Reversing Parkinson’s Law
C. Northcote Parkinson was 49, and a history professor at the University of Malaya, when the Economist published his “law” that work expands to fill the time available. The Sydney opera house was supposed to take four years to build, it took 14. But the version the government needs to consider is his Law IV: "The number of people in a working group grows regardless of the amount of work to be done." There were about 384K UK civil servants in 2016 and there are 508K today. The work, now we are through Brexit, has not substantially changed. Indeed, removing the time spent dealing with Brussels and our EU partners should have substantially reduced it.
Law IV was based on Parkinson’s experience in the armed forces in WW2. When work is novel and hard to specify, resources seem unlimited and the more people you have under your command, the more you get paid, Law IV will seem unstoppable.
Here is the cure: the CEO has to summon the head of the department needing the treatment and inform him that the Chairman was told by someone he was playing bridge with at the club that his equivalent department only needed many fewer staff. The number should be the largest credible, maybe 50%, maybe 90%. “Can’t give you names, old boy. This was at his club. What we need to do now is to see what your team is doing now and would not be able to do in future if we chopped the numbers likewise. We need to list all the things. And we need the effects on completion dates.”
The full picture is needed because otherwise the junior will suggest eliminating, or delaying, the CEO’s favourite items.
What happens next depends on the relationship between the two parties. When it is a new CEO who arrived as part of a hostile take-over, the junior will be in fear of his or her own job and miracles will be achieved. Conversely, if it is all too cosy and the CEO is just going through the motions, nothing will happen.
The difficulty in the civil service is that, even if the ministers decide radically to prune their departmental headcount, the permanent secretary probably will not agree and there may be nothing the ministers can do. Permanent secretaries may answer to their ministers but they are not directly managed by them. Permanent secretaries are line managed by the Head of the Civil Service, usually the Cabinet Secretary. What that means in practice is that the Prime Minister and Head of the Civil Service need to agree that the current 508K headcount must be cut to 400K and that all permanent secretaries must agree their contributions with their ministers. Not doing so would be a sackable offence, possibly impacting pension rights. That should get their attention.
The road from Delors to Brexit
In September 1988, Jacques Delors, then President of the EU, spoke to the UK Trade Union Conference in September and outlined a socialist future of the European project. He won the support of the TUC by pledging to use the EU to impose workers’ rights, collective bargaining, strengthened trade union power, and all the paraphernalia of a centrally directed, statist vision of Europe.
He achieved his aim in the short term of winning TUC support for UK participation in the EU’s drive for “ever closer union.” But he also brought to the surface many of the fears that others were beginning to feel towards the new political dimension the EU was exhibiting. The UK had joined what it thought was a free trading bloc that was called at the time the “European Economic Community.” But the EU was by now showing a self-aggrandizing movement towards concentration of power in its hands at the expense of those of its constituent members. It looked as though it was in the process of becoming a centralized authoritarian body that could override the wishes of European electorates.
Delors’ speech to the TUC confirmed this, and the response was not long in coming. Ten days later in Bruges, Prime Minister Margaret Thatcher made a speech that questioned the Delors agenda to “introduce collectivism and corporatism” and to “concentrate power at the centre of a European conglomerate.” She went on to assert opposition to the centralizing and collectivist programme that had moved on from its original “charter for economic liberty.” She set out her determination to oppose it.
“We have not successfully rolled back the frontiers of the state in Britain, only to see them reimposed at European level, with a European super-state exercising a new dominance from Brussels.”
Her speech lit a fuse that burned its way steadily and remorselessly towards the UK’s vote to leave the EU 28 years later. The Bruges Group was founded immediately after her speech, and campaigned over the years against the ever-growing powers of the EU bureaucracy. The growing electoral support for and success of Euroskeptic candidates finally forced the issue onto the political agenda.
The rest is history, and there is little doubt that many future historians will draw a straight line between the speech of Delors to the TUC, and the subsequent UK withdrawal from the EU. It is even possible that Jacques Delors himself, now aged 96, might reach the same conclusion.
Just to remind, incentives matter - even for professionals
British General Practitioners - the gateway to the services of the National Health Service - get paid through capitation fees. An amount per person who is on their patients list.
More than a third of GPs refused to offer routine appointments during the last year, a poll has revealed.
Covid absences, unprecedented demand from patients and staff shortages have created significant pressures in primary care, GPs said.
