Be careful what you wish for
It’s a reasonably standard claim, that workers should gain lots of things over and above their mere wages from their employment. Rights to this and that, good things that should be provided. The problem, of course, is that all of those things cost money. Compensation of the workers becomes rather higher than the wages of the workers. Which does lead to things like this:
Meat companies across Europe have been hiring thousands of workers through subcontractors, agencies and bogus co-operatives on inferior pay and conditions, a Guardian investigation has found.
Workers, officials and labour experts have described how Europe’s £190bn meat industry has become a global hotspot for outsourced labour, with a floating cohort of workers, many of whom are migrants, with some earning 40% to 50% less than directly employed staff in the same factories.
The Guardian has uncovered evidence of a two-tier employment system with workers subjected to sub-standard pay and conditions to fulfil the meat industry’s need for a replenishable source of low-paid, hyper-flexible workers.
About 1 million people work in Europe’s meat sector, with unions estimating that thousands of workers in some countries are precariously employed through subcontractors and agencies.
Well, yes, the larger the wedge between compensation and wages then the larger the temptation to find alternative arrangements which close that gap. This always being true, the more mandates are loaded onto formal employment there more less formal structures attract.
This is not something restricted to the meat sector, it’s one of those unfortunate facts of life.
Mr. Hayek and a plate of chips
Hayek’s grand insight in his Nobel lecture was that the centre just never can gain enough data to create the information on how to run society in any great detail. This does, of course, still leave open the meaning of “great” and “detail”. At some level of granularity we are going to have to have centralised decision making whatever the fog of ignorance such decisions are taken in. Say, and just to pick an historical instance which will never repeat itself, what should be the British response to the French marching upon Brussels again?
But that level of detail does seem to be pretty low (or high perhaps). Here’s The Guardian on food:
The grave effects of this relatively recent departure from time-honoured eating habits comes as no surprise to those of us who never swallowed government “healthy eating” advice in the first place, largely on evolutionary grounds.
Is mother nature a psychopath? Why would she design foods to shorten the lifespan of the human race?
And time is vindicating. This bankrupt postwar nutrition paradigm is being knocked for six, time and again, by up-to-date, high quality research evidence that reasserts how healthy traditional ingredients and eating habits are.
Apparently organic rice doesn’t lead to immortality.
We do not, by the way, insist that either this or the official advice is correct or not so. Instead we just want to ponder the idea that the official advice might be wrong. Even after all those decades upon decades of research and investigation. If this is true then we’ve a guide to what level of detail we ought to have government dealing with, don’t we? If they can’t manage simple things like advice upon diet then the complex issues like the housing market, who makes what where, in what quantity, prices, energy supply, all those sorts of things, will have to be dealt with by the alternative, markets.
Government will thus be restricted to areas where they are competent like dealing with bumptious Corsicans. Well, mildly competent perhaps, don’t forget it took them 15 years last time around.
The simple answer to Skidelsky's question
Increased automation leads to greater productivity of labour, this is true. This means that we need less labour to achieve any one task, we therefore have labour available to tackle a further such task. The end result being that we now undertake, or perform, two tasks with our available labour and so are richer - we’ve the two, not the one, things.
So far so good then Skidelsky goes wrong:
The problem is social: to ensure that the fruits of increased productivity are passed on to the mass of the people in the form of higher wages and non-work income. The political debate is about how much public intervention is needed to ensure that the wealth created by machines trickles down to all sections of the population.
This is to make the mistake of thinking that your income is the amount of money received for your labour. Not so, your real income is what you are able to consume as a result of your labour. As society is now more efficient in its use of labour, more is being produced that can be consumed, therefore real incomes have risen as a result of the increased productivity.
This doesn’t in fact require public intervention. It’s a natural outcome of a market economy. That increased production hits the supply and demand curves, prices fall, consumers benefit.
The mistake is to think of the benefits from automation arriving to us in our roles as workers - they arrive to us in our roles as consumers instead. As William Nordhaus memorably pointed out, 97% or so of the benefits of entrepreneurial innovation - not exactly the same as automation but not far off it either - arrive as the consumer surplus. This being achieved simply though market competition, no politics nor public intervention required.
This rather depends upon who you read and believe about climate change Mr. Jack
Ian Jack has been reading Bill McKibben and some others that he, Mr. Jack, has published on the subject of climate change:
The idea of a better future has been replaced by one of a future not as bad as it could be, providing urgent steps are taken; but for more than 20 years (more than 30 years, if the counting starts with Hansen’s address to Congress) the science behind our understanding of climate breakdown was widely dismissed either as an international conspiracy or an inconvenient speculation, or relegated to a problem on a par with McKibben’s “growing trade deficits”.
That rather depends upon who you read on the subject of climate change. We ourselves would avoid the hysterics and go and have a look at the science. But, you know, perhaps we’re funny that way.
That science is easiest understood in the SRES. This is the set of economic models that has underlied all discussions since the early 1990s. In which we are presented with a range of possible futures. Where humanity as a whole becomes perhaps 5 times richer this century by being somewhere between socialist and social democrat. Or up to 11 times richer by being globally capitalist and free market. In that latter case absolute poverty is entirely extinguished as a part of the human experience which is something that we’d describe as a better future.
That lowest flourishing of humanity also leads to high emissions and thus climate change. That glorious enrichment is consistent with low emissions and little climate change. This is not just the science these are the underlying models upon which everything else done by the IPCC, Stern Review and so on is built.
We do think that’s rather a better future.
Who knows, perhaps Mr. Jack should try reading some of the people correct about climate change rather than just those that he himself publishes?
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.