A new approach to overseas development
The United Nations has a target for developed countries to spend 0.7% of their Gross National Income (GNI) on Official Development Assistance (ODA). The UK had previously set this target, then reduced it to 0.5%, but now targets returning to 0.7% in 2024-2025.
Some commentators criticize the UK, and indeed the USA, for contributing too little to the development of poorer countries, but the amount the two countries give is much higher than the figures show. The statistics only show what governments contribute (£15.2bn), but data from the World Bank shows that £23.6bn is paid in remittances from the UK, with £10.6bn in charitable donations. People who came here as immigrants send money to their families back home, and thereby make a significant impact on their domestic economy. The same is true in the United States.
Furthermore, this direct person to person aid does more economic good than government to government aid. As Professor Peter Bauer pointed out, government aid signals to ambitious people in poor countries that they must turn to the government to improve their lot. People who might otherwise go into business or start businesses themselves, turn instead to seek contracts from government or positions within government. There are also fewer opportunities for corruption and waste in person to person transfers of wealth, although some smaller fraud has occurred. The money goes straight into the local economy and helps to fund things such as education, as well as raising living standards.
There is something else that works. It is the low tax, light regulation model that boosted Hong Kong from abject poverty into first world affluence. It did the same in Singapore, in Taiwan, and in South Korea. It was behind the West German “Economic Miracle” of Ludwig Erhard, and of Japan’s rapid post-war recovery.
The UK should boost development in poorer countries by the two things that we have ascertained work in practice. It should encourage person to person aid transfers from UK people to their relatives in poorer countries. This could be done by giving such contributions the same kind of tax relief that goes to those who make donations to registered charities through Gift Aid. An allowance would be set at such a level as to avoid this generous tax relief being used for tax avoidance or overly advantaging those whose families live abroad.
The UK could also collaborate with poorer countries to have an area, preferably including a port, assigned on a lease of perhaps 30 or 50 years to a consortium, solely at the invitation of the host. It would be a freeport and much more. The governing consortium would set the levels of taxation, and run the area’s policing and judicial administration. They would determine its property laws and its regulatory structure. The aim would be to recreate what Hong Kong and the others did. With the right conditions, property rights and rule of law, international investment would pour in, creating both businesses and jobs locally. Local people would rush to work or live there because of the opportunities.
There is little doubt that untrammelled enterprise would achieve far more than development aid has managed to attain after decades of effort. Combined with incentives to augment person to person transfers, this could set poorer countries on that upward path to affluence and increased prosperity.
The idea's right here, a tax on private jet fuel. It's the details that are awry
This is not a bad idea, despite being about climate change and also in The Guardian:
Our legislation would increase fuel taxes for private jet travel from the current $0.22 to nearly $2 a gallon – the equivalent of an estimated $200 a metric ton of a private jet’s CO2 emissions – and remove existing fuel tax exemptions for private flight activities that worsen the climate crisis, like oil or gas exploration.
We advocate the carbon tax so we should, must and do welcome proposals to impose the carbon tax.
There are a few problems here. If emissions from flying are a bad idea then emissions from flying are a bad idea. There’s no reason why only private jets should pay such taxes - government ones should as well. So too should commercial ones. That goose and gander thing really does apply to Pigou Taxes upon externalities.
Of course, the rate is wrong, should be more like 80 cents so as to reach the $80 social cost of carbon. There’s the usual American political foolishness about hypothecation of tax revenues. Instead of allocating that revenue to some specific subject better to simply put it into the general fund. There’s absolutely nothing at all about climate change that says government should get bigger. Only that the revenue for government should perhaps come from different places.
We spend enough time around here berating people for proposing very silly things to do about climate change. Here we’ve at least the beginnings of a sensible suggestion. Yes, the solution to aviation is the carbon tax. Because people should pay the full price of their actions and that should be visible in prices. Once those costs are included then of course we are finished with the subject. The only flying that will take place is that which is producing more value than the damages caused. That is, the only aviation left after a carbon tax will be that which increases human utility.
