We do love the smell of a free market in the morning
That this particular example comes from restrictions upon the freedom of entry into the market doesn’t change the underlying lesson - markets work:
Pay for HGV drivers jumped by more than a tenth in just five months as the industry struggles with severe worker shortages that are straining Britain’s supply chains.
The “staggering” rise from February to July, shown in figures from jobs site Indeed, is almost double the rate of increase across all driving jobs. The increase is more than 13 times the 0.8pc average rise across all jobs during the period.
Supply has changed, so prices have.
As to why supply has changed there are different arguments put forward. Test centres being closed because of the lockdowns has meant no new entrants on the supply side. However, when we look at what the industry is blaming it upon it seems Brexit is the issue. Some large portion of drivers were EU nationals who no longer have the right to work in the UK economy. As we pointed out elsewhere:
Brexit is about to give us a problem with this, though. Karl Marx was right: wages won’t rise when there’s spare labour available, his “reserve army” of the unemployed. The capitalist doesn’t have to increase pay to gain more workers if there’s a squad of the starving eager to labour for a crust. But if there are no unemployed, labour must be tempted away from other employers, and one’s own workers have to be pampered so they do not leave. When capitalists compete for the labour they profit from, wages rise.
Britain’s reserve army of workers now resides in Wroclaw, Vilnius, Brno, the cities of eastern Europe. The Polish plumbers of lore did flood in and when the work dried up they ebbed away again. The net effect of Brexit will be that British wages rise as the labour force shrinks and employers have to compete for the sweat of hand and brow.
It’s entirely true that the standard economic assumption is that immigration doesn’t lower local wages. Because those immigrants bring with them their own demands as well as the supply of their labour. This might need a little modification to point out that this is only true of settled labour, not transient.
Our major point here though is that one that markets do in fact work. Circumstances have changed therefore prices have and in doing so the price changes have adapted the whole to the changed circumstances. Higher pay will call forth more supply of drivers at which point we’re done and dusted, right?
This lesson being true whatever we think of either Brexit or the free movement of labour. Even if we think that one or both is a gross mistake prices still allow the economy to adapt to even calamitous errors.
Pretty good system, eh?
Venning's Law
“The correct answer to a question containing the word “surely” is “No””
Venning’s Law being what we require to evaluate this claim from Owen Jones:
Surely here is an opportunity to help define a new deal for the post-pandemic workplace.
By which he means, as an example:
But it’s not just the free market that denies workers power and control in their jobs....(...)...But a new settlement for the workplace must also be more democratic. ...(...)...The case for workers’ democracy is overwhelming
It is the free market which allows that power and control. Because it is exactly that free market which produces choice in which job it is that is applied for, or left if it doesn’t come up to scratch.
Democracy produces the tyranny of the majority, where all must work to the job rules that the plurality decides upon - this not being freedom nor power and control.
Yes, of course democracy is a good thing in its place - bloodless changes of power perhaps, decisions upon the overarching matters that must be taken at that national level. But working hours - say - or which flavour of pizza is to be produced (or even ordered or eaten), what combination of wages, benefits, services and goods in kind should make up labour compensation, these are all things that should be decided in a more fine grained manner than whatever the majority thinks they should be.
The reason being that we all have different desires about such things. Some prefer the certainty of a fixed wage, others the freedoms - and variabilities - of the freelance life. It is exactly that free market which produces the 30 odd million differences which make up the 30 odd million jobs in the country. The where, the what, the wages, the hours, the side gigs, the pension, the other compensations. That multivaried series of differently shaped holes into which we get to try and jam our own shaped pegs to maximise utility.
The imposition of majoritarian rules reduces that glorious freedom and liberty provided by that free market. Or, to put this another way, the free market enables us to vote with our feet, a much more powerful force for liberty than merely waving ballot papers.
The core lesson of economics
The number of women drinking at “high-risk” levels rose by 55 per cent during the first lockdown, while the number of young adults smoking rose by one quarter.
A study funded by Cancer Research UK found that among men, prevalence of high-risk drinking rose by 31 per cent during the period, with a more steep rise seen among women.
At the same time, there was a 25 per cent increase in 18 to 34-year-olds who smoke, which translated into a rise of more than 652,000 young adults, the charity said.
Not that we particularly believe those figures. “High-risk” drinking for women seems to be in a week what journalists know as lunch. Nor is this to say that lockdowns were or were not proportionate.
It is though to insist upon the base lesson of economics. Many things have benefits, all things have costs. The trick is to try to find the right balance. Yes, lockdown might well have increased drinking and smoking. It certainly left cancers untreated and all three of those will lead to deaths that could have been - well, not avoided as none of us do get out of here alive - delayed.
