Now we've won, let's kill what works!

The victory of Jezzbollah and the Corbynistas appears to be turning politics in a French direction. That is, let's not worry about whether something works of not, let's check that it conforms with theory. And so it is with the various market reforms in the NHS. As Kristian Niemietz points out:

So when Corbyn used his acceptance speech to congratulate the Welsh government for ending the “internal market” in the Welsh NHS, declaring that this is “something we want to do in the rest of Britain”, he was not setting out a new policy stance – he was merely expressing a fait accompli. It was not Corbyn who exorcised the ghost of NHS reforms past. His party did that before he was even nominated. Which is strange, because these reforms were a qualified success story.

Quite so, one of the things in recent years was that NHS England had rather more of that market reform than NHS Scotland or NHS Wales did. Entirely unsurprising to people like us NHS England also did rather better over those years than NHS Wales or NHS Scotland. But for Jezzbollah and fellow travellers markets are inefficient: so they must go, whether they worked or not:

The Scottish and the Welsh NHS are the closest thing to a counterfactual, because they are still more or less run like the old (and, if the Corbynistas get their way, the future) English NHS. Even though they are, in per capita terms, better funded and generally better staffed than their English counterpart, their performance lags on most measures. Rates of mortality amenable to healthcare are higher than in England, waiting times are longer, and hospital infections are more prevalent.

Niemietz has a fuller paper exploring the subject at that link.

It's entirely possible for people to paint our own love of markets as being simply ideological. Enough people do that enough of the time that of course it's possible. But our commitment to them is actually practical. We're entirely happy to admit that there are times when competitive markets are not the solution. We do know our history and that time of competing private armies was called the Wars of the Roses and it's not generally held to be a happy time. But we do support markets when they work.

As they do in the provision of health care to the populace. Those parts of the NHS system that have been flirting with markets provide more and better health care than those that don't. We really do not see this as evidence that markets should be removed from the provision of health care. However French and conformant to theory our politics becomes.

It's free speech that will defeat Islamist preachers in universities

https://www.youtube.com/watch?v=mi5da2AhDCY I suspect most readers of this blog will agree with Barack Obama's basic point in the video above, which is that by banning racist books and right-wing speakers to 'coddle' oversensitive types, universities are failing students.

This is a problem we have in the UK as well – Brendan O'Neill and Tim Stanley were barred from speaking at a debate about abortion they'd been invited to take part in at Oxford last November, and certain parts of the social justice movement have been waging a quiet war against 'trans-exclusionary' radical feminists (and vice-versa, perhaps) by having them barred from university conferences and events, heckling them when they speak, and so on. People like James Watson have been made untouchable for suggesting that there may be genetic differences in IQ between different races.

This is not entirely a left-wing phenomenon. Today David Cameron has 'named and shamed' universities 'that regularly give platforms to hate preachers who are determined to undermine British values'. It's not clear to me what 'British values' are, or what's so bad about wanting to undermine them. Is belief in the NHS a British value, making free marketeers dangerous too? Is belief in democracy, excluding Jacobite restorationists from campuses and the like?

The obvious response to this is that these people will not just 'undermine British values' but actively encourage students to kill other people. Of course we already have laws against incitement to violence (excessively strict ones, some would say) but perhaps these don't work here. A roundabout suggestion that the, ahem, Zionists are controlling the media and, you know, maybe these ISIS fellas aren't so bad after all is not – and should not be – illegal, but might plant a seed in enough people's minds to lead them to kill.

No doubt there is something rotten in British universities, but I wonder if part of the problem is that opponents of these speakers are heavily restricted by the sort of people Obama attacked yesterday.

How easy is it to oppose Islamism on university campuses? Being anti-abortion is unpopular, but Islamophobia is so forbidden that Ed Miliband proposed to make it a hate crime. Last year Plymouth University's Islamic Society tried to have a speaker from the anti-Islamist Quilliam banned from speaking there. The year before that, a mob of students blocked Israel's deputy Ambassador to Britain from giving a lecture at the University of Essex. There is no shortage of other examples either.

