A certain incompetence to this argument about electricity privatisation
It is The Guardian, of course, that tells us that if only the electricity system were more communal, communitarian even, then things would be better. Freed from those vicious capitalists who just suck dividends and profits out of the system we’d be better off:
The monopoly grid companies haven’t invested much in upgrading the system for renewable energy, but they have extracted huge amounts in dividends and interest. National Grid shareholders took £1.4bn out of the company in both 2020 and 2021, although that is still below their record take of £3.2bn in 2017. The private generators didn’t invest in renewables until we started injecting public money. The supply companies didn’t compete and just enjoyed extracting dividends, until even Theresa May admitted there had to be a price cap – a humiliating acknowledgement of market failure.
The price cap is the market failure itself but let us leap beyond that and just feel how joyous it is to be free of capitalist exploitation.
This isn’t just theoretical. In other major western countries, most households do not have to play the market as in the UK. In Germany, public sector suppliers of energy are more trusted, and two-thirds of all electricity is bought from municipally owned energy companies (“Stadtwerke”). They avoid other problems of the UK system, too. Stadtwerke own and run the great majority of the distribution companies and have also played a leading role in developing renewable electricity generation. The Stadtwerke of Munich city council has been supplying enough renewable energy for the needs of every household in the city since 2016, and by 2025 will supply enough for all the local industries, too – your BMW will be made using public renewable energy.
Well, yes. Although we do need to add the one more little bit here. The EU tells us that the average price of electricity in Germany is .30 euros per KWh. That’s about 26 pennies in real money these days. The average price of electricity in Britain is, according to Go Compare, 17.2 of those real pennies.
German electricity is about 50% more expensive than British. Yes, true, some of that is the extra costs of the lunatic Energiewende plans but we’re not entirely free of such green levies here either.
This being the argument in favour of the capitalists plus competition of course. That in the absence of those two things prices will be higher. As they are in places without those two things. Therefore we all submit to that vicious competition and the exploitation by the capitalist classes because it makes us better off.
As Joan Robinson pointed out: “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”
Just think how high fuel poverty would be if we were like Germany with those municipally owned companies and prices to match.
Things that would be hilarious if they weren't tragic
This probably isn’t where we’d start when looking for advice on how to run global farming:
Elizabeth Mpofu a member of Zimbabwe Smallholder Organic Farmers’ Forum (Zimsoff)
The reason being that Zimbabwean farming has not exactly covered itself with glory in recent decades:
The main reason is that organisers have given agribusiness a lead role in the process and largely ignored the social movements and small farmers’ organisations around the world that produce a third of all food. As a result, the summit will unavoidably push for an industrialised and corporate-driven food system, undermining the future of the millions of small-scale farmers, fishers, herders, food vendors and processors across the world.
In contrast, small farmers’ movements such as La Via Campesina and its allies are presenting a very different future. La Via Campesina launched its vision of “food sovereignty” 25 years ago, at the 1996 world food summit. Food sovereignty is the right of peoples to healthy and culturally appropriate food produced through sustainable methods and their right to define their own food and agriculture systems. It is based on a model of small-scale sustainable production benefiting communities and the environment. Food sovereignty prioritises local food production and consumption, giving a country the right to protect its producers from cheap imports and to control its production.
The why Zimbabwe declined from the breadbasket of Africa into a wasteland of malnutrition being that large scale corporate agriculture was dismantled in favour of small scale production.
Yes, we’re entirely aware of the colonial legacy, the racial issues, but in terms of economic structures that is what happened - the dismantling of corporate agriculture.
Doing this again in more places just doesn’t sound like a good idea.
All of this before what we regard as the insuperable obstacle to such small scale and local farming. It’s peasant farming and the problem with that is that for peasant farming to exist the farmers have to be peasants. If farming is to be done in two and three acre plots then the incomes of those farms will, by definition, be limited by the value that can be created from two and three acre plots. Say, in the region of $800 to $1,000 a year, tops.
Insisting that billions of darker people, far away, continue to live the sort of lives that would shame a medieval villein just doesn’t coincide with what we consider to be a desirable future for the human race.