If this were about the Black Death and graveyards overflowing with a third of the total population then proportionality would be obvious. It’s possible to mutter that perhaps it isn’t at present. But again that’s not quite our point here.
The true cost of anything is what is given up to gain it. As it appears in the textbooks, opportunity costs. This means that we cannot gain anything - say, a low death rate from an endemic or pandemic disease - without bearing the cost of some of something else. The message here being more deaths from some other cause.
It’s a harsh truth and one brought to us by economics but it applies to life in general. There are no solutions, only trade offs. The game is to find the best one of those available.
The European Union misses the point of trade once again
The EU is working on proposals to jump-start home output of a type of specialist magnet vital in electric car motors by offering support to local producers so they can compete with Chinese rivals, sources close to the situation said.
Ooooh, that’s exciting. We do know our way around the rare earths world here so we welcome that as very good news. So, the EU is going to reduce the start up costs of mines for rare earths, is it? Possibly lighten the regulatory load to do so? Also, actually allow people to set up rare earth separation plants? Sort out the Reach and thorium disposal regulations that make those cost so much? Generally stop doing the things that stop people mining and producing the necessary metals?
Making the magnets is a trivial task once that’s sorted out.
Ah, no, as you were, that’s not what they’re going to do at all:
The proposals being considered by the EU include both cheap financing and compensation for higher raw material costs, said two sources who have seen the plans but were not authorised to speak publicly about them.
They’re going to throw taxpayer money at the costs they themselves create.
A viable magnet industry in Europe would also need the support of customers, such as automakers, who must agree to pay a slight premium
Oh, consumers are going to get whacked as well. They are doing well, aren’t they?
Here’s the thing. Rare earths aren’t difficult they’re just tricky. The trick being to be able to navigate through the regulation that surrounds their mining and separation. Make that less of a problem and more of it would be done.
Or, of course, we could turn to trade:
"Chinese permanent magnet producers get raw materials at 25% below the price I can get them," said Bernd Schleede, head of permanent magnets at VAC.
"To reach a level playing field either the EU should compensate for this gap, or should consider penalties on the import of magnets. I personally would prefer the first option."
Why not, you know, just buy them from those foreigners? That is the purpose of trade after all, to get our hands on those things that J Foreigner makes better or cheaper than we do.
One of us did, at one point, do serious work on a rare earths separation plant - even if it wasn’t for these magnet materials. A true story from that little adventure. The EU environmental paperwork process took longer than the entire drawing board to production process in China. Amazingly, and we’re sure this will shock, the EU plant never got built and several Chinese did.
Funny that, isn’t it?
What if gambling shops are a low margin business?
This does sound terrible, doesn’t it?
The UK’s most deprived areas have more than 10 times the number of betting shops than the most affluent parts of the country, research shows.
Gambling venues are concentrated in the most deprived areas of Britain, against the wishes of people who live nearby, according to a report commissioned by the Standard Life Foundation charity. “Those with the least resources are being targeted more,” the report says.
Analysis of the geography of bookmakers, amusement arcades and bingo halls by academics at the University of Bristol found there are more than 10,000 gambling venues in Britain, higher than the number of supermarket sites.
Of those gambling outlets, 21% of them were in the most deprived decile of areas in Britain, while 2% were in the wealthiest. For comparison, 10% of supermarket chains’ stores were in the poorest areas, while 7% were in the most well off.
This is similar to the oft quoted finding that fast food takeaways are mostly in the cheap part of town. That very sentence there telling us what could be the cause. For fast food takeaways are not known as vastly high margin businesses. Therefore they will - likely - be where rents are cheap and thus in the cheap part of town.
Now we don’t know whether this is true of gambling shops but we’d expect it to be true. Certainly, we’d expect a report looking at the issue to at least consider the point even if only to be able to rule it out.
For example, it can be cheaper for businesses to set up in deprived areas where the rents may be lower
Sadly, that’s as far as they go. Detailed consideration of the point doesn’t then follow. We’d thus pay this report no mind. Simply because they’ve not made enough effort to rule out simple economic incentives to explain the observed behaviour.
Madsen's Intelligence Squared Speech on Karl Marx - April 2013
Like many public figures who leave a legacy, either in their writings or their deeds, Karl Marx was sometimes right and sometimes wrong. I concentrate on some of the things about which he was wrong.
