap. The solution to this is to change the insistence at least, if not the government. Rather than who is doing the building within those rules.
Don't let TfL drive Uber out of the market
It has been two years since TfL first rejected Uber’s license renewal and they still seem to be reaching the wrong decision. They have continually failed to value Uber’s popularity. Uber has 3.5 million regular users in London alone and yet TfL wants to deny Londoners the service. Backlash against Uber is not exclusive to the UK.
Today marks the anniversary of Madrid’s taxi strike. Much like in the UK, Spain’s black cab equivalent has been hostile to its biggest competitor Uber. The strike has left a black mark on the reputation of Madrid’s taxis. The standoff lasted sixteen days last year and saw taxi drivers blocking roads. But this anti-competition protest wasn’t enough to persuade people to use Madrid’s taxis. It lost them what little reputation they had left as not only did they provide an inferior service, they also actively intimidate and disrupt alternatives.
Madrid’s taxis’ refusal to embrace competition saw them suffer. Ultimately, they were forced to accept innovation and many of them have now paired with ride hailing apps such as Pidetaxi and Tele Taxi. London’s black cabs should learn from their European counterparts that resisting competition will do them no good. In the long run, it simply isn’t viable to deny consumers what they want and consumers want Uber.
Despite criticism over its safety, Uber remains popular among many adults, including parents wanting to ensure their children get home safely (with the added benefit of not having to leave their home to do so). Part of this success stems from the ability to track rides. Parents are able to see their kids in real time. They also know the license plate of the car beforehand. Uber also enables parents to pay for their kids and know they can get home at any time, no matter what the cost and that their kids won’t spend the money on other things. While Uber may not be entirely safe, it is certainly on a par with black cabs. Uber drivers must pass a DBS check and get a TfL private hire license.
There have been concerns over Uber’s safety as unauthorised drivers were able to upload their photos to the accounts of authorised drivers on some 14,000 journeys, however, this is not just cause to ban the app entirely. The overwhelming majority of journeys are conducted by authorised drivers with authorised profiles. Uber can introduce safety measures such as requiring photos to be taken at Uber’s office and then uploaded by Uber itself or random spot checks. Safety concerns are not, however, limited to private hire vehicles. Those who criticise Uber in favour of black cabs seem quick to forget cases such as the black cab rapist, John Worboys.
Another reason for Uber’s success is that it’s easy to use the app. Uber is hassle free as they can be booked in advance, the driver knows the exact destination and removes the need for passengers to speak to the drivers. The last factor makes it desirable with tourists as it removes the issue of a language barrier.
Uber has honed its service thanks to competition, such as Cabify. If Uber didn’t provide a service that people wanted, it would have failed a long time ago. Rather than changing to meet the demands of the customer, black cabs have attempted to deny the customer of a service that will satisfy them.
Uber doesn’t just make customers happy but also its employees. Uber enables 45,000 licenced drivers in London to work flexible hours that suit them. According to a 2018 report from the University of Oxford they earn above the London living wage. Banning Uber will harm these drivers and disproportionately affect minorities: 80% of black cab drivers are white compared to 26% of private hire drivers. In the States, drivers with Gold, Platinum or Diamond status on Uber’s reward system for drivers (i.e. frequent drivers) are rewarded with full tuition coverage at Arizona State University Online for them or a family member. Uber is planning on introducing this UK version of this scheme with the Open University.
TfL has denied Uber the renewal of its license over concerns over safety but left Londoners with an alternative that offers a service many customers don’t want. Any system is fallible and susceptible to be misused. Replacing Uber with black cabs leaves Londoners no more protected. The solution to problems with the market for taxis is not eradicating competition. It is introducing more of it.
We'd call this from Joe Stiglitz propaganda, not economics
It is, of course, possible to argue about the effects of economic changes. But we do think it helps to be reasonable about this. Which isn’t quite how we’d describe this assertion from Joe Stiglitz:
Given tax cuts that disproportionately benefit the ultra-rich and corporations, it should come as no surprise that there was no significant change in the median US household’s disposable income between 2017 and 2018 (again, the most recent year with good data).
The tax cuts were signed into law in late December 2017 and took effect for the tax year (which is in the US the calendar year) 2018. Now we do indeed believe in the healing power of money fructifying in the pockets of the populace but we’d perhaps think that that effects of a 1% of GDP change in tax revenues might take a teeny bit longer than that to come through.
Especially as the claimed and planned route is to be through higher business investment.
