A reminder to Bill drafters: all we need is one right

“It’s not just the European Union that needs sorting out,” UK Prime Minister David Cameron told his Party Conference this week, “it’s the European Court of Human Rights.” This is not the first time he has said that: he said it to the judges’ faces a couple of years back, at the ECHR’s gleaming headquarters in leafy Strasbourg. They were not overly impressed. But his audience this week thinks he is spot on, and most people in the UK probably agree.

The ECHR is not an EU body but, emerged out of the postwar European Convention on Human Rights. Otherwise, no Parliament agreed to it, no British citizen voted for it, no Prime Minister signed a treaty authorizing its power. Like Topsy, it ‘just growed.’

We are all in favour of human rights, of course, but countries disagree on exactly what those rights should be and how they should be enforced. The UK, in particular, has a very different legal tradition from other European countries – one that has served them a long time, and which they are justly proud of. But being empowered to overturn the decision of the courts in the UK and other countries, the ECHR is effectively imposing one legal regime – a judge-led regime – on everyone.

But why do we want the law of different countries to be identical? We can learn a lot from different countries running their affairs in different ways, then looking to see which way is preferable. Imposing a single legal view on a large number of countries prevents that learning from taking place.

And why should an unelected body deign to override the decisions of different countries’ courts and legislators anyway? Originally, the plan was that the ECHR would simply influence governments to ‘do the right thing’. But now, though it has no democratic legitimacy, it can override the decisions of UK courts and elected UK representatives. So in effect, law is being made by ECHR judges, and countries like the UK are bound by its decisions. That, as Lord Judge pointed out, gives us “a very serious problem with sovereignty”.

That is a particularly serious problem when a country thinks that its entire security is at risk. More than once, the ECHR stopped the deportations of suspects to face serious charges, including terrorism and genocide charges, to face trial overseas. Indeed, the ECHR has stopped deportations of foreign nationals already found guilty of serious offences abroad. Often, the grounds for such decisions have been the UK family ties of the accused, or their ‘right’ to the UK’s generous healthcare system. But what really got ministers’ goat was the Court’s blocking, for a long time, of the deportation of the radical Abu Qatada, wanted on terrorism charges in Jordan.

So now, the UK is to have its own new Bill of Rights, passed by Parliament. Actually, our old one, dating from 1689, has served us pretty well. I only hope that in drafting the new Bill, ministers do not fall for the nonsense perpetrated in the postwar settlement – things like the ‘right’ to free education. Because every right is someone else’s responsibility to provide. You can be sure that every lobby group will be out there, campaigning for ‘rights’ to this or that or the other, all at taxpayers’ expense of course, to be included in the Bill.

But in fact, all we need is one right – the right to be left alone without other people, and especially governments, pushing us around.

If Mr Cameron calls, I will gladly give him a draft.

Greenpeace really is getting desperate here

Desperate in the sense that they’re now claiming that if the people whose lives get disrupted by fracking get a share of the money from fracking then this would be bribery. Rather than what we might normally call it, compensation:

Jim Ratcliffe, the 61-year-old industrialist who founded the chemical giant Ineos, is promising to hand more than 6% of future shale gas revenues to those sitting on the reserves or affected by their extraction, in an effort to replicate efforts in the US where shale gas has created scores of new millionaires. The situation in America contrasts starkly with that of the UK, where efforts to develop the controversial new energy source have been delayed by landowners, environmental groups and the planning system.

Simon Clydesdale, UK energy campaigner at Greenpeace, said: “This is just more of the same bribes and bulldozers approach that has already proved a failure. With one hand the fracking industry goads the government into steamrolling people’s right to oppose fracking under their homes, with the other it offers cash incentives.

“The industry forgets people have legitimate concerns about fracking that won’t be easily assuaged by cash sweeteners.”

It’s all very Dave Spart isn’t it?

Leaving the Trotskyist Hippies aside the interesting part of this is that we seem to have reversed, to some extent, the nationalisation of fossil fuel reserves that happened many decades ago. It’s a standard of landowning law that the landowner owns the minerals underneath it. Except for gold and solver and then later we added fossil fuels to the list nationalised. Given that there would therefore be no benefit to landowners of fracking under their land there’s been a certain resistance to allowing it.