The grand glory of large scale, corporate, agriculture is that it destroys the need for anyone to live as a medieval peasant. We all glory in the fact that none of us paler folks have to do that any more so quite why anyone campaigns to impose it upon those duskier rather escapes us. Perhaps this is part of that white supremacy and privilege we hear so much about these days?
Welcome to the micromanagement of an entire continent
The European Commission is on a collision course with Apple after announcing it will introduce a new law forcing all mobile phone companies to share a common charger.
Given, as Sr. Barroso pointed out, that “the point of the EU is to stop Germany invading France. Again.” how does this help?
The legislation is also expected to deter manufacturers from selling chargers with every new smartphone, in a bid to further cut waste.
Consumers may not be treated to a bundle either.
It does cross the mind that this is just that little bit detailed for the ruling system of 500 million people. As Hayek pointed out, the centre is between somewhat lacking and entirely bereft of the data, let alone information, to plan matters on a fine scale. But no doubt there is some massive gain to be had from this?
It is estimated the law could cut e-waste by 980 tons a year.
There is no lack of the materials to make the chargers from. If there were then the price mechanism would already have made them too expensive to give away with every new phone.
Further, saving waste in such quantities doesn’t seem all that important. 1,000 tonnes at double the density of water (about right, -ish) is a block 5 metres by 10 metres by 10 metres. We’re really rather certain that in a polity of 4.5 million square kilometres there’s somewhere viable to park that. The “saving” is also some 0.002 of a kg per year per person within the EU.
This before we think of the extra resources that will be required to organise two distribution mechanisms, one for phones bereft of chargers, one for chargers themselves.
Abject nonsense.
Inheritance Tax Is Against Human Nature
When people think about inheritance, they invariably conjure up a mental image of some plump duke or marquis, sipping cocktails on a yacht in the Bahamas, courtesy of their twelve-times-great grandmother who slept with Charles I and was rewarded with a grand tract of land that turned out to have huge coal deposits under it.
Yes, that is galling, but bygones are bygones. You can’t unscramble the past and say how much of such a person’s wealth today, which might have been augmented or diminished over the centuries comes from legitimate or illegitimate sources (and even that definition is probably a matter of opinion). But who cares? I am not poor because some aristocratic landowner is rich. Wealth today is something that is created, not taken from others, usually by force, as it was for most of human history. It is not a zero-sum game. And it’s easily lost.
To see that, look at the annual ‘Rich List’ survey published by the Sunday Times. When the survey started, every one of the richest fifty or a hundred people owed their wealth to inheritance. Today, more than half have made it themselves. They’ve even pushed the Queen down the rankings.
And all power to those billionaires. They have made themselves rich by producing goods and services that other people want to buy from them—quite willingly—and which transform their lives. The computers that make our domestic and work lives easier, the online systems that deliver goods to our door in minutes, the smartphones that connect people all around the planet and put a warehouseful of useful amenities (camera, torch, alarm clock, books, music collection, atlas, timetables, payment card and the rest) right in our pocket—all these things improve the lives of billions of people. The people who create that sort of social benefit are rewarded by grateful customers. And they should be able to keep that reward. Rewarding success is a good way to inspire more of it. Punishing success is a good way to kill it, or drive it away. You could take the entire wealth of billionaires and distribute it evenly across the planet, but it wouldn’t make most people noticeably better off and the poorest would still be poor a week later. The way to create prosperity is to encourage it and let it flourish. Not to double-tax it, once when it is earned and then again when it is passed on.
But still we’re looking at the wrong thing. Inheritance is particularly important to families who are less wealthy. They scrimp, save, and pass on a greater proportion of the assets to the children than do rich families. That’s economically and socially important because it reduces relative inequality by ensuring that less-wealthy families’ capital is kept intact instead of being dissipated. The children are left an asset that they can use to improve their own lives. They might use it to invest in a business and improve the lives of their customers too. Or, with today’s restrictive planning rules, it might be the first family home they can afford to own and live in. One of the useful social institutions that inheritance taxes kill off, however, is that of the family-owned business. They used to be common: trusted parts of local communities, with families’ reputations invested in them. But family businesses are often short of liquidity; get landed with a big tax bill when a family member dies, and you have to sell up, because there is no spare cash around to pay it.