More than 800 family doctors were surveyed by Pulse and 35 per cent reported that they had stopped taking bookings for routine appointments at some point in the last 12 months.
One GP in Liverpool, who asked to remain anonymous, said his practice had switched off the online booking system overnight and at weekends due to the overwhelming demand.
He told the magazine the workload level would be “unsafe” to operate and the practice still sometimes turns off the booking system during the day.
The incentive therefore is not to actually see - or treat, heavens above no - patients. It is to have a list of patients who may or may not get seen - or treated.
As we’ve been known to point out the first of the two things that everyone should know about economics is that incentives matter. It’s possible to muse that incentives are misaligned here.
Possible even to go further and suggest that the incentives be realigned. Pay GPs for actually seeing patients - or even, wonders, treating them - and marvel as behaviour changes to match the new incentives.
After all, none of us has great problems in getting in to see a lawyer, who are indeed paid by the time they spend actually dealing with us. So, yes, why not pay doctors as we do lawyers, they both claim to be professionals, why not pay them the same way?
GPs are currently paid not to see patients. Is it really any wonder that it’s difficult for a patient to see a GP?
The big (government) cheese
Observers of the British media might form the conclusion that politics in the UK is somewhat cheesy. In the United States, however, government is literally cheesy. In underground cellars, converted limestone mines, and caves kept at an exact 36°F are stored 1.4 billion pounds of government-owned cheese.
Government started the scheme of buying surplus milk products to help dairy farmers by maintaining their prices. It mostly consists of processed cheese and dehydrated milk powder because these have the longest life spans. US processed cheese is typically composed of various different types of cheeses blended together with other ingredients such as emulsifiers. It was widely used by the US military in World War II, and in US schools since the 1950s.
There was a UK Government cheese in World War II when it was officially decreed that as part of the war economy and rationing, only cheddar cheese made in a certain way would be broadly available to consumers on a national scale. It was unofficially known as “government cheddar,” and was rationed. This was phased out after the war ended, but US Government cheese goes on.
When Ronald Reagan became President in 1981, he ordered the distribution of 560 million pounds (250,000 metric tons) of government-stockpiled cheese. It went to welfare beneficiaries, food stamp recipients, and the elderly receiving Social Security in the United States, as well as to food banks and churches.
The surplus has built up again, however, and is currently given out regularly to prevent the stockpile growing ever larger. In 2016 the government decided to distribute approximately eleven million pounds of cheese worth $20 million, to give aid to food banks and food pantries from across the United States. The purpose was to reduce a $1.2 billion cheese surplus that had been at its highest level in thirty years, and to stabilize farm prices. Currently eligible senior citizens over the age of 60 are provided with one 2-pound block of processed cheese every month, supplied by participating dairies.
The policy is controversial because the processed cheese is high in saturated fat, cholesterol and sodium, and is regarded as unhealthy by many food scientists. In a difficult-to-believe scenario, the US Department of Agriculture has run campaigns promoting greater consumption of dairy products, while the US Department of Health has run campaigns urging less consumption of them.
Although US government cheese reportedly melts readily and is therefore easy to cook with, its taste and texture are regarded with disdain, even by those not already disdainful of American cheeses. Its production has nothing to do with demand, but is down to the lobbying of the American Dairy Association.
The US government cheese stockpile is what happens when government interferes in the market to ‘protect’ producers. It calls to mind the EU’s once infamous butter mountains and milk lakes, and its current mountain of milk powder. Unfortunately, many of the countries that face food shortages have populations with a high degree of lactose intolerance, ruling out the obvious solution.
One unnamed official of the US Department of Agriculture reportedly suggested that the best thing that could be done with the surplus cheese would be for the government to dump it all in the ocean and not buy any more. It would perhaps be preferable to the current policy.
Nationalised health care
It’s the stunning efficiency with which government plans and manages health care which makes the NHS that Wonder of the World admired by all those poor benighted Johnny Foreigners who do not get to enjoy it:
A hormone replacement therapy (HRT) substitute could be available across the country within days if the Health Secretary cut NHS red tape, an MP has said.
Shortages of HRT have forced menopausal women to share supplies, buy privately or go without the “lifesaving” medicine.
Sajid Javid, the Health Secretary, will meet drug manufacturers on Thursday to try to fix the shortages.
He will be joined by Madeleine McTernan, who was appointed as the head of the HRT supply taskforce last week.
We have a taskforce no less. And a shortage. Forcing that consideration of which way the causality runs.