So perhaps institutionalised political correctness is allowing Islamists to get a free pass at universities without being challenged, as it has arguably contributed to child abuse in Rotherham and elsewhere. If feminist comedian Kate Smurthwaite is too edgy to be allowed to perform to Goldsmith University students, what hope do harsh critics of Islamism like Maajid Nawaz or Douglas Murray have?

Banning hate preachers would mean we must also accept the principle of banning Maajid Nawaz for pushing back against them, Tim Stanley for opposing abortion, and Germaine Greer for showing insufficient respect to Caitlin Jenner. It concedes too much.

Open debate is too valuable to give up in places where it is supposed to thrive. It shouldn't be harder for Islamists to speak at universities – it should be easier for their enemies to contradict them. The problem is not what is being said, but what is not being said.

Proof that Britain is a profoundly conservative nation

Do note that we do not mean that Britain is a Conservative nation, only a conservative one. And our proof comes from an unlikely source, George Monbiot:

Battered into passivity by the media’s misinformation machine, distracted by consumer culture and the celebrity circus, we live in a permanent fug of confusion about the sources of oppression, and of alienation from the means by which they might be addressed.It is tempting to assert that civic life in this country is dead – but it’s not true. Millions of people belong to NGOs, or volunteer for charities. Eerily, however, there seems to be no connection between this mass participation and political change.

That is, we let the politicians prance in their Westminster bubble and keep on keeping on ourselves. We can see that there are things that we can do, ourselves and without direction, to make our country, our nation, a better place.

So, we go do them. Without orders, without instruction, without central control or even an ideology to guide us upon our way. Those who train the guide dogs for the blind, raise money for the air ambulances, the hospices, those who rescue those in peril on the seas: volunteers all. Done not for the glory of anything, just for the humanity of having done it.

We could call this evidence of profound liberality, and in a sense it is. You want to pitch in to society then do so, you don't then don't. No one is forced to do anything but the system as a whole works well, better than many if not all others.

It is also profoundly conservative (again, not Conservative). This is Edmund Burke's little platoons of society just getting on with being society. We ourselves are generally radicals which is the complete antithesis of conservatism. And yet this is at least one aspect of the conservative society that is Britain, even modern day Britain, which we thoroughly approve of.

Civil society should carry on being just and only what it is, civil society, and don't let anyone tell us different.

Can we get this straight please? Obesity saves the NHS money

We have the public health crew on the rampage again:

Britain's junk food diet has become the leading cause of death and ill-health, ahead of smoking, according to a study published in The Lancet. The research shows that 40 per cent of NHS resources are spent dealing with ills caused by potentially preventable lifestyle factors such as unhealthy eating habits, obesity, alcohol and smoking.

We might think that since everyone pays for the NHS then everyone gets treated by the NHS. That fit person who survives to get dementia, that fattie that keels over at 40 are all deserving of the same treatment, no?

Overall, researchers found that life expectancy rose by 6.4 years between 1990 and 2013, increasing from 75.9 to 81.3 years.

And obviously something is going right. Leading to the thought that perhaps some of this is that as we don't die of other things these days then lifestyle diseases are all that's left to shuffle us off this mortal coil. But there's a vast mistake in this analysis as well:

Simon Stevens, the head of the NHS, has said the health service could be bankrupted by the strain of weight-related disease if current trends are not reversed. One in five children is obese by the time they leave primary school, and two in three adults are overweight or obese. In June, Mr Stevens said parents and society were doing something “terribly wrong” in how the next generation was being brought up, which would fuel a tide of diseases. He called for a change in the nation’s habits to turn around current trends. “Cutting down on junk food diets, couch potato lifestyles, cigarettes and booze could make Britain one of the healthiest places to live in the world, while saving taxpayers billions on future NHS costs,” Mr Stevens said.

Someone who is the head of the NHS, someone responsible for spending £120 billion or so of our money, really should understand this following point. Fatties, boozers and gaspers save the NHS money, not cost it. We've mentioned this before around here:

The researchers found that from age 20 to 56, obese people racked up the most expensive health costs. But because both the smokers and the obese people died sooner than the healthy group, it cost less to treat them in the long run.

On average, healthy people lived 84 years. Smokers lived about 77 years and obese people lived about 80 years. Smokers and obese people tended to have more heart disease than the healthy people.