Inheritance taxes are bad taxes because they are against human nature. Every parent wants to help their children have a better start than they did. If inheritance is taxed, they will simply look for other, inevitably less efficient, ways to do that. Inheritance taxes are levied very infrequently, on a death, but they are still predictable. People may have years in which to plan how to avoid them (or even evade them) by shuffling around their assets. But that means that their capital is shunted into less productive assets, in order to escape the tax, instead of making its way into productive, profitable and socially beneficial business investments. Inheritance tax is a disincentive to invest productively, an incentive to spend tax-efficiently. It seems quite likely that the harm this does to the economy means that inheritance taxes have actually produced a negative return for most or all of their 125-year history.
In what world do we want corporations campaigning?
We too think this is a bad idea but from the other end - 6% looks like 6% too much to us:
The world’s biggest tech companies are coming out with bold commitments to tackle their climate impact but when it comes to using their corporate muscle to advocate for stronger climate policies, their engagement is almost nonexistent, according to a new report.
Apple, Amazon, Alphabet (Google’s parent company), Facebook and Microsoft poured about $65m into lobbying in 2020, but an average of only 6% of their lobbying activity between July 2020 and June 2021 was related to climate policy, according to an analysis from the thinktank InfluenceMap, which tracked companies’ self-reported lobbying on federal legislation.
We regard corporate lobbying of politicians as just one of those unfortunate things. We’d vastly prefer a more laissez faire world where everyone stuck to their knitting. But politics will continually interfere in how business is done therefore business will continually try to explain to politics how most plans for regulation are truly, deeply, madly, stupid. Plus there is that little point of those with an eye for the main chance attempting to get their competitors regulated out of business.
Less regulation would lead to less lobbying that is.
What would be worse, is worse, though is a demand that corporations - whether Big Tech or anything else - should be lobbying on non-business issues. For or against climate change - which is the issue here - or for or against free higher education, or gender recognition, or organic farming or any of the other subjects of political dispute these days.
Why would any of us want corporations weighing in on either, any, side of these issues? Acting according to whatever collective view they’ve got, sure, but spending money to influence politicians, which is what lobbying is?
There are actually reasons for promoting shareholder primacy and this is one of them. Why would we want Facebook, Google, Amazon or any of the others paying to tell politicians how many windmills the country should have?
If that doesn’t convince then think of this. Can you imagine the screaming from InfluenceMap if that corporate answer to that question were “fewer”?
One Damned Surprise after Another
Trump signed a deal with the Taliban that NATO would be out of Afghanistan 18 months later, i.e. by 31st August 2021. Apparently, just two weeks before the final exit date, this came as a surprise to our Foreign Secretary, Dominic Raab, holidaying in Greece. Poor chap, nobody told him anything. Now his Cabinet colleague, Kwasi Kwarteng, has been equally astonished, last weekend, by the sudden leap in the international wholesale price of gas, even though it has been rising steadily, by 250% since January, by 70% since August and 455% over the past year. He was busy getting a few Statutory Instruments rubber stamped by Parliament. Never mind the UK energy market was collapsing into chaos, we had to be sure our “Ecodesign for Energy-Related Products and Energy Information (Lighting Products)” were up to scratch.”
Was Ofgem closely monitoring developments? Its 2020/21 annual report, published in July, does not give that impression. The Chair, Martin Cave, in his Foreword states “Ofgem, as a regulator, has two equally important challenges - to protect today’s consumers to make sure they get a fair deal, and to protect consumers in the future by tackling climate change” but the report as a whole is far more interested in decarbonisation than consumer prices. Ofgem seems to have forgotten that its original role was to simulate free markets in gas and electricity, not to pursue social policies.