Which is, after all, the point of the game itself - civilisation’s aim is to maximise human utility.
Contestable monopolies, if exploited, will be contested
The latest of the Yellow Perils is that China is restricting the export of gallium and germanium.
The Chinese today produce 98pc of the world supply of primary gallium. The figure falls to 80pc for purified gallium used in industry, but you cannot reach that stage without access to the raw material. This is the metal that China has chosen to target along with its sister germanium, 31 and 32 respectively on Mendeleev’s periodic table. It won’t be the last.
Many are getting very worried over this. No one should be very worried over this.
One set of reasons is technical. The raw materials to produce the two are, respectively, Bayer Process residues and fly ash from coal burning. Here’s a list of those plants that extract alumina from bauxite, that Bayer process. Stick the right doohickey on the side of any of those plants - very few currently have one - and get gallium. Very, very few think that there’s a shortage of fly ash in the world. Both can also be extracted as byproducts from certain zinc ores.
There is simply no shortage at all of the base materials. All that’s ever needed is the willingness to actually process them out of extant resources. So, not a large problem then. China’s the major supplier because it’s willing to do it cheaper than others and when that’s not true then China won’t be the major supplier.
We can prove this from experience. Back in 2010 China tried something similar with the rare earths. As one of us predicted - to predict these things, in print, is more impressive we feel than simply historical pointing - that this would not be a problem. Four years later it was agreed that we had made the right prediction.
It’s also possible to appeal to another set of reasoning, away from the technical details of these markets. Which is that if anyone tries to exploit a contestable monopoly then the monopoly will be contested. The only way you can keep a monopoly position that could be contested is by not exploiting it for reasons of profit or power. That is, if you have a monopoly over the production of something just because you do it well, or cheaply, or subsidise it, then the moment you raise your price to profit from your control then everyone else is going to roll up sleeves and go back to doing it themselves. Slightly more expensively than when you were doing it, true, but less expensively than your attempt to exploit.
Which is indeed what happened with rare earths. And will also happen with gallium and germanium. And, as we insist, every other contestable monopoly. It’s the very attempt to capitalise upon that monopoly position that motivates everyone to break it. And precisely because it is contestable the contestation will work.
It is true that Gerry Wise is no longer with us to guide the germanium factory (Gerry being perhaps the tail end of that Finchley area metals industry described by Oliver Sachs in “Uncle Tungsten”) but as it happens one of us has the plans for a germanium extraction plant on a desk somewhere - fly ash from a lignite plant to produce perhaps 4 tonnes a year (say, 2% of global demand. About). If anyone’s unconvinced by the explanation above about why not to worry they can just send a blank - but signed please - cheque and we’ll get on with it.
Or perhaps more sensibly, leave those who know what they’re doing to contest that monopoly that China is trying to exploit. As we insist, it will be successfully contested.
The NHS guarantee card
The announcement that private facilities are to be used to provide some healthcare services without charge to NHS patients is an important step on the road to improving the NHS. More such steps should be taken
All UK citizens should be given an NHS Guarantee card, like a credit card, that guarantees them free treatment. Their Health Guarantee card must give whoever treats them full access to their health records, previous treatments, together with any previous or current conditions. It must cover the cost of their treatment, funded by the state.
In the event of any delay in access to treatment in the public health sector, the card should be valid for private sector treatment, with a cap on costs similar to those widely used in automotive and housing insurance. Such caps should be subject to periodic review by the Department for Health and Social Care.
With the funding of healthcare covered by social insurance, the delivery of healthcare should be provided by a mix of public and private facilities paid by the state or private insurers on the basis of the treatments they deliver. GPs should be paid according to the number of times they see and treat patients, with in-person consultations paying more than video or telephone meetings. Doctors would be paid for providing healthcare for patients, rather than for having them on their books, which is the current system.
Similarly, hospitals and consultants should receive their funding according to the treatments they provide. The government should make contracts with them to provide healthcare on an agreed basis.