There does seem to be a simple solution too:
Theramex, manufacturer of Bijuve, a substitute for Oestrogel which is facing significant shortages, said it had ample supply to meet the demand but NHS bureaucracy meant it was only available in three areas of the country.
About 150 NHS hospital trusts and 130 NHS clinical commissioning groups have yet to approve Bijuve on their formularies and only women in Somerset, Norfolk and Oxford can access it.
Tina Backhouse, UK country manager of women’s health at Theramex, told The Mail on Sunday that the supply shortages could be eased within days if the product was added to all formularies.
Now of course, that’s the manufacturer suggesting a solution that would increase said manufacturer’s sales so the appropriate level - and probably higher than Public Health England’s suggested guidelines - levels of salt should be taken with that.
And yet we do still have that example of the efficiency of government run health care, don’t we? The “not very much” efficiency.
One disagreement though:
“It would be better for there to be a national formulary”
No, it wouldn’t. For there were then we’d have that majority refusal to supply imposed upon all, wouldn’t we? We’d not in fact have those three areas supplying without problems, thereby showing that the substitution does in fact work.
As we’ve been known to point out it is competition - and a different formulary is competition - that improves productivity.
Just what should the critical minerals strategy be - less perhaps?
We can tell that something’s coming to a head. When two of the major Sundays publish long pieces on these critical minerals then clearly a political decision on critical minerals is imminent. The Sunday papers being where you go to influence future political decisions.
Last year, the UK formed the critical minerals expert group, and is due to publish a “strategy” on minerals soon.
Ah, yes.
So, the Sunday Times gives us a long piece on how those inscrutable Chinese are doing everything really cheaply and efficiently and don’t we just have to do something about that?
“The challenge the West has is you are competing against a Chinese processing industry that’s years ahead and is already very cheap,” noted Sanderson of Benchmark. With raw material costs going up, carmakers will be under pressure to choose the cheapest supplier; these are unlikely to be European processors,”
Cheap and in volume - we’d better get government involved to make sure that doesn’t happen!
The Sunday Telegraph:
The Western world has become tangled in a near Chinese monopoly of rare earths - the materials required to make the magnets required for all manner of items in households, industry, military and the green transition.
China provides around 98pc of the EU's requirement for rare earth metals. While the minerals could be mined in many countries, Beijing has invested in the production capacity required to process and export them worldwide.
Terrors, the division and specialisation of labour, added to trade, has led to cheap and efficient supply. Such a terror that requires a solution.
By the end of that piece it becomes an advertisement for Pensana, who are building a rare earths separation plant on Teesside.
As to what actually should be done. Lithium at $70,000 a tonne is a self-solving problem. The lower levels of stock markets are infested with the traditional two men and a dog companies claiming to have a lithium deposit. Why wouldn’t they be, with lithium at $70,000 a tonne? There is also a flood of real capital into sensible projects. Plus entirely new extraction technologies - why wouldn’t there be with lithium at $70,000 a tonne? Adaptations of desalination technologies now mean that lithium can economically be extracted from brines where there’re only 50 or 100 parts per million Li. We’re getting close to where mere seawater is a source and with lithium at $70,000 a tonne we might well be there in fact.
Lithium is likely to follow the same path it did last time. Everyone got terribly excited back around 2013 and some of the mines funded then have already gone bust - on the grounds that so many got funded that the marginal mines went bust.
More specifically with the rare earths the production of rare earth concentrate is trivially simple. Cheap too - values of such concentrates are in the $x,000s per tonne and x is not just a single digit number but a low one. What costs the money is the separation into the individual elements - a tolling price for that service is perhaps $20,000 a tonne. It’s the processing that matters, not the mining.
At which point we could indeed get all Mazzucato about this and demand that government have a plan, intervene. The first stage of which would be to change current environmental law so as to allow people to build rare earth separation plants.
The terror is that rare earth ores will near always contain thorium. That’s radioactive, even if lightly so, and it does need to be extracted. The actual written laws about what you do next are sensible enough and on paper it’s not a grand problem. Extract and store and there we are. The reality of trying to get the permissions and licences to do so is that it’s damn near impossible. So, it’s damn near impossible to gain permission for the rare earths processing cycle.
