George Monbiot and the things he doesn't know

We get treated, again, to a Monbiot column outlining the things that George doesn’t know.

But to suggest that the public assault on truth is new, or peculiarly Russian, is also disinformation. For generations, in countries such as the UK there was no epistemic crisis – but this was not because we shared a commitment to truth. It was because we shared a commitment to outrageous lies.

Well, yes, lying is bad, truth is better. But what, specifically, do we need to correct?

Nearly everyone who appears in the media, across almost the entire political spectrum, seems to accept that economic growth can and should continue indefinitely on a finite planet.

The finity within which economic growth is constrained is the knowledge of how to add value. For economic growth is the adding of value, not the consumption, nor even use of, any particular physical supply. Therefore the agreed finity of physical supply is an interesting, but not conclusive, constraint upon economic growth.

Almost all believe that we should take action to protect life on Earth only when it is cost-effective.

Doing things which use more resources than they save would be an odd way to save those finite physical resources, no? But these two are arguments that we’ve all had before with Monbiot and he simply will not accept the truths being told to him.

But this one really does take the biscuit:

Research by the Indian economist Utsa Patnaik suggests the inflation that pushed food out of reach of the poor was deliberately engineered under a policy conceived by that hero of British liberalism, John Maynard Keynes. The colonial authorities used inflation, as Keynes remarked, to “reduce the consumption of the poor” in order to extract wealth to support the war effort. Until Patnaik’s research was published in 2018, we were unaware of the extent to which Bengal’s famine was constructed. Britain’s cover-up was more effective than Stalin’s.

Patnaik is the activist who claims that Britain sucked $45 trillion out of India during the Raj. Less than connected with reality we’d say.

But this idea that no one knew. That it has all been under-researched. Total codswallop. You see, they gave the Nobel in Economics to the laddie who studied that Bengal Famine. Amartya Sen. His foundational work was on precisely that famine.

George is trying to tell us that the groundbreaking research by the guy they gave the Nobel to is all hush hush stuff unknown. No George, no. Funny as it may seem other people have examined the world too.

LME nickel, energy companies and the FTT

The wounds at the London Metal exchange over the nickel contract are, in our view, largely self-inflicted. Cancelling trades is not a good look for an exchange. But the effect is that:

The plunging liquidity represents an escalating crisis for producers and consumers who rely on the exchange to hedge their pricing risk.

If the speculators disappear then there’s no one to take the risk being shifted by the real world market participants. This not being the purpose of such exchanges, but it is the economic function. The purpose is just to allow people to buy and sell in a regulated manner. The effect is to risk shift.

All those energy companies went bust because they didn’t shift their risk onto such exchanges. Partly because some of them were just silly, partly because such risk shifting was expensive - not enough speculators in the market to make the risk shifting cheap.

Which brings us to those varied ideas for a financial transactions tax. The Robin Hood Tax and so on - the aim of all of which is to make such speculation in futures, options and other financial markets more expensive. Which has the knock on effect of making the risk shifting more expensive, so people will do less of it.

The deliberate aim of the FTT is to make all markets work as badly as LME nickel or the retail electricity companies. And why would we want to do that?

P&Oh Dear

“I completely hold up our hands, my hands, our hands”, remarked the disgraced chief executive of cruise liner P&O. Hauled in front of a Commons Select Committee testifying why he fired 800 staff without notice, Peter Hebblethwaite was a man overcome by repentance. His merciless slashing and burning of staff through pre-recorded Zoom calls stays true to Mr Hebblethwaite’s name being apt for a Charles Dickens villain. 

There was little hiding for poor Hebblethwaite. The Chair of the Committee, Darren Jones (Labour, Bristol North West), hurled across at him “are you in this mess because you don’t know what you’re doing? Or are you just a shameless criminal?” A deserving comment given his intentional breach of the law, with many, including the Prime Minister, calling upon his resignation. 

Alarmingly, this fiasco has also reignited much support for the age-old foe: nationalisation. Iain Dale took to his LBC soapbox and called upon the British Government to take ownership of P&O, a sentiment shared by hundreds of protestors throughout the nation. Even with the rightful outrage against P&O we must not stoop to think nationalisation is a desirable alternative. 

In doing so, we find ourselves in a similar position. Introduced by then Secretary of State for Industry and dashing crown prince of the far-left, Tony Benn, the Government nationalised the shipping industry, marking a radical turning point for British industrial history.

Soon became apparent was its severe inability to turn a profit. Like a toddler evading their mother’s attempts to smear them with sun cream, the state-owned industry agonisingly resisted breaking even or showing even a mere slither of feasibility. 