Mr Kwarteng should have been surprised that it is not staffed by 1,000 handpicked intelligent and competent staff navigating our way through the complexities of international energy markets; instead it handpicks its employees to ensure they are as dumb as the rest of us. Here’s CEO Brearley in the annual report: “we have redoubled our efforts to ensure that Ofgem – as well as the wider energy sector – have diverse and inclusive workforces that better represent the consumers we all serve. Diversity and Inclusion has [sic] therefore been a key focus of our engagement this year.”(p.8)
Given that, he should not have been surprised that Ofgem regards the wholesale price of gas as outwith their control and forces gas retailers to buy at that price but sell at, or below, the “cap” even if that is lower than the price they’ve already paid wholesale. Bankrupting the smaller suppliers and destroying the market currently appears to be Mr Kwarteng’s plan. 39 energy companies are expected now to fail, leaving only 10. It is true that those who offered long term fixed pricing without hedging their future purchases have themselves to blame but wasn’t Ofgem supposed to be supervising?
A number of surprises paved the way. Who would have thought, for example, that the demand for energy would bounce back as the pandemic eased? Who were the clever people who thought that was a good time to take gas platforms out of production for maintenance? Thanks to Covid and poor management, a major backlog has built up but the regulator calling the shots was not Ofgem but Health and Safety. UK gas production is down 28%.
Russia gets blamed for rigging gas prices but the truth is the UK gets a trivial amount of gas from Russia; it gets over 120 times more from Norway. A bigger, and more predictable, surprise is that the wind does not always blow at the same speed. The UK shift to renewables is admirable in many ways but it is far from clear that the Department for Business, Energy and Industrial Strategy (BEIS) has thought through the need to balance renewables with reliable energy from nuclear and gas, nor through the need for gas for the production of CO2 for food, drink and health uses.
Imports and storage were traditionally important means of evening out price spikes. Unfortunately, BEIS and Ofgem have assumed eternal price stability and presided over an annihilation of the UK imports and gas storage facilities. The UK can store 4% of annual gas consumption. In Germany, France, Italy and Austria, this ratio is between 20 and 30%. US natural gas prices (about $5/mmBTU) are a currently a fraction of those in the UK (about $23/mmBTU) but we are unable to take advantage of them.
The BEIS reaction to the gas price crisis has been to clobber the consumer through higher retail prices and government subsidies which will inevitably be passed on in taxes. It does not seem to have occurred to them that the downstream higher costs are exactly matched by the upstream higher profits. Whether Ofgem is responsible for wholesale prices or not, the natural gas producers and wholesalers could be taxed on their windfall profits and the proceeds used to offset costs to government and consumers as well as restoring the UK energy market.
As things stand, we are not witnessing market failure so much as government failure. Mindless of the current chaos, BEIS launched, on 20th September, a consultation on the governance guidance for the Oil and Gas Authority, a quango of 164 persons that some might consider wholly unnecessary. When I googled it, the initial response was that no information was available because the search engine “filters out results that might return adult content.” The comment could apply to BEIS as a whole, a department founded only five years ago and employing, with its quangos, about 20,000 people. Some might consider it too big for its own good; on the ball it is not.
So far a few surprises, that should not have been surprises, have been noted but its dogged refusal to consider energy options for the future is much more worrying.
Replacing fossil fuels, i.e. coal and gas, will be primarily by electricity. Generation will mainly be from renewables underpinned by nuclear. Given the volatility of renewables and the slowness of turning nuclear on and off, there will need to be some remaining gas and biomass generation, with carbon capture, but hydrogen will only be a storage medium, e.g. for planes, where electricity, which will always be cheaper than hydrogen, is not available. So much is common ground.
The BEIS approach to nuclear should be ringing alarm bells. It is reminiscent of the Air Ministry’s dismissal of Spitfires and jet engines in the 1930s. High command was still fighting the previous war. BEIS is wedded to old high pressure nuclear technology, both large (Hinkley Point and Sizewell) and small (Rolls Royce) which needs large and complicated containment structures and safety systems. Other countries (the USA, Canada, China and Indonesia) are pushing ahead with Generation IV new technology low pressure plants with commensurate reduction in problems of siting and safety. For unexplained reasons, low pressure plants, using molten salt as a coolant, have been rejected by BEIS and do not appear in the 2020 energy White Paper. These units are small and low cost by comparison with existing nuclear power stations.