He was wrong to predict that history would take us to the inevitable triumph of the proletariat and then stop. History shows no signs of doing either. Marx was also wrong to suggest that this would happen first in the most advanced economies as the final stage of capitalism. In fact such revolutions as came took place in less developed economies such as Russia and China. It has not happened in the advanced economies, and this could be because Marx was wrong about something else.
He predicted that capitalism would drive down wages to survival level before its final denouement. In fact as economies became more advanced, both wages and living standards rose to levels not even dreamt of in Marx's day, and this seems to have lowered the pressure for revolutionary change.
Marx was also wrong about something more fundamental. He was wrong about change. I don't just mean that he was wrong about the changes that would come about; more fundamentally he was wrong about how change takes place. He took the Hegelian model of change.
To Hegel change comes about through staccato triangles. A state of affairs nurtures its opposite, and from the violent clash between the two a new state of affairs emerges. Thesis, Antithesis and Synthesis. Violence is at the core of it, and hence Marx's commitment to revolution.
But Marx was a contemporary of Darwin. He had read Darwin's "Origin of Species" and admired Darwin's account of the origins of humankind. He failed, however, to spot the significance of Darwin's theory of change and to incorporate it into his own programme.
Darwin advanced a gradual mechanism of change in which small differences gradually come to dominate over time. It is evolutionary, not revolutionary, and is a much more accurate description of how change usually happens in human societies than was Hegel's account. Indeed, Darwin was right and Hegel was wrong. This means that Marx was also wrong, wrong about change, and wrong about how capitalism would develop.
The point is that capitalism changes and evolves. It has been through many transformations. The capitalism that Marx thought would collapse under its own contradictions is not the capitalism of today - the one this motion refers to.
In the material world organisms evolve. They respond to crises and they change. A similar thing happens with our social practices. They evolve and adapt to new circumstances.
Capitalism has faced many crises, and each time it has evolved and changed. Each time a new form of capitalism has emerged to solve the problems its predecessor faced. This is how human beings progress. We solve our problems by adapting our practices.
Capitalism certainly faced a crisis in 2008, but it is still with us, as yet uncollapsed. It is evolving and responding to the changes that are needed and, as before, when the dust of crisis has settled, it will be a new version of capitalism that goes on to generate more wealth and to expand the opportunities open to humankind.
That new version of capitalism that emerges will have to be one which somehow manages to keep at arm's length the politicians wanting to fix its outcomes for political advantage. Greedy bankers can only take reckless risks if politicians make it cheap for them to do so by turning on the taps of credit and money. Politicians like booms and bubbles because they help them to win elections and office, so procedures must be found that limit their ability to do this. Those whose greed is for power are no less deadly than those who greed is for gain, and both need rules to circumscribe their scope for action.
I wish to make a further point: that capitalism will survive because it is the only valid way we have found that works in practice to create wealth and the opportunities it brings.
Marx was wrong about another important thing. He subscribed to the labour theory of value, believing that the value of a thing arises from the labour put into producing it. Wrong. Value is based on demand. If no-one wants a thing, then no matter how much labour went into producing it, it is valueless.
We all value things differently, which is why trade takes place. We trade because we each put greater value on what the other person has than on what we are offering in exchange. We both gain more value when we trade, and that's how we create wealth.
We produce in order to trade and to create wealth, and we invest in order to produce. That's in essence what capitalism is, and it works - certainly better than anything else that has been tried. And it works more humanely, too.
Yes, capitalism grows more complicated and more ambitious as it evolves, but its principles remain. Capitalism will survive its current crisis. It will be tweaked and modified but it will not collapse, because nothing has ever been found that can replace it or do what it does, or bring the advantages and benefits it brings.
It has brought the resources that have lifted most of humankind above subsistence and starvation, that have enabled us to conquer diseases, to fund education and social services, to enable people to engage in artistic and cultural activities and to enrich their lives with previously undreamt-of opportunities.
That is why this motion, cumbersome and ambitious as it is, is also misconceived, and why I urge everyone to defeat it.
A period of reflection would be welcome from Mr. Hutton
Being wrong isn’t a problem that’s just the inevitable result of trying to apply 1500 cc of brain pan to a complex universe. What actually matters is how much rethinking is done when reality disagrees with the initial analysis. Which is where Will Hutton is rather letting us all down:
British capitalism seems to be on a roll. A million job vacancies were advertised in July, a new monthly record. Early signs are that unwinding the furlough scheme, now under way, is not going to cause a sharp rise in unemployment.