GPs, consultants and hospitals should be given their independence through a wider rollout of NHS Foundation Trusts, rather than being managed by a centralized bureaucracy. They should compete to provide treatments, to attract patients, and might be encouraged to specialize in doing what they do best.
There should be tax deductions for those who use supplementary private insurance to save the state money and resources. This happens in Australia, where most people take out private cover in addition to the state’s Medicare programme that guarantees them treatment. Since the private insurers cannot take into account the current health status of the applicant, the risk is pooled.
UK doctors are leaving in significant numbers to go to Australia, some as soon as they have finished their qualifications. Yes the changes outlined herein could potentially make the UK’s NHS as efficient, as attractive, and as popular as healthcare in Australia is.
How dastardly of those epicanthic'd, communist, foreigners
Apparently Chinese competition in electric cars is worrying the Germans:
German car makers must do more to make electric vehicles cheaper and more appealing because manufacturers are losing out to China, the head of Berlin’s top group of economic advisers has warned.
Monika Schnitzer, chair of the Germany’s Council of Economic Experts, said car makers needed to “get their act together” and “do their homework” as people increasingly turn to cheaper Chinese-made cars.
Our word. People on the other side of the planet have worked out how to do something - it matters not what it is - better than those closer to us. That those far foreigners look a little different, don’t share our political system, speak wildly different languages, matters not. For trade, just trade alone - the freedom of the individual to buy whatever it is from whoever the individual cares to alight upon - means that the local capitalists are forced to rip us off a little less.
For that is what is happening here. And it doesn’t matter a fermented mung bean why those Chinese are making cheaper cars than Germans. Chinese government subsidies, simple skill, application, lower wages - all make no difference to the important point here. That there is competition in electric vehicles forces those German - and every other in the world - factories to up their game and make better and cheaper. The beneficiaries are, entirely obviously, us. Us consumers, us going about our daily lives.
As we’ve recently noted people will try near any argument to show that trade’s a bad idea. And yet think about this. Every producer of everything is, all the time, forced to compete with those who are the best in the world at doing that thing. Which is why things just get cheaper and cheaper for us out here the people the economy ought to be run for. You know, us, the people.
True, a problem with Chinese cars could be that we’d just want another one an hour later but if they’re cheap enough why not?
Ahistorical, economically illiterate nonsense
Jason Hickel is out there again, trying to prove that it was capitalism and markets - through colonialization and oppression - that caused the poverty of the past. Before that all were Breughel peasants straight out of a painting, dancing happily with their abundant harvests.
The aim of this is to prove that capitalism causes - actively creates - poverty and that therefore socialism works. Of course.
The new paper. And as they say it depends upon the earlier one here. The major claim is:
The rise of capitalism from the long 16th century onward is associated with a decline in wages to below subsistence, a deterioration in human stature, and an upturn in premature mortality.
All adults should admit that our economic numbers over this time period are estimates, derived from proxies. We know they’re not accurate even as we somewhere between hope and insist they’re around and about right. But perhaps they’re not? Possibly Professor Hickel has done us a great service by calling attention to their failures? At which point, abacii out and let’s try to get them right this time then, eh?
Well, possibly. Though first we should get all Worstall on the Hickel Thesis. Which is to accept the workings and the thesis. Then ponder what should also happen if it is all true. The absence of that other thing which must - that is, must - also happen would show that there’s some problem in those workings.
That thing which must also happen? The population must shrink. Because that’s what below subsistence means. Hickel himself uses it, a family of four can survive. Thus two adults can raise two children who then go on to have children - the very definition of what is necessary for the population to remain of stable size.
Actually, we need more than this because of child deaths, infertility and so on but two make two make two on average is necessary for that stable population size. And that is also the definition of subsistence income. One below subsistence is one where the population is not even replaced. That is, population must fall.
No one at all doubts that for periods the general population was below subsistence, we do have periods of falling population. Similarly, no one at all doubts that parts of the population were below subsistence for long periods of time. London’s population never did replace itself for centuries, it always did depend upon immigration - but for reasons of disease more than poverty.