Cancer incidence, except for lung cancer, was the same in all three groups. Obese people had the most diabetes, and healthy people had the most strokes. Ultimately, the thin and healthy group cost the most, about $417,000, from age 20 on.

The cost of care for obese people was $371,000, and for smokers, about $326,000.

Here is a paper on that very point.

Having us all slim, svelte, sober and pure of lung into our 90s would cost the NHS very much more money than the current level of topers, smokers and lardbuckets does.

There might well be very good reasons to advise people that the private costs of their behaviour, the years of life they will lose through their habits, might well not be worth it. But the public costs of their actions are the other way around from what is being assumed here.

And really, we do think that someone in charge of £120 billion of our money should know the difference between a positive and negative sign in front of an influence upon his budget. That's not, even in this day and age, too much to hope for, is it?

Seriously, don't worry about Iran's new uranium discoveries

Apparently Iran has discovered new sources or uranium within its own borders:

The Iranian government has found a surprise uranium reserve which could allow the country to fuel its nuclear programme without having to look abroad. It was previously thought that Iran would have to import uranium from other countries in order to power its nuclear plants, which would have made it easier for the West to monitor the develop of the controversial project.

This is not, not at all, what it appears to be:

Some Western analysts have previously said that Iran was close to exhausting its supply of yellowcake - or raw uranium - and that mining it domestically was not cost-efficient. A report published in 2013 by U.S. think-tanks Carnegie Endowment and the Federation of American Scientists said the scarcity and low quality of Iran's uranium resources compelled it 'to rely on external sources of natural and processed uranium'. It added: 'Despite the Iranian leadership's assertions to the contrary, Iran's estimated uranium endowments are nowhere near sufficient to supply its planned nuclear programme.'

The point about reserves, about mineral reserves, is that they are entirely dependent upon cost of extraction. Something that we pointed out here in this handy .pdf. That Iran has uranium within its borders simply is not a surprise to anyone at all. It would be entirely possible, just as an example, to run a nuclear weapons and or power program simply by grinding up pieces of Cornwall. Or, in fact, the back gardens of suburban England. The question is, at what cost?

What Iran has announced is that it's found uranium. What it hasn't announced is that it has uranium which it is economic to extract. Therefore nothing at all has changed: for we all always knew that Iran had uranium, just as every country, city and hedgerow does.

Six points about the Trade Union Bill

1. Making striking more difficult might be a good thing. The most controversial part of the bill is the part requiring at least 50% turnout in strikes overall (so 25% of members must vote in favour), and for public sector strikes the backing of at least 40% of those eligible to vote. This certainly does make striking less easy, but it hardly makes it impossible. If workers really feel that they need to strike, they can still do so, provided they get 25% or 40% of total members (for private and public sector workers respectively) to agree with them. This does make it harder for people like Len McCluskey and Mark Serwotka to call strikes that most union members don’t want, though.
2. Most workers aren’t in a union. Only 14% of private sector workers and 54% of public sector workers – 25% overall – are in a union. That means that strikes, even if they are good for union workers, only benefit a small number of workers. And everyone else is inconvenienced by them: strikes can be costly and time-consuming for people who use the services that the striking workers provide.
3. People who are in a union are generally middle-income workers. According to the ONS, “Middle-income earners were more likely to be trade union members than either high or low paid employees. About 38 per cent of employees who earned between £500 and £999 were members of a trade union, compared with 21 per cent of employees earning £1,000 or more. The proportion of employees earning less than £250 who were trade union members was 15 per cent.” Also, “Employees in professional occupations are more likely to be trade union members” (this includes jobs like nurses).
4. Why shouldn’t firms be allowed to hire agency workers to fill in for striking workers? Workers who take part in official strikes (as defined here) are protected from being fired, except after 12 weeks of striking if the employer has tried to settle the dispute. This privilege is popular but if the only reason to stop firms from hiring replacement workers is that it makes strikes less powerful it’s not clear why this is a bad thing.
5. Some parts of the bill do seem draconian. Making strikers wear armbands may be justifiable if there is a problem with identifying workers who are actually working and who are taking part in the strike – I don’t know if this is the case. Requiring picketers to give their names to the police seems entirely overboard, though, and David Davis is probably right that it’s unnecessary.
6. Strikes do cost money, though some might have a surprising upside too. Between 2011 and 2014 (inclusive) about 3 million days worth of labour were lost directly because of strikes. That's costly and does not include the time lost from people working from home, leaving work early, coming in late, etc. (Giles Wilkes points out that over the same period 520 million days were lost to illness. With that context, 3 million doesn't sound very high.) But there may be surprising upside too – a Cambridge paper released today says that the February 2014 tube strike was a net positives in efficiency terms, because 1 in 20 people who found a new route to work stuck with it after that, and the long-term savings to them from that outweigh the daily losses to the other 19 in 20 workers. I'm not sure if that scales to other strikes, but it's quite a nifty finding either way. (NB: I haven't read the full paper yet, so I can't vouch for it.)