With the dawn of Thatcher’s government, a more hardline stance was taken. By 1982 the industry had closed more than half of their shipyards, and yet the widespread losses still persisted, losing some £251 million/year when adjusted for today’s rate. This situation became so perverse that each new vessel was built at a loss. With the great cost combined with low quality, it is little wonder that so few Brits chose to buy domestically built ships. In 1983, around 44% of orders from within the United Kingdom were placed with domestic producers – compared to the long privately-held maritime industries of West Germany and Italy, standing at 82% and 95% respectively. 

Outcompeted by foreign rivals, maritime nationalisation did little besides undue harm. Despite intending to save the industry it created a hostile environment for wider business and squeezed away what little demand there was left. 

In recent weeks, these fickle ideologues are once again rearing their heads. We must strongly reject their demand for the government to prod its bony finger into the market once again. Instead, the true culprits of this debacle should be directly targeted – the P&O executives. Mr Hebblethwaite’s decision to not consult with the trade unions prior to the mass culling was a conscious breach of the law, and he should be punished as is necessary. Nationalisation would spread punishment not just across the entire organisation, but also onto investors and consumers. Calls to do so are neither proportionate nor reasonable – and will bring great harm for punitive reasons. 

The reason we do not act like fascists is because we are not fascists

There’s an ululation out there, a shouting, that we should just nick all the money of these people because they’re the bad guys. That cash can then be put to such good uses:

Oligarchs' superyachts and mansions must help fund a new Ukraine

No, really, just no:

A prized painting by Russian master Wassily Kandinsky that was sold under duress during World War II has been returned to the descendants of its former Jewish owners.

The oil painting, Bild mit Häusern (Painting with Houses), was just one of a treasured art collection inherited by Robert Lewenstein and his wife Irma Klein, which, at one point, also included works by Van Gogh, Renoir and Rembrandt. But the pair was forced to auction off the Kandinsky painting in October 1940 as they fled the Nazis five months after they invaded the Netherlands.

Records show the director of Amsterdam's Stedelijk Museum bought the Kandinsky for a fraction of its value at the time. Het Parool reports: "He paid 160 guilders for it – a pittance of the original value at the time, 2000 to 3000 guilders."

We are not attempting to compare this current war with the Holocaust. We are also not comparing the stripping of assets from any passing Russian with those events of 1940. We’re not comparing, we’re insisting they’re the same thing.

It’s entirely possible to freeze assets for the duration, is probably sensible to do so as a method of putting pressure on the system in The Russia. But to actually take the assets - a clear requirement before they’re then spent on doing something else - requires a more than passing reference to that rule of law thing.

It’s necessary to convict, in a fair trial, in a court of law, of something that was a crime at the time it is claimed it was committed, in the jurisdiction of the law being applied. Even, the penalty in the law that applied at that time must include the confiscation which is the sentence.

Nicking houses and boats on the basis of passports does not meet these standards. Therefore we should not be doing it.

The reason we do not act like fascists is because we are not fascists.

It’s reasonably well known that I have extensive business experience in The Russia. Just for the avoidance of doubt I have no business, assets, interests, contracts nor anything else in the country and have not done for well over a decade.

The Perils of Inflation

The interest rate on my student overdraft in the mid-1970s was 17%. I responded by spending even more. After all, inflation had hit 24%, so the Clydesdale Bank was effectively paying me to borrow their money.

An inflationary world is a mad world. Inflation can rise so fast and so far that firms cannot keep up, and do silly things. Like subsidising my profligacy and otherwise spending money on projects that in a normal world would never be considered.

The Office for Budget Responsibility figures that UK inflation will be at 8.7% by year-end, but remembering what I do from the 1970s, I figure that might be optimistic. And it’s highly damaging. After three years at that level, inflation has shaved almost a quarter off your savings. After seven, you’ve lost nearly half. 

That’s bad all round, but it’s particularly bad for young people, who have already lost out to the baby boomers thanks to the miracle of public borrowing. And planning controls too: with house prices spiralling because planners and NIMBYs won’t let us build enough houses for our increasing population, the savings-destroying effect of inflation makes the prospect of getting together a deposit increasingly remote. And because incomes are being eaten by inflation, it becomes harder for people to save at all. 

That in turn prompts another damaging effect. As inflation erodes incomes, workers demand more money to compensate. And if inflation is high, they demand not just enough to balance what they’ve lost in the last year, but even more to provide for what they expect to lose in the next. That is why, in 1972, with inflation heading over 20 per cent, coal miners demanded a 43 per cent wage increase. As did others.

Meanwhile, employers see their other costs rising too, so affording wage rises becomes harder, and heightens tensions between employers and employees. And since nearly 18% of the UK workforce is government workers, taxpayers come under pressure too. 