But Hickel’s claim is that in general the population was below subsistence for the centuries from the beginnings of capitalism - that long 16th century - up to the 1880s in N Europe and well into the 20th century in Asia and other parts.
Well, that’s easy enough to test. If that is true the global population must have declined over that time period. Because that’s just what the mass of people living below subsistence means.
Ah. Global population quintupled over this time period. As did the population in Asia. As, near enough, did the other measured subsets, that in Africa, the Americas and so on. It is not possible to have 5x the population if everyone has been living below subsistence for those centuries.
Therefore the Hickel Thesis is wrong. The true intellectual masochists can worry about why he’s wrong, where the short circuit in his abacus is, and the rest of us can muse over the errors of allowing the anthropologists to do numbers and then go do something more interesting.
When’s the footie then?
It's amazing what people will try as a protectionist excuse, isn't it?
Chinese electric cars imported to the UK to help hit net zero targets will enable Beijing to spy on British citizens, ministers have warned.
With car companies facing quotas for zero emissions sales from next year ahead of a ban on new petrol and diesel vehicles in 2030, China is predicted to dominate the UK market because of its prowess in providing cheap electric cars.
However, sources at the heart of government have raised concerns that technology embedded in the vehicles could be used to harvest huge amounts of information, including location data, audio recordings and video footage, while also being vulnerable to remote interference and even being disabled.
Meanwhile, a cross-party group of MPs warned the Government that Britain is poised to cede control of the “critical infrastructure” of its car market to Beijing “with all the attendant security risks”.
Therefore - and we have no doubt at all that this will be next - Jaguar Land Rover must be subsidised so that the Indians can have the data instead. Or Ford, so the Americans, BMW the Germans and so on. Or, for the truly weird, there will be an insistence that British Leyland be revived.
Because Johnny Foreigner might find out that location - a British car is being driven in Britain - therefore cars in Britain must be vastly more expensive through either the taxes to pay subsidies or the banning of the cheapo version made by J Foreigner.
The actual answer here is for government to butt out. Anyone worried that the sojourn on Lover’s Lane is being tracked in Guangdong won’t buy a cheapo Chinese. The rest of us can get on with our own trade offs over data, cost, privacy and the rest.
After all, it’s probably better that someone on the other side of the world has that Lover’s Lane tape than someone inside our own government, isn’t it? Shenzen really isn’t going to care while locals might well try to use it.
Incentives do matter, yes, they do
Mental health crisis may not be all it seems
We must ask whether generous benefits for conditions such as stress have made opting out of work too attractive
Parris then has to very delicately tiptoe through his explanation. Yes, of course some suffer dreadfully from problems, society rightly supports them, but is it vaguely, just possibly, just a bat’s squeak of a chance there, rumoured to be even the sniff of some not being quite so ill that they could not work? In fact, would not, if it were not that the benefits are large enough to make not working - or even claiming while working - worthwhile?
Even with all the qualifications Parris has to shovel in we fully expect there to be a massed chorus of shrieking about how terrible he is for even bringing up the point (J Portes was quick off the mark “faux concern combined with complete and wilful ignorance” - as we said).
At which point we can be a bit more blunt than is possible in a Times column. Of course some are blagging it. Humans respond to incentives, d’ye see?
No, really, humans do, to the point of deciding when they die:
In 1979, Australia abolished federal inheritance taxes. Using daily deaths data, we show that approximately 50 deaths were shifted from the week before the abolition to the week after (amounting to over half of those who would have been eligible to pay the tax). Our findings suggest that the scheduled abolition of the US inheritance tax may lead some deaths to be shifted from the last week of 2009 into the first week of 2010.
Incentives matter. No, really matter.
Some who perhaps should not be claiming illness or disability related payments will be - the government’s handing out free money so obviously some will.
There is also no absolute solution to this. We desire a system which picks up every single case of those who do require the help. That means that the rules are going to have to be relaxed enough that some who don’t will also be able to get it. We don’t want a system where the truly ill cannot gain help - we therefore have to put up with system leakage.