However, the government has lowered the tax rate on gas and oil brought up through fracking: allowing that Coasean bargain to be struck again between the drillers and the landowners. There’s now room in the sums for compensation to be offered: and thus compensation is being offered.

Politics: It’s a funny old game

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Is there anything more off-putting to people outside the Westminster Bubble than witnessing the carnival of party conference season? If you don’t support a party, you’ll be as perplexed as an ornithologist at the Manchester derby. Everywhere you turn, discussions rage about the latest transfer news with rumours of the latest Conservative MPs to migrate to Ukip, and tactics discussed in intricate detail about how to defeat the opposition. You’ll even hear chanting: “Five more years!”

The football analogy can only be stretched so far though. While support for football clubs remains as popular as ever, people are becoming less interested in political parties – at least the top three:

“Membership of the three main political parties is at a historic low: less than 1% of the UK electorate is now a member of the Conservative, Labour or Liberal Democrat Party, compared to 3.8% in 1983. Latest estimates suggest that the Conservative Party claimed 134,000 members, the Labour Party 190,000 and the Liberal Democrat Party 44,000.”

And don’t expect this to change any time soon: Less than a third of young people express interest in politics, according to a recent ONS survey. It found that only 31% of 16 to 24-year-olds were fairly or very interested in the subject.

This decrease in interest in established parties and politics is offset by one trend though – a growing interest in small parties:

“[M]embership of smaller, often nationalist parties has risen markedly since the new millennium. In June 2014 membership of the UK Independence Party was around 39,000; in September 2014 membership of the Scottish National Party was around 64,000; in December 2013 membership of the Green Party was around 14,000. Though none of these parties can claim to equal either the Conservatives or Labour in size, their rise nonetheless represents a notable change in the make-up of the UK’s political landscape.”

There is plenty wrong with all major political parties, but there is a lot more wrong with these smaller parties. Ukip represents the worst of Little Englanders and the SNP the worst of Little Scotlanders. The Green Party has a more international outlook, but one in which the entire globe returns to a utopic state of nature; a time where our lives were very nasty, very brutish and all too short.”

In the long run, I don’t think this matters very much. In Britain, our lives – from money to morals – will increasingly become disconnected from political decisions. The next generation is more open to others doing what makes them happy, while Bitcoin and blockchain technology offers the prospect of capital accumulation and exchange without the state. This, in part, might be why so few young people care about politics. But whether or not tolerance and tech trumps politics, we have a few elections between now and then; elections where the result will greatly impact the wealth and happiness of us all.

So what can be done? You don’t necessarily need to rush out and join a political party, but I think we would benefit from smarter, more open-minded people in politics and the policy process. For example, we know immigration is a hot topic, but we should also know that removing all barriers to migration throughout the world is calculated to increase global GDP by between 67% and 147.3%. This isn’t going to happen, but it should be the sort of data to inspire a generation. Perhaps not Steven Woolfe’s generation though; Ukip’s spokesman on migration and financial affairs thinks we should cap net immigration at 50,000 per year.

It might not be rational or feel particularly empowering to vote but occasional elections aren’t the only way of engaging in politics and policy. For example, if you’re a student on a gap year, you could apply to work for the Adam Smith Institute.

The game of politics isn’t always beautiful but the key players influence the result – even if they aren’t sitting in the House of Commons.

Philip Salter is director of The Entrepreneurs Network.

Are the markets wrong about CEO pay and the recovery?

CEO pay has risen by 937% since 1978 in the US, compared to a rise of just 10.2% for the average American worker, according to a centre-left American think tank. That feels like markets must be wrong, but as Scott Sumner points out, when market decisions and our intuitions clash, we’re often the ones at fault:

CEO pay has been controversial for two reasons. It has risen very rapidly in recent years, and it often seems unlinked to performance. But pay is very closely linked to expected performance, which matters when contracts are signed. A few months ago Steve Ballmer resigned as CEO of Microsoft and the stock rose by billions of dollars. More recently, Larry Ellison (sort of) stepped aside from Oracle, and the stock plunged by billions of dollars. This shows that CEOs have a huge impact of stock valuations. Whether the market is rational in believing that is a trickier question, but it’s the job of corporate boards to put people in place that will maximize shareholder value. That means they need to at least try to get the very best, even if it costs a lot of money in terms of higher salary. If they aren’t paying obscene salaries then the board of directors isn’t doing its job.