Corbyn's economic policy: a critique

What should an economist make of the economic policy of Jeremy Corbyn, the new leader of the Labour Party in the United Kingdom? Among other things, Corbyn and his team have proposed not just a minimum wage but a "maximum wage" as well. That means, presumably, that firms will not be allowed to pay any employees over a certain amount. Unless that amount is set at some extremely high level – so high that it would not be considered a 'socialist' measure at all – the result is obvious. Talented people will leave in order to get higher pay elsewhere, and talented people who might have come to the UK from other places (like high-tax France, for example) won't. Likewise, companies whose business relies on world-class human resources will not be able to attract them in the UK, so will move abroad, or will not bother to come. So unless Corbyn can get the entire world to adopt the same "maximum wage", the policy won't work. And even if he could, there would then be a lot of talented people downing tools.

Another strand of Corbyn thinking is to nationalise (or is it re-nationalise) the energy companies. He might even re-open the coal mines, whose workers caused Margaret Thatcher so much annoyance. Unless the aim is to re-create a labour movement based around mining communities, the latter policy seems odd, for several reasons. First, the UK's coal resources are pretty poor. Thatcher may have had political reasons to close the mines, but the straightforward economic reasons were the low quality of the mineral resource in the UK, and the inefficiency of the UK coal-mining operations. At one point it was cheaper to land coal from Australia in the UK than to mine it ourselves. Were it feasible to mine coal efficiently in the UK, more people would be volunteering to do it. Also, deep-pit coal mining is not, and never will be, a particularly healthy occupation. In a country that is doing its best to stop people smoking cigarettes, it seems remarkable to wish to send more people into coal mines. Unless you figure the entire job can be done by robots, which on the basis of other countries' experience, seems unlikely.

As for nationalising energy companies, why bother? Will that really contribute more to the UK economy? How much more efficiently could the state run the energy sector, even on the most optimistic assumptions? Is the presumed benefit worth the upheaval?

And another point: would compensation be paid to the (millions of) shareholders of the energy companies? If so, that would be a big drain on the government budget: these are big companies so the bill would run to – who can be sure, but probably £200bn or more. What other government budgets are going to be cut to pay that bill? And if no compensation is paid, what signal does that send to potential investors in UK enterprises? Simple: the message that their money could be taken off them without notice. Better, many might think, to put their cash elsewhere. And better, many entrepreneurs might think, not to bother building up a business in Britain.

Corbyn has taken a robust anti-austerity stance. We should borrow to invest in our future prosperity, he insists. The proposition would be more widely accepted, were the UK government's borrowing not already at a record high (apart from war debts) and getting higher each year. Arguably we have not had austerity, we have just kept on borrowing, and spending, perhaps a bit slower than we might have done.

The plan is for 'People's Quantitative Easing'. The argument is, not entirely fallaciously, that the previous rounds of quantitative easing have gone into creating asset bubbles, which is fine for the people who own assets such as shares, but not for the ordinary workers whose firms are finding it hard to meet their wage bills. So how can we get new spending to do the business? Corbyn's answer is to spend it directly on things that matter, things that will improve our lives, things that will makes us prosper in the future – things like roads, housing, transport, green energy and digital projects. In other words, the Bank of England will be creating money that the government will spend on projects that the government decides fit – not to finance the projects that industry and business believe would deliver the best return. The policy certainly envisages a much larger role for the public sector in the economic life of the nation. But is public decision-making any better than private decision-making? Is Whitehall good at prioritising and managing investment projects? Probably not.