We can change how much leakage there is, sure, at the risk of blocking out some of the deserving. But that’s just the standard point that all of life involves trade offs.
Two of the grand lessons of economics in the one story then, incentives matter, there is no solution only trade offs.
Except that’s not the end of it. For we also have those looking at the working disability numbers and therefore insisting that there’s a problem with the NHS. Or with social services. Or that government’s not spending enough money on antiracism, community outreach or the rest. Which means that we do actually have a useful lesson at the end of this. Which is that the current working disability numbers are not a result of government spending too little, but of it spending too much. Perhaps rightly too much - taste can vary as to how much blagging we’ll accept in order to make sure no one deserving is missed. But government spending lots on a relaxed definition of disability is not an argument that government must be spending more on disability.
Now gosh, yes, this does surprise, doesn't it?
We must regulate artificial intelligence. Despite the fact that we still don’t know what it can do, what the benefits might be, even who will produce the one we want to use, we must regulate:
These same principles should extend to investors funding newer entrants. Instead of bankrolling companies that prioritise novelty over safety and ethics, venture capitalists (VCs) and others need to incentivise bold and responsible product development. For example, the VC firm Atomico, at which I am an angel investor, insists on including diversity, equality and inclusion, and environmental, social governance requirements in the term sheets for every investment it makes. These are the types of behaviours we want those leading the field to set.
We must even regulate the flow of money to those who might be innovative!
Dorothy Chou is head of public affairs at Google DeepMind
Our word, we are surprised. The incumbent, worried about the insurgents snapping at its heels, suggests that the law should be used to hobble that competition. Nothing like this has ever been seen before has it? That man with the red flag in front of a newfangled automobile just never happened.
What’s worse, they may well get it too. Because the incumbents exist and so are a political pressure group whereas those who will exist are not. Nor, obviously, those who will benefit from the innovation lost because no one, as yet, knows what that will be.
Which is that basic problem with regulation, isn’t it? Those who will benefit from there being regulation are a political force, those who will benefit from there being none are not. Therefore politics naturally produces over-regulation.
Bud Light's woke and broke
By the standards of a mature beer business these numbers are near insane:
The owner of Bud Light has revealed a steep drop in US sales after the beer’s collaboration with a transgender social media influencer sparked a backlash.
The world’s biggest brewer, Anheuser-Busch InBev, revealed that US revenues dropped by 10.5pc in the second quarter of the year.
Inflation makes that YonY comparison worse of course.
On the specific issue we are, of course, the liberals that we always are. The entire aim of the liberal project is that consenting adults get to adult consentingly. As long as we’ve no breaches of Mill’s fist/nose interface problem then get on with life as you wish. We do only get the one pass at it after all so make it a good time by your lights.
This does indeed mean blokes in frocks - or, a different description, trans rights. Use whichever you prefer. The duty of everyone else is to allow and tolerate.
But we also illuminate a more general point here too. Who actually has the power in a capitalist and free market economy? Quite clearly it’s us as consumers. Even something - as here - as trivial as an ad for a beer can lead the capitalists, the producers, losing substantial amounts of money. Billions off the market capitalisation in fact. And all just because some of us consumers decide to switch where and how we’d like to spend our money.
That is, it’s us out here with the power over what gets produced. We’d even go so far as to insist that we have a duty to use it too. Maybe Lush and their greenie vibes do it for you - then spend your money there. Maybe the use of a trans influencer is right up your street - Bud Light’s pretty cheap at present so buying by your principles might even save money. Or, of course, the opposite could be true. Your values are met by some other combination of acts, influences and claims. So, go for it.
It’s the market part of the system that gives us the power over the capitalist part. So, yes, we should use that. Boycott, or buy by preference, according to your desires and views about life, production and everything. No, not according to our, but to your. The end result will be that liberal society we so desire - one designed and made by the revealed preferences of the 8 billion people around us.
And that is, in the end, what the liberal ideal is. The world that results from everyone having the freedom to, well, to be free.