20 years back that mine in California closed at least in part because the process was leaking thorium back into the desert that the thorium had come from. Shifting it around a bit was an environmental crime, d’ye see? Or there’s a plant in the US that can process the material under current licences. Actually, no problem at all. Except it doesn’t have the licence to be allowed to do so - thanks to the State of Utah. It has all the licences required except the one that allows it to ship rare earths out of the plant. An old French plant closed because its thorium storage capacity was full and it wasn’t allowed to build more.
The problem isn’t with capital - that’s abundant in this space. It’s not with technology, nor even expertise. It’s the paperwork to be able to go do something. So, relax the paperwork and it would get done.
We can even go that one Mazzucato stage further and insist upon government actually spending money on the problem. There are a number of possible technologies that would make this separation less costly. Bring that price down from that $20,000 a tonne. We know of one proposal out there for a £1/2 million pilot project for example - the major problem with it being that it would cost at least £1/2 million to get the licences to do it. Plus some indeterminate amount of time which again just adds to the costs. That regulatory uncertainty means private capital is rather wary.
That is, where the market is being allowed to operate, with lithium, high prices are doing their usual job of being the cure for high prices. Where markets are being constrained by regulation - rare earth processing - the problem is not being solved.
Therefore the critical minerals strategy needs to be less regulation constraining markets. And if you believe that that’s what the British government’s critical minerals strategy is going to be can we interest you in this fine bridge we’ve got for sale? Only one little old lady owner, very few miles on the clock…..
At last, something in The Guardian we agree with
Well, for the first time since it left Manchester, and Manchester liberalism, behind that is:
At a time when household budgets are already being squeezed, it is more important than ever that companies feel the heat of competition to force them to keep prices down. But across too much of our economy, that isn’t happening.
Competition is indeed a glorious thing. It’s both what keeps prices down and also drives the productivity increases which make us all so much richer over time. This applies to corporations, of course it does, but we’d just like to note that it applies to corporations, not just companies.
A corporation having wider meanings than just a company. The railway system is, for example, a corporation in the wider sense. So is whoever provides the buses. Farming as a whole in the UK can be thought of as a corporation - the NFU certainly acts like one often enough. All of these suffer from competition in exactly the same way that Sainsbury’s, Waitrose and Morrisons have suffered from the irruption of competition by Aldi and Lidl. Those company corporations suffered so that we consumers could benefit - because the competition keeps prices down and improves productivity. Those other corporations should too.
Which then tells us what we should do about health care of course. We can’t sell the NHS because the only revenue stream is us taxpayers so who would buy it? But then we don’t want to sell it anyway because if sold it would still be that monopoly not subject to the competition which improves prices - which here would be a smaller call on taxpayers - and productivity - here actually curing people of things that can be cured, an activity the NHS is pretty terrible at compared to other health care systems.
What we need to do is break the NHS up so that it is subject to that competition which improves prices and productivity.
How lovely of The Guardian to make our point for us.
It's possible to think that some people haven't quite got the point
Those manganese nodules down there in the abyssal deeps, there’s a fairly concerted move to get them dragged up to feed the renewables revolution. Also a fairly concerted move to make sure they don’t get mined at all:
Louisa Casson, a Greenpeace campaigner, criticised the industry for running the conference and banks for considering investing in the “dangerous and unnecessary” projects to “make a quick profit”.
“This destructive new industry wants to rip up an ecosystem we are only just starting to understand,” she said. “[They are] aiming to make a quick profit while our oceans and the billions of people relying on them bear the costs.”
Well, yes, we all knew Greenpeace were bananas - build absolutely nothing anywhere near anywhere.
This being The Guardian of course certain details manage to escape them:
The hoped-for gold rush lies thousands of miles away on the bed of the Pacific Ocean, where trillions of potato-sized nodules of rare earth elements
Umm, no, they’re nickel, cobalt, copper, manganese, none of which are rare earths. Anything to do with financial numbers confuses of course - this is The Guardian:
expected the ISA to agree a payment regime that would hand mining companies a post-tax profit of 17.5%.
No, it’s for an internal rate of return, IRR, of 17.5%.
But details, schmetails, except we do love this proposal, which does seem to be wholly and entirely missing the point:
The African Group considers that this philosophy alone is insufficient. More specifically, the African Group will only support a payment regime that demonstrably:
a.) results in deep-sea mining contractors facing rates of payment (an overall burden of taxation)
that are within the range of those prevailing for land-based miners;
b.) results in substantial and fair compensation to mankind whenever deep-sea mining occurs; and
c.) either i.) constrains production from deep-sea mining to a level that does not result in lower
metal prices and a loss of government revenue from land-based mining; or ii.) results in high
enough revenue from deep-sea mining for governments with revenues from land-based mining
to be fully compensated.