It’s possible to note that we lack the Nobel Joe has so whadda we know but a more reasonable conclusion here would be that Professor Stiglitz is indulging in a little bit of propaganda rather than economics. After all the standard New Keynesian models all do conclude that fiscal policy does take a finite amount of time to take effect.
Why not just stop trying to do impossible things?
The London Green Party tells us that it’s impossible to recycle everything correctly:
It is "impossible" to recycle household rubbish in London because of a "postcode lottery", the Green Party has said.
The capital's 32 borough councils were asked for their policies on recycling seven items, including a plastic bucket, crisp packet, ballpoint pen and a bicycle tyre.
None could recycle all seven items.
Our own attitude to such things is that if it’s impossible to do we should stop trying to do it.
More specifically here with recycling the aim is to reduce the use of resources. We’re cool with that, not just fine in fact but actively in favour. Using fewer resources to gain output makes us richer, for of course that means that we can then go on to produce more with those unused resources.
This does though mean all resources. Recycling is more expensive than holes in the ground or large furnaces. Therefore recycling - at this level at least, what does not consume more resources ends up not as recycling but as scrap - uses more resources. Given that our aim is to reduce resource use we should therefore be using the holes and the incinerators more.
As Hayek didn't quite point out about supranational governance
Hayek’s point, in The Pretence of Knowledge, was that the centre couldn’t possibly have the information to be able to plan or direct either an economy or society. Not in any detail at least. We might add a more modern coda to this, that the higher and more abstract the “centre” becomes as a source of governance the worse the problem becomes. Take this from the new head of the International Monetary Fund for example:
Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the “roaring 1920s” that culminated in the great market crash of 1929, revealed that a similar trend was already under way.
While the inequality gap between countries had closed in the last two decades, it had increased within countries, she said, singling out the UK for particular criticism.
“In the UK, for example, the top 10% now control nearly as much wealth as the bottom 50%. This situation is mirrored across much of the OECD (Organisation for Economic Co-operation and Development), where income and wealth inequality have reached, or are near, record highs.”
Leave aside differences of views here - we are not worried by inequality in the manner that is so fashionable these days. Rather, look at the facts being trotted out.
UK income inequality is lower than it was in 2008, lower than it was in 2001, lower than it was in 1990. This is not what we would associate with something rising to record highs.
The problem with any current measure of wealth inequality is that we don’t - unlike with income - include any of the things we do to reduce wealth inequality. The calculations deliberately exclude any political, government or state redistribution of wealth - this isn’t the way to see what needs to be done that’s the way to see what would be if we didn’t do anything already. It’s not even the way to measure what is, it’s to measure what might have been.
If international advice on governance is to be so divorced from reality then that international guidance isn’t going to be all that useful really. Something entirely predictable given that Nobel acceptance speech from Hayek. Those in the international institutions simply don’t have the knowledge to be able to tell us anything useful about what we should do.
Hong Kong and Santiago: Making Sense of the Two Protests
Protests in the streets of Santiago, Chile have been going on for several months. Thousands have been injured and at least 29 people have died in clashes with authorities. In Hong Kong, it’s been nearly a year. While the two bursts of demonstration overlap in time, they reveal very different psychologies.
Modern Hong Kong is a product of colonialism. Modern Chile is the product of dictatorship. The two countries have distinct stories that have shaped their respective cultures.
Benign Neglect
Hong Kong was won by the British in the nineteenth century as a consequence of the First Opium War. Institutional gene-splicing meant the island got British Common Law, but not much more was imposed. Policies of benign neglect in the fifty years prior to the 1997 handover resulted in stellar economic growth and relative autonomy.
The results have been nothing short of miraculous: Hong Kong remains the crown jewel of Asia, with a per capita GDP of about $46,000.
Hong Kongers thus see themselves as of a special kind, or at least they want to define themselves as something other than Chinese nationals. It’s no wonder: compared to the rest of the world, Hong Kong is a shining example of free and open markets. They have a strong commercial culture. And they view the People’s Republic and its Communist Party as authoritarian. Their protests are motivated by desperation to keep freedom, prosperity, and identity—despite a colonial past.
Hong Kongers want self-government, but Chileans on the other hand...
Shame and Bus Fare
While Chile has a rich history prior to the rule of Salvador Allende, his rise was an important catalyzing event. Allende, a socialist, came to power in 1970 and doubled down on land seizures that amounted to the state appropriating 59% of agricultural land. In response, general Augusto Pinochet led a 1973 military coup that brought down Allende. Pinochet was brutal in victory. He instituted a purge that meant death for thousands of political enemies.
This has become Chile’s national shame. And yet Pinochet’s economic reforms were friendlier to private property and free markets—so much so that Chile has become the economic success story of South America, topping the list of countries in GDP per capita. So what are Chileans protesting?