The anti-austerity call also comes at a time when the Bank of England is thinking much more about how to tighten things than to loosen them. The UK's growth is already well ahead of Europe's in general, and there are fears that this growth simply reflects the fact that interest rates have been held at 'emergency' levels for more than five years. An important job for a central bank is to dash away the punch bowl before the party gets too raucous and ends in people doing stupid things. Now might be a good time to stop pouring the punch.

How to fund all of the new expenditure envisaged by Corbyn and his team? There is talk about cutting tax reliefs and subsidies to the corporate sector, which the team estimates at £93bn. True, there are far too many little schemes to aid business, all of them squibs injected into the budget speeches of past Chancellors in order to get a cheer of approval from MPs. We would be better to scrap them and have generally lower taxes. But equally, cutting schemes such as grants for research and development might actually, in the immediate term, do more harm than good, forcing firms to cut back their research and investment activities. More thought is needed on that one. And even if the £93bn figure is accurate and not a wishfully high guess, how far does that take us towards paying for the ambitious economic programme that is envisaged?

Another ambition is to 'end' tax evasion and avoidance. A pressure group that the Corbyn team rely on puts the loss to the Exchequer of avoidance and evasion at £120bn. There is no justification for this figure. Surveys generally agree that the UK has one of the world's smallest shadow economies. Certainly, there is a fair bit of back-pocket trading, and when VAT is 20% it is not surprising that many people would prefer to pay in cash than have their transaction go through the books and suddenly grow one-fifth larger in cost. If it were possible to prevent cash transactions (and France has recently lowered the size of transactions where you are actually forbidden from paying in cash), it is entirely possible that a lot of fledgling businesses would be killed off by the tax, and perhaps by the extra regulation of doing everything by the book. But for small transactions, how can the back-pocket method ever be totally policed? The idea that there are £120bn of savings waiting there to be picked off is – well, optimistic.

Likewise with avoidance. True, the Treasury can take action against schemes whereby people are paid in rare metals or some other ruse to avoid national insurance and the like. But the point about avoidance schemes is that they are legal. They work within the existing rules. The more complex the rules are, the more possibility is there of moving money, quite legitimately, from one column to another in order to benefit from the different treatment of it and lower your tax bill. There is really only one solution to this – to have taxes that are low enough that they are not worth avoiding. But that does not seem to be on the Corbyn agenda.

So much for what is in the Corbyn economic programme. Just as revealing is what is not in it. There has been precious little mention of encouraging new start ups, helping growing companies with easier rules and regulations, and promoting entrepreneurship. There has even been ever little talked about improving the conditions for new kinds of company to grow, such as social enterprises, cooperatives or mutuals. The solution to our ills is seen as greater spending led by the state, not a revival of growth, enterprise, trade and entrepreneurship led by ordinary individuals and groups. Given the competition which the UK faces from other, dynamic, economies, this seems a worrying oversight.

In which we praise Jeremy Corbyn for doing the right thing

We do have to admit, this could be the only thing Jezza gets right in his time at the top of the Labour Party but let us praise people doing the right thing when they do it all the same. It is entirely right, just and proper, that the Corbyn for Leader t-shirts were purchased from malodorous sweatshops in Nicaragua and Haiti.

Jeremy Corbyn swept to victory backed by cash raised from the sale of T-shirts made by factory workers earning just 49p an hour. The Socialist firebrand’s fighting fund got a £100,000 boost from the ‘Team Corbyn’ garments, which sold out on his official website. Moments after taking over the Labour leadership, Corbyn spoke of his determination to combat poverty and inequality in an impassioned victory speech.

We too believe in the combat against poverty. And so we do indeed praise Corbyn and his team for doing their bit against such poverty. Their buying their t shirts, and we apologise for our cynicism here, from the global poor will almost certainly do more for said global poor than any political policy they start to mutter about in the months and years to come.

The factories are run by Canadian clothing giant Gildan. In Nicaragua, workers are paid £101 a month for shifts that keep some workers on the factory site for more than 12 hours a day, with breaks. Based on information from workers and their union officials that most employees work 48 hours a week, that works out at 48.5p an hour.