We grasp the fully compensated part. That’s just the countries which currently host mines trying it on. Shrug, commercial negotiations are about trying it on and seeing what one can make stick.
But don’t you love that idea? A new mine may only be opened if it doesn’t reduce the prices of the metals mined? Rather missing the point of opening a new mine really.
That demand is actually that the current mines must have a cartel over any new mines to protect their profits in perpetuity. Given that this is a UN driven process don’t dismiss the possibility of it happening either.
Perhaps this international negotiation thing isn’t in fact quite the way to manage new technologies?
Let's just not have fresh food checks then
The Guardian tells us that checks on fresh food from the remnant EU are to be delayed again:
The delays could push back the full implementation of Brexit controls until 2023, sources said, with physical checks removed and a potential relaxation on the requirement for import of products, animals, food and feed system (IPAFFS) paperwork.
We’ve not had such checks for near 18 months now. In fact, we’ve not had such checks for some four decades if we include the time we were inside the EU.
The absence of such checks in the near 18 months since we left has produced no problem that anyone has reported upon. And we would have been told if there had been some outbreak of turnip trichinosis, shallot shigella or equine lasagna - that last being a real one and one that happened during our membership period.
The benefits of such checks would therefore seem to be zero. The costs of them will be something above zero. Doing something that costs but which gains no benefit at all is one of those things we shouldn’t be doing - it makes us poorer.
Yes, of course, it’s possible that the absence of checks could lead to problems. But having tried it for that near 18 months we’ve now found out that the could is actually does not. One of the values of experimentation is that we move from that world without the Rev Bayes to one with his insight. Given that we now have real world evidence we can assign a probability to the possibility of problems with not having checks. It’s zero.
So, let’s just not burden ourselves with the costs of those checks. For they’re not needed.
We can gain the same policy advice through another construction as well. The r-EU has armies of inspectors wielding their clipboards all over the fresh food production system. This was good enough for us while we were inside that system. Now we’re outside those r-EU inspectors are still there, doing their wielding. There’s absolutely no point in our checking their work, as we didn’t used to, so let’s not bother ourselves with the cost of doing so.
That is, the r-EU itself is already carrying all the costs of inspecting the fresh food they send us so why should we bother?
The Guardian on corporate profits
The Guardian is shocked - shocked - that corporate profits have increased.
The analysis of Securities and Exchange Commission filings for 100 US corporations found net profits up by a median of 49%, and in some individual cases by as much as 111,000%. Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.
Given that the purpose of a company is to enrich investors we find ourselves very relaxed about this, very relaxed indeed. It is competition which benefits consumers, not the capitalism part so much.
We would though argue slightly about some of the detail:
Steel Dynamics profits increased 809%. The company was “not materially affected by inflation” as higher prices “exceeded” increased supply chain costs.
Well, yes, tariffs on imported steel will have that effect upon a domestic steel producer. Tariffs are the deliberate choking off of the competition which benefits consumers after all. If this noting of the profit rise had been accompanied by The Guardian calling for abolition of the tariffs then we’d be right there with them. But it isn’t is it? We’ve the capitalists being blamed for what the government has deliberately gone out and done.
Fertilizer giant Nutrien’s profits shot up by about $1.2bn on “higher selling prices [that] more than offset higher raw material costs and lower sales volume”.
One of the things Nutrien does is make nitrogen fertilisers. The price is set globally, N. America enjoys lower natural gas prices - fracking - than the rest of the world, so a N. American nitrogen fertiliser manufacturer will enjoy super profits as a result of fracking. The solution to such excess profits is to allow fracking elsewhere - Guardian?
Concentration is particularly pronounced among commodity companies, a problem highlighted in the grain market. CPI data shows bread and cereal prices increased by 30% and 7% between 2019 and 2021’s fourth quarters, while wheat skyrocketed to an all-time high in March as war largely eliminated Ukrainian and Russian crops.
Meanwhile, four large grain producers control about 90% of the market. Among them are Archer Daniels Midland, whose profits jumped 55%, and Bunge, whose profits swung by about $280m. Three companies control 73% of the cereal market.
Those are not grain producers, farmers produce grain. They are grain traders and transporters.
There are indeed things that can be done to reduce corporate profits if that’s what is desired. The Guardian doesn’t suggest any of the useful ones - pity really.