A bus fare hike.
Of course, the protesters see such transit cost increases as indicative of great wealth disparity in Chile, despite a slightly lower inequality score (Gini) than that of Hong Kong. Many Chileans view their comparative economic success as far too lopsided and linked to dictatorship.
"[A]ll the measures the governments take are patches that do not end up helping anyone,” says 24-year-old medical student Natalia Torres, quoted at Business Insider. “They end up enriching the rich and impoverishing the poor.”
According to Foreign Policy, the association between today’s ruling elite and Pinochet is undeniable.
Many of the [conservative party’s] initial founders were in their late 20s and early 30s at the time of the transition and therefore still comprise an important component of the Chilean right. The country’s recently sacked interior minister, who initially tried to quell the protests with government repression, was one of the UDI’s founding leaders and earliest national deputies. Another early UDI leader, Hernán Larraín, still heads the Justice Ministry.
As long as Chileans see their problems as linked to the legacy of dictatorship, they are likely to overlook whatever economic progress Chile has made relative to the rest of South America.
Despite cashing Pinochet’s check, they know it had been signed in blood. Many Chileans then—especially the youth—have come to believe that to erase that historical stain, they must not only rid themselves of the dictator’s legacy, but return to socialism.
It’s ironic, then, that Transantiago fare increases sparked the protests. The once-solvent private transit system had, ironically, been socialized more than a decade prior.
Unhappy Endings
So what can we make of these two stories? The most troubling thing is that neither is likely to end well.
In Hong Kong, the protestors are battling hard and keeping at it because they know the mainland government plays a long game. One protester, quoted in the The Atlantic, reflects a rather nihilistic sentiment among Hong Kongers: “We might as well go down fighting.”
In a sense, Hong Kong is a city-state full of Tiananmen Square “tank men”. They want self-government. They want free markets without interference from Beijing. Indeed, pro-democracy candidates won landslides in recent district-council elections. But the mainland regime is likely to put its thumb on them and keep it there. It’s difficult to see any scenario in which the Communist Party ever lets go.
By contrast, socialism in South America is a persistent mind virus, especially as a response to pervasive corruption and cronyism. One can’t help but wonder whether Chile, in its efforts to wash away Pinochet’s legacy, will discard that degree of economic liberalism that has made it South America’s success story. Chile is by no means perfect, but it stands in stark contrast to experiments like that in Venezuela, or the irresponsible neighbor Argentina with its outsized debt and money printing.
Consent of the Governed
As one who is working in the area of international development, creating autonomous “prosperity zones,” I see much to admire in both Hong Kong and Chile. But beyond relatively free markets, the two protest movements seem to share only one thing in common; their unrest parallels the degree to which they view their operating rules and rulers as being imposed on them.
Rule by democratic majority is not always enough to quell unrest, especially when half the country imposes its rules on the other half.
“It turns out there’s only one thing that guarantees production of good laws,” writes hedge fund manager Michael P. Gibson. “The people bound by the laws have to agree to be bound by them. … Consent must be real, transparent, and continuous.”
Most of the world fails to appreciate this insight.
But there’s no getting around it: you need the consent of the goverened. Not hypothetical. Not tacitly. Real consent. A system of law that provides for regulation or expropriation on behalf of cronies, will create neither peace nor stability in the long run. State power destroys the foundations of voluntary cooperation. And in so doing it destroys what makes a society attractive, leading to eternal battles by constituency groups over favorable regulations and transfer payments.
Although neither Chile nor Hong Kong is a Utopia, each is a beacon. But if China’s socialist oppression and Chile’s socialist populism persists, they are likely to lose their edge as commercial centers. My hope is that the creation of new, special jurisdictions will allow for islands of economic freedom in the world.
I have dedicated my life to creating these niches, because freedom and free enterprise remain humanity’s best hope. Maybe Chileans and Hong Kongers will find some measure of peace beyond this chaos. Chile is a big country, they would have enough space to start a prosperity zone as an experiment in freedom. And if Hong Kong falls, then a New Hong Kong might be created in the region – but of course, outside of China.
At the very least we can hope future generations learn something from their trials. Just maybe there will be somewhere on earth to go when socialism returns to each.
Titus Gebel is a German entrepreneur with a doctorate in law. He founded, among others, mining company Deutsche Rohstoff AG, and is the current CEO of Free Private Cities Inc., a company working on the creation of contract-based prosperity zones and private cities. Gebel is also the author of Free Private Cities: Making Governments Compete for You.