In Haiti, workers are paid a piece rate depending on how many shirts they make – some earning as little as 39p an hour. One woman told us she earns about £20 for a six-day week.

And that's why this alleviates poverty. Because, if people are willing to work in such conditions for such pitiful wages what must the alternative jobs be like in those same economies? Quite, obviously, worse.

As Madsen Pirie of this parish has been known to point out, the best method of global poverty alleviation is for us all to purchase goods made by poor people in poor countries. And thus the purchase of some 1000 or so t shirts from those factories staffed by said global poor in poor countries contributes to the alleviation of poverty.

And so we applaud this action: more people should buy more things from sweatshops after all.

We would also note that in terms of poverty alleviation this might well be the only time that the Corbynistas and Jezzbollah will actually put their own money where their mouths are. But to point that out really would be cynical, wouldn't it?

In which Ha Joon Chang finally jumps the shark

Our attention was drawn to this quite wondrous piece by Ha Joon Chang in the Financial Times:

Bolivia isn’t the only country in Latin America that has defied the Washington Consensus and improved its economic performance. Argentina, Ecuador, Uruguay and Venezuela have all ditched Washington Consensus policies and have seen both accelerated economic growth and reduced income inequality. I am not saying everything is peachy in those Latin American countries. In particular, Venezuela has serious macroeconomic imbalances, although they have improved recently, while Argentina is haunted by its past debt crisis. More worryingly, much of their economic growth has been due to the commodity price boom — fuelled by China’s super-growth, which is coming to an end — rather than industrial development. So there is a serious question about the sustainability of their growth.

However, these countries’ experiences show how the Washington Consensus policies have failed developing countries. That most of the fastest-growing developing countries outside Latin America, such as China, Vietnam, Myanmar, Ethiopia and Uzbekistan, haven’t even adopted Washington Consensus policies in the first place corroborates this observation.

The first point to note is that there's a certain confusion there about what the Washington Consensus actually is. It is, in fact, just a list of stupid things that governments should not do. Although phrased in a positive manner, the real point is don't do the opposite:

The consensus as originally stated by Williamson included ten broad sets of relatively specific policy recommendations:[1] Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP; Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment; Tax reform, broadening the tax base and adopting moderate marginal tax rates; Interest rates that are market determined and positive (but moderate) in real terms; Competitive exchange rates; Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; Liberalization of inward foreign direct investment; Privatization of state enterprises; Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions; Legal security for property rights.

The idea that China hasn't followed at least most of that is ludicrous.

As is the idea that Venezuela has been doing well quite frankly.

Yes, we know, Chang has a horror of the idea that markets undirected by the bureaucracy might actually work but really, this is too much.

What good news as we face more First World Problems

This will no doubt set off the usual anguished whining among the usual suspects. But we regard this as cheering news, extremely cheering in fact:

Poor diet has emerged as the biggest contributor to early death around the world, according to new analysis from the leading authorities on the global disease, with red meat and sugar-sweetened beverages among the foods implicated in 21% of global deaths.

Smoking cigarettes still carries the highest risk factor of premature death in the UK, followed by high blood pressure and obesity. But the Institute of Health Metrics and Evaluation (IMHE) in the US says that a combination of dietary factors, from eating too few fruit and vegetables, nuts and whole grains to too much sodium and cholesterol, is taking a toll on health in the UK and across the globe.

We do rather doubt much of what we're told by these prodnoses who would control our diet. It was only last week that they were telling us that animal fats would murder us all in our beds and then after decades of saying so they've changed their minds. However, the good news is here:

Sub-Saharan Africa has a different pattern of risks from the rest of the world, with a toxic combination of childhood undernutrition, unsafe water and sanitation, unsafe sex, and alcohol use.

That is, where people are still in that absolute destitution of peasant poverty then people die from simply lack of food and sanitation. Whereas where people are not in that absolute destitution of peasant poverty they live long enough to die of something else. We regard this as an advance in human civilisation, whatever our beliefs about the accuracy of the diagnoses of those First World diseases.

For it's never going to be true that we can solve all the troubles of the world in one fell swoop: but that we do seem to be solving them, one by one, is reason for cheerfulness, no?