Back in the 1960s, corporate decisions were much easier. You allocated capital to new auto factories, steel mills, appliance makers, and churned out product for which you knew consumers were waiting. Even IBM was fairly predictable for a time. In contrast, a modern CEO at a high tech firm might find the company quickly destroyed by new technology if he doesn’t keep on his or her toes. Think how much Sony would have benefited in the past 10 years if it had had the Samsung management team. Perhaps an extra $100 billion in shareholder wealth? And that’s also why the finance sector is so much more important today, decisions over where to allocate capital are both more difficult and much more important.

In other words, CEO pay may have risen a lot because CEOs matter a lot more, relative to the average worker, than they did in 1978. You could just deny this, because nobody is ‘worth more’ than others, and so on, but that’s an emotionally biased response. In terms of cold, hard cash, people are worth different amounts.

The market’s valuation of CEOs might turn out to be wrong, of course – markets misjudged the future returns of a lot of assets in the run-up to 2008, but then, so did virtually everyone else. The question is what, in a world where anyone can be wrong, we can look to as the least-bad way of collecting and judging existent information.

Pundits on Twitter and in the media can make a living by being wrong. Look at, say, the Guardian’s editorial writers or, if you tend to agree with them, the Telegraph’s. Or look at any think tank – except us, of course. Or financial advisors. Pundits don’t really suffer if they add ‘noise’ (a nice word for bullshit) to the sum of information that’s out there, so it’s hard to know if the pundit you’re listening to is telling you what you want to hear, or what’s actually true.

Markets – the people who make financial decisions that are aggregated in stock exchanges and the like – do. If you have a ‘false belief’ as a trader or business owner, you’ll lose money; if you have enough false beliefs, you’ll go bankrupt. And markets are utterly brutal in bankrupting people with false beliefs. We might have a good reason to ignore markets if we know something that they don’t, but if that’s the case, we should be making money from that private knowledge. Doing so will add that knowledge to the sum total of the market’s knowledge.

This is why I’m an optimist. Lots of my friends and people I agree with on nine out of ten issues think that the markets are wrong and that some economic catastrophe is coming. If they’re right, markets are wrong and they should be in line to make a lot of money (he said sarcastically).

So how can I judge? I look at who has more to lose, and who has a better track record. Through that lens, markets come out top – and my doomsaying friends sound just as biased as their opponents who just can’t imagine why a CEO would be worth paying a lot.

An interesting little story about path dependence

There’s no particular theoretical reason why the Burnley Miner’s Social Club should be the world’s largest consumer of the Benedictine liquer. There’s also no theoretical reason why it shouldn’t be: which is good for the fact is that it is. It’s a useful reminder of two things, the first being path dependence:

A working men’s club in the north of England is the world’s biggest consumer of French Benedictine liqueur, downing 1,000 bottles a year of the alcoholic beverage.

The golden tipple has been a favourite at the Burnley miners’ working men’s social club for more than a century after being popular among soldiers who developed a taste for it during the First World War and drank it to keep warm.

Since then the drink has become a best seller at the 600-member club – which has even introduced a ‘Bene Bomb’ in a bid to keep it popular among the younger members.

There really isn’t going to be any other 600 member club that gets through a 1,000 bottles a year of the stuff. The fist of our wider points being to point once again to the idea of path dependence. Things that happen today are often as they are because of some other thing that happened in the past. Perhaps the Dvorjak keyboard is better than he qwerty, perhaps it isn’t, but the reason we don’t use it today is because it definitely wasn’t better with mechanical typewriters. Qwerty was deliberately designed, for purely mechanical reasons, to stop people typing too quickly. How we do things today is dependent upon things long irrelevant but important at the time we started the activity.

The second of course being that sometimes things just happen. You can see how the Benedictine story started: someone in one of those regiments got ahold of a bottle and told his mates how good it was. A century later it’s still going on. The habit survives just because of that original happenstance and the social reinforcement of it over time. As with driving on the left or the right. Unlike Dvorjak there’s no particular merit to either system, no basic reason to choose one or the other: and different places have chosen differently over the years (Sweden changed over from one to the other in, umm, the 1950s. Sadly, the story about the buses changing sides a week before the cars isn’t true).

The world can make a lot more sense if we keep in mind that stuff really does just happen sometimes and the effects can be with us centuries later.