House prices are rising at the fastest rate since 2004. Public borrowing in July halved compared with last July. Many new companies are being created. Business confidence is rising. The recovery is moving so fast as threats of lockdown recede that the UK on average will get back to pre-pandemic levels of output before the year is out. The chancellor, Rishi Sunak, can indulge his boss’s tantrums; his political position could hardly be stronger.
Sceptics, pretty much everyone, including me, have been confounded.
OK, that’s fair enough. The idea that the British economy required - as Hutton kept insisting - the hands of the wise, like say the wise Will Hutton, on the tiller in order to be able to deal with the cruelties of change turned out to be wrong.
What actually happened is as we marketeers would predict. Exactly when we face uncertainty - which is what change rather is - is when we need to abandon that attempt to plan. Planning being difficult when no one does know what comes next.
So, the initial diagnosis was wrong. At which point the adult, even sciencey, thing to do is work out why the initial theory was wrong. For in those conflicts between hypothesis and reality it is always reality that wins. This being precisely what Hutton doesn’t do:
However, beware. British capitalism has not changed its spots. The open questions are whether the government has learned from this success, understands the nature of the recovery and has a well-designed, flexible strategy to navigate the economy through a near perfect storm of challenges. On the evidence so far, the answers are that it hasn’t and it doesn’t – and is instead given to wishful thinking.
We can pretty much guess what comes next, can’t we? Despite the success of not having that hand on the tiller:
We need more of this thinking and action – much more. There are strengths on which to build, but it means putting business before finance, prioritising real economic needs before overheated worries over public debt, thinking honestly about addressing the obvious costs of Brexit and committing genuinely to levelling up and achieving net zero. There are politicians, business leaders, officials and thinkers who get all this. We just need to have them in power – not sidelined by the delusional.
That’s right. Un-planning by the Great and Good has just been shown to work therefore we must have more planning by the Great and the Good.
If Will Hutton’s not even willing to learn from his own admissions of faulty thinking then why do the rest of us even give him the time of day?
We do hope that Tony Juniper has the right end of this stick
There are two logical possibilities here, two opinions that Tony Juniper might be holding:
Tories making Britain greener than before Industrial Revolution, says Natural England boss
Tony Juniper,
More specifically:
The high water mark for the UK’s biodiversity and natural landscapes was before the Industrial Revolution, when forests covered much of the UK and air pollution was low.
And, well,
The plans could see areas that have been ignored for decades turned into new protected areas, reversing the decline of biodiversity and habitats for the first time since the Industrial Revolution.
“Before” is a long period of time. The high point of - to take one example here - Britain’s forests was about 5,000 BC. After the glacial period and the subsequent tree colonisation and before the arrival of the Neolithic farmers with their copper axes. Given the peering into the past being done here that’s a rough estimate of course.
One possible interpretation of what Juniper is saying is that it was the Industrial Revolution which damaged Britain’s environment and so we must clean it up. The other possible interpretation is that it was not having an Industrial Revolution which damaged Britain’s habitat and it was the arrival of of that enabled us to clean it up.
Given earlier interactions between ourselves and Mr. Juniper on the subject of economics and the environment we’re not hopeful that he’s got this the right way around. It’s precisely and exactly the move from wood to coal, from extensive low input to high input industrial farming, from human and animal labour to artificial energy sources, from reliance on the bounties of nature to manufactured inputs, that has enabled, even allowed, the clean up of the British environment.
The Industrial Revolution is not something to be cleaned up after, it is that process of cleaning up itself.
We really do hope that the boss of Natural England has this the right way around. But we just can’t bring ourselves to believe that Tony Juniper does know of the environmental Kuznets Curve, let alone that he grasps the implications of it. Which is a bit of a problem with having him doing that job on behalf of the rest of us really.
Being able to shut down sugar beet is rather the point of Brexit
There’s clearly a PR campaign going on on behalf of the British sugar beet industry. Too many pieces arriving wailing about how terrible it would be if folks could just buy world price sugar from wherever it strikes their fancy to do so. Not that we’d accuse this specific - or any other specific - piece of being part of a campaign rather than just an independently produced, and excellent, piece of journalism:
This is before growers feel the impact of post-Brexit trade deals with large sugar producers such as Australia. It’s a concern for Lankfer, whose land is in international trade secretary Liz Truss’s constituency. He has twice hosted her at the farm to answer questions from growers.
British farmers hail sugar beet for its role in crop rotation and the timing of its harvest. “It’s a good break crop, and it spreads the workload over the winter,” says Lankfer.
The destination of his beet is visible from the field itself: the factory at nearby Wissington where it is processed, eventually ending up in products such as Coca-Cola and Cadbury chocolate, or bagged and sold to consumers under the Silver Spoon brand.