For examples, see Moltex which aims to have a plant operational in New Brunswick in the early 2030s. The Canadian Nuclear Safety Commission has given Phase 1 approval. Terrestrial Energy intends to be generating electricity for Ontario Power by the late 2020s. ThorCon International is on track to be licensed in Indonesia by 2026. SINAP-CAS aims to have a prototype running in Gansu Province this month and a full plant in 2030. ARC, also in New Brunswick, aims to be up and running in the late 2020s. TerraPower has backing from GE, Hitachi and Bill Gates and expects to be operational in Wyoming in 2027/28. Finally, Ultra Safe Nuclear Corporation, based in Seattle and working with the Dutch, expects a licensing decision for a plant in Ontario in 2022 and there is no reason to believe it will not be granted.
In short, there is a lot going on in the world of new technology but BEIS is oblivious to it all. Rather than huddling up in the office, their 20,000 staff would like to be working from their homes this winter, if only they could afford the heating costs. Now there’s a surprise.
Perhaps Professor Mazzucato could examine her own logic
This is amusing or puzzling according to taste. Professor Mazzucato is telling us that government spends much too much upon consulting. That process of buying in outside expertise to address a particular and precise problem which cannot be dealt with in house. Her argument against this - do note this is the argument against this practice - includes the following:
Meanwhile civil servants are assumed to be stuck in old ways and lacking relevant competences. Frequently, teams find they do not have enough internal capacity to deliver what ministers want, and feel they have no option but to outsource.
Evidence that the civil service does not have the requisite specialised knowledge and therefore outsources is used to show that outsourcing of specialist knowledge should not happen. We do think that’s a piece of logic that would benefit from some examination, possibly even correction.
We were, given our own involvement in the overall process, amused at this:
….with companies even contracted to help deliver the privatisation of state-owned enterprises.
Well, yes. Most people do hire a merchant (“investment” these days perhaps) bank and a stock broker when selling a company onto a stock exchange. It’s one of those things, like hiring a baker to make your bread.
What really amuses though is that the complaint itself misses the entire point of our having government in the first place. It is true that there are certain things which must be done and which only government can do. Excellent, so we the people contract out those things to the specialists. That this base logic also applies to those specialists in governance should not be all that much of a surprise. There are skills, knowledge, they do not have but others do - go get it from them then.
To return to our baker. Professor Mazzucato has entirely forgotten Paul Seabright’s point about the supply of bread to London. No one is ins charge of it because it has been contracted out to the market. It is remarkable that it works but it does. It is not, in fact, necessary to have - even, it is undesirable to have - niente al di fuori dello Stato. But then convincing corporatists of that has always been a difficult task.
Do corporations have to obey the law?
That’s a silly question, we know, for of course corporations have to obey the law. Say, just to imagine, that Facebook had illegally intervened in the Brexit referendum, or an election campaign here, then of course we would be righteous in insisting that they should obey the law here. That’s what national sovereignty means, that whatever we decide the law, here, should be has to be obeyed by those who are or who operate here.
Except people then go on to insist that actually, corporations should not obey the law:
Apple and Google shut down a voting app meant to help opposition parties organize against the Kremlin in a parliamentary election in Russia that’s taking place over the weekend. The companies removed the app from their app stores on Friday after the Russian government accused them of interfering in the country’s internal affairs, a clear attempt by President Vladimir Putin to obstruct free elections and stay in power.
We’d not argue with much of that. But it’s what comes next that matters:
In a bid to clamp down on the opposition effort, the Russian government told Google and Apple that the app was illegal
Maybe it is and maybe it isn’t, legality can be a shifting concept in some places. But this?
Critics say the episode serves as an example of why Apple, specifically, can’t be trusted to protect people’s civil liberties and resist government pressure.