So, employers look to other ways to reduce their costs. They might use cheaper inputs to make their products — products which probably end up lower-quality as a result. One of the easiest things to cut, of course, is investment. Which gives us lower productivity and the dismal prospect of stagflation: prices rising but the economy going nowhere. 

We can’t blame the government entirely for rising food and fuel prices, but even in the best of circumstances, overspending seems a way of life to them. Since March 2020, the Bank of England has bought £875 billion worth of government IOUs, simply creating more money to pay for it. But money is like anything else. The more of it there is around, the less it’s worth. 

Sure, the Bank is now being a bit more cautious, but no central banker wants to inflict pain. Yet the lesson of the 1970s, again, is that those countries (e.g. Germany) that acted swiftly on inflation recovered much faster than those (e.g. UK) that thought the required belt-tightening was too painful.

How cute, Nick Timothy thinks it's all about politics

Politics affects the world, certainly, but does not determine it:

For globalisation – the treaties, processes and structures that have made the world more complex, inter-connected and inter-reliant – is the product of political choices. Those choices, such as the regulation and deregulation of labour markets, the regulation and taxation of capital, and the terms on which countries traded with one another, determined not only that globalisation proceeded apace, but the nature of change it brought.

Globalisation - that process which is on the verge of finally killing off absolute poverty among human beings - was not a policy choice. Technological change meant that it was almost, almost, inevitable. The policy changes that would have been required to stop it were such that only the most insane of polities did in fact stop it.

Air travel has become cheaper in real terms. International telecoms have declined in price to being, in effect, free. Goods transport has declined in cost to where - pace just this past 18 months - it’s possible to move 40 tonnes of goods from anywhere to anywhere for $5,000.

With those three globalisation was inevitable. If goods, people and information are trivially cheap to move around then globalisation is inevitable. It’s possible, as North Korea has shown, to unplug from this but it does have to be that extreme in order to do so.

Our favourite example of this point comes from the 19th century. In antebellum America it was the South, that agrarian, plantation, society that was against tariffs upon imports. The North, with its growing manufacturing base, tended to desire much higher tariffs. Post-bellum, tariffs rose, doubled in fact and more for the North had won and who cared what the South thought?

Trade continued to rise though, the American economy continued to integrate into the global one. For the barriers to trade are tariffs (and quotas, bans, other political things) plus the costs of doing the trade - transport, communications and so on. The steamship alone so lowered ocean transport costs that despite the doubling of tariffs the costs of trade fell.

Looking back over this past 80 years yes, tariffs have fallen and so on. But it is those larger influences of cargo, communication and carriage that have really driven the process. As with the 19th century political trade barriers would have had to double, triple and more in order to stop the process and even then would likely only have slowed it. If we still had the trade politics of 1950 (just to pick a date) we would still have a very much more globalised economy today than we did back then.

Mr. Timothy ascribes far too much influence to political choice - but then he always does, doesn’t he?

Regime change in Russia

The statement by Vladimir Putin that the government of Russia is something for the people of Russia to decide is one that has been echoed by some Western leaders and politicians. It is a pious sentiment but, unfortunately, it is not true. The Russian people have no opportunity to change their government because Russia is not a democracy in any meaningful sense of the word.

The Russian media is not free, and opposition and dissent are stifled. One opposition leader, Boris Nemtsov, was murdered in 2015, almost certainly by the FSB, successor to the KGB that Putin once worked for, and was done on his orders. The use of a Novichok nerve agent to poison another opposition leader, Alexei Navalny, is known to have been carried out by the FSB, again on Putin’s orders, and the name of the agent who carried it out is known.

A leading Kremlin critic, Alexander Litvinenko, was murdered in London with radioactive polonium-210, and again, the names of the two FSB agents who carried out the attack are known. The attempted murder of Sergei and Yulia Skripal was carried out on British soil by two known and named FSB agents using Novichok supplied on Kremlin orders and almost certainly sanctioned by Putin personally.

Street protesters are routinely and regularly beaten by police truncheons, arrested and imprisoned. The media toes only the Kremlin line, and opposition newspapers and TV and radio stations are silenced and shut down.

Elections are rigged, and ballot boxes are stored without scrutiny in the custody of government officials, or disappear altogether. The courts routinely hand down whatever verdicts and sentences the Kremlin seeks to impose.

This means that all the elements that go to make up a democracy are absent. No free press and media, no independent judiciary, no effective opposition tolerated, and no fair elections. The Russian people have no say in how their government behaves, and cannot change it. It is a mockery to say it is “in their hands.” It is not.