Being within any state, nation or organisation of either means making a series of compromises. One of the EU ones was that significant support would be given to the continent’s sugar beet farmers by keeping out the cheaper cane sugar available from tropical climes. Hmm, well, think of that as you wish.
One of the points about being out of the EU - as with any other selection of states, nations, or groups thereof - means being able to change that set of compromises. The political balance has changed, who gets to insist upon economic privilege through the powers of the new state does.
Think on it for a moment, the ideal of Scottish independence is driven by the ability to change policy, away from those imposed by the imperialist English and toward those more acceptable to Scots. That’s what we’re told at least. The point of the going their own way being to, err, go their own way. The same was true when Ghana gained independence and so on, it’s rather the point of independence.
Being outside the EU means we now can, if we choose to, stop supporting the sugar beet industry. Leave Britons to buy their tooth rot as they wish. We, of course we do, insist that Britons in aggregate will benefit from that free trade. But that’s not quite the point we’re making here.
Complaining that Brexit means sugar beet might not retain support is ridiculous - the very point of Brexit is to be able to make the choice about whether to support sugar beet or not. Or more generally to accept, reject or modify the series of compromises that belonging to the supranational organisation required.
This isn’t even to acclaim Brexit as being worth it for offering that freedom. It’s just to insist upon the outcome of that process. Some parts of society gained economic privilege under the old system. The move to this new one means re-examining whether we wish to accord such privilege again.
So, do we all want to have to pay more for our sugar in order to support some few thousands farmers? No? Well, at least that’s a choice we get to make now.
George laddie, if government takes something then it's got to pay for it
George Monbiot is getting very het up - again - about the idea that governments should be held to the contracts they sign:
Or are they? On behalf of commercial interests, governments are all too happy to be constrained. A UK oil company is currently suing the Italian government for the loss of its “future anticipated profits”after Italy banned new oil drilling in coastal waters. Italy used to be a signatory to the Energy Charter Treaty, which allows companies to demand compensation if it stops future projects. The treaty’s sunset clause permits such lawsuits after nations are no longer party to it, so Italy can be sued even though it left the agreement in 2016. This is one of many examples of “investor-state dispute settlement”, that makes effective action against climate breakdown almost impossible. It represents an outrageous curtailment of political choice, with which governments like ours are entirely comfortable. I’m not sure how we can escape such agreements, but government lawyers should be all over this issue, looking for a way out. Otherwise, future corporate profits remain officially more important than life on Earth.
The Italian government, or any other, can ban drilling any time it likes. As the British one has effectively banned fracking. The only restriction is that it must stand by, live up to, whatever contracts it has already signed:
According to the company’s boss, Rockhopper is not just claiming compensation for the money which it actually spent on exploring Ombrina Mare (US$40-50 million). It also wants an additional US$200-300 million for hypothetical profits the oil field could have made had it not been banned.10 While many countries’ constitutions do not consider anticipated profits to be protected private property, in investor-state disputes companies regularly receive compensation for alleged lost future profits.
The Italian state did take the fee to allow the exploration in the first place. It was perfectly happy to see that $40 to $50 million spent on something that might increase its own revenues through royalties. OK, so, now, it changes its mind. Fair enough - it does though have to pay up for the money that it previously received and the amount it encouraged to be spent. On the grounds that the contract it signed, entirely voluntarily, said that it would if it did change its mind.
Whether prospective profits will also be paid out is a matter for that arbitration process. Such arbitration processes necessarily taking place outside the courts controlled by the government being sued of course. Skipping over much of the detail Cairn Energy was charged $1 billion and more in tax by India. Tax which wasn’t actually due under the law at the time. The Supreme Court of India even agreed (in a different case) that it wasn’t due. So Parliament retroactively changed the law to make it so. It’s only that ISDS process outside the Indian political system that has led to even an offer by India to accord with the contractual relationships it voluntarily agreed to.
Just like any other economic actor we need to be able to hold government to the contracts that it signs.
Yes, it’s entirely true that reasons of state do sometimes mean that contracts will be revoked. Or that property will be forcibly acquired. Compulsory purchase of your house to build a railway can indeed happen - but you are to be paid market prices for the property when it is taken from you. As the American Constitution points out the government can’t demand your spare bedroom to house the Marine Corps - but it can pay for and hire as many hotel rooms as it likes.
Any government can change its mind. It can even repudiate contracts. It’s just that when it does so it has to pay for what it is that they’re taking away when they do so. Not paying for such political choices does have a name - theft.