But this is the point. Are we to insist that corporations obey the law or not? Or is there some special set of laws that they don’t have to obey - possibly some set in foreign places - and some other set they do - like those where we reside?
That we don’t like some laws that J. Foreigner sets up is fine, even honourable. We might also say that some sets of laws are so appalling that no one need feel bound to obey any other them. No one’s going to be too upset about a corporation bruising one or more North Korean laws after all.
But we do enter a terrible minefield when we insist that corporations should ignore some laws and not others, in foreign places, because of what we think about them here at home. It’s time to make up minds. Should Apple break Russian law or not? And if so, then which of our own are equally ripe to be ignored? Facebook and elections perhaps?
Just how many problems is it that would be solved by fracking?
We will admit to a certain surprise at present:
Gazprom, Russia’s state-owned energy corporation, is facing an investigation into a spike in the cost of natural gas and a knock-on effect that threatens to disrupt the supply of meat in the food chain within a fortnight.
On Friday night, more than 40 MEPs signed a letter accusing Gazprom of “deliberate market manipulation” by ratcheting up gas prices to record levels. On Monday, electricity prices in the UK surged to 11 times above normal levels – a record high caused by a crunch in the gas supply chain and a lack of wind to power turbines.
….
As a result, household energy bills are likely to rise next year but the immediate effect has been to force the closure of two “globally significant” fertiliser plants in the UK that will lead to shortages of carbon dioxide, a by-product crucial to the meat processing industry and the manufacture of fizzy drinks.
That a supplier with market power decides to exercise it doesn’t surprise us at all. Nor does the price rise more generally. If the supply of electricity is not linked to price - which it isn’t, it’s linked to whether the wind blows or not - then high prices do not become their own usual cure for high prices.
What does though surprise us is that we cannot see anyone pointing out the solution to these varied problems. Reverse the decision to ban fracking. That would enable farming to continue - the country doesn’t have enough land to even try the non-fertiliser organic methods at any scale - and solve the pig stunning issue, bring electricity prices down and even increase the security of electricity supply.
The number of problems to be solved by fracking seems large, the number caused by banning it equally so. We’ve a free gift of nature down there in the Bowland Shale and not taking advantage of it seems absurd. Especially since the argument against doing so is that entirely spurious concern about earthquakes at as much as 0.5 on the Richter Scale. This is the sort of level of a heavy lorry going past the end of the road, a cat jumping off the bookshelves in the next room.
The ban is publicly justified by an entirely made up and created concern. We should re-examine that justification and reverse the decision. Fracking cures what ails much of the energy system at present. So, we should go fracking.
Facebook needs to learn that once you've paid the Dane the grift never stops
We can’t say that we‘re surprised here at all:
Facebook has announced new efforts to combat climate crisis misinformation on its platform, including by expanding its climate science center to provide more reliable information, investing in organizations that fight misinformation, and launching a video series to highlight young climate advocates on Facebook and Instagram.
But critics say the new push, announced on Thursday, falls short and will allow vast amounts of climate misinformation to slip through the cracks.
Facebook has long been criticized for allowing misinformation about the climate crisis to proliferate on its platform.
Once censorship starts happening then everyone with a misconception to push - or a truth they’d like to see denied - will be piling in to get their favoured lies declared to be the truth. So, any system that does succumb to that “public” pressure to stop certain viewpoints being promulgated will face an ever growing army at the gates insisting upon yet more of that censorship. We’d not be in the slightest surprised to find that entirely mainstream views are now included as that misinformation. One of us is actually listed as something akin to a climate denier for agreeing with the Stern Review on what we should do about climate change.
We’d go further than this as well and point out that once you’ve paid the Dane you’ll not get rid of the Dane:
Khoo, of Friends of the Earth, argued Facebook could do far more. “For a company that makes $85bn a year, a $1m program that outsources the problem they’ve created shows that Facebook is not serious about solving climate disinformation,” he said.
Ah, yes, spend more than $1 million a year on Khoo and his friends and you might be able to achieve peace. For the moment.
It never does actually work, does it?