The behaviour of Russia’s brutal regime underlines the merits of democratic accountability in the free countries of the world, the ones that can peacefully change their government and influence their government’s course of action. It makes us appreciate what we have when we see what happens in countries which lack that.

When regime change comes about in Russia, it will not come from the Russian people, but probably from men in military uniforms, or more likely from the black-robed figure bearing a scythe.

Just to remind, you can tell all sorts of political lies with numbers

On seeing this we thought we’d better change our line of business. Net profit at 20% of turnover? Why aren’t we - and everyone else - piling into this sector?

Revealed: top 10 children’s care providers made £300m profits

Concern at growing role of private equity as councils struggle to meet spiralling costs

Sounds like the very thing, doesn’t it? Such profits must mean gross undersupply and thus plenty of room for us and others to fatten our own wallets:

Profits among the top 20 providers of care home and fostering places now amount to 20% of their income.

We thought we’d check though, for such margins are most, most, unusual outside the racier sort of tech operation. This is last year’s report on the same issue but they’ll not have changed their measurement method:

Aggregate profits measured using the popular EBITDA method (Earnings before Interest, Depreciation and Amortisation) amount to £265 million at an EBITDA margin of 17.2%.

Ah, they’re not in fact measuring profit at all.

There is a spectrum in politics concerning numbers. One can tell the truth, be misleading, that shades into casuistry and then to flat out lying. We’ll leave it as an exercise for the reader as to where this particular measure belongs on the spectrum.

So, one is doing children’s care, children’s homes. Which rather implies that there’s a home, a building, in which this is being done. Businesses, just like us individuals, tend to borrow on a mortgage to pay for those buildings. The interest bill on that borrowing is a cost of being in business - a substantial one. As is putting money aside each year - depreciation - to do the necessary reworking, repair and general maintenance on those very buildings.

As with anything property based in Britain these days these costs will be substantial.

So, the measurement of “profit” being used here is one before a substantial portion of the costs. That is, it’s not profit at all. It’s margin before interest, amortisation, depreciation.

Or, somewhere on that spectrum from truth to lying - again something for the reader to specify.

Just to make one further point. The second part of the report worries about the debt levels at these companies. Measuring profitability before interest plus also being concerned about high debt levels does strike us as being very close to cakeism. But then that’s rather the art of using numbers in politics, isn’t it?

Mrs Sunak and the Infosys dividend

We thought that perhaps one of these little details of how capitalism works might be useful.

Mrs. Sunak owns a stake in an Indian company, Infosys. That has paid her a dividend.

The Infosys accounting period - fiscal year - is to March 31. The latest accounts available are therefore for the quarter to 31 Dec 2021. Infosys pays an interim and a final dividend each year - or has done in the recent past at least.

Any dividend received recently will therefore be connected to the business activities, profits made, before Sept 30 2021.

Not that we expect this to change the shouting going on but we did think that someone, somewhere, ought to point this out.

The outrageous rip offs of capitalist free markets

Just such appalling behaviour, how could anyone possibly support this? Supermarkets are ripping off the poor consumer by, well, by cutting prices to said consumers:

UK supermarkets accused of ‘bombarding’ shoppers with cheap meat

Entirely disgusting, we hope we can all agree.

Britain’s biggest supermarkets stand accused of “bombarding” shoppers with offers of cheap meat, despite pledging to promote more meat-free diets to improve health and tackle global heating.

They are using money-saving promotions, such as two for the price of one, as a way of “pushing” meat, at odds with moves in the UK and globally for consumers to eat less of it, research found.

Consumers gain more of what they desire and this is - as the tone here makes clear - just appalling, isn’t it?

At which point to make that distinction between what people ought to want - even what they might say they want - and what they do want. Expressed and revealed preferences in the jargon. The best guide to which is to follow the money.

The supermarkets offer deals on meat because this at least appears to them to be profit maximising. That means that consumers must desire cheap meat - otherwise the offer would not be profit maximising. From which we can divine that consumers want cheap meat, whatever is said about health and or global heating.

As the aim of our having an economy - a civilisation even - is that more people gain more of what they desire this seems to be a good idea.

The only people who seem to be unhappy about this are those who think that consumers shouldn’t desire nor have more, cheap, or possibly even any, meat. But it is one of those very basic axioms that the people who get to define what they want is the people themselves, not others on their behalf. For those who would and do say that you cannot have what you desire because we say so are authoritarians and as such they can go boil their heads.

Supermarkets offering cheap meat? It’s the very proof perfect we require that capitalist free markets make us all richer. Because we end up with more of what we desire, not less of what some prodnose thinks we shouldn;t be allowed to have.