The winds of political change

UK by-elections (like last week’s in Rochester and Strood, where the UK Independence Party gained its second MP) have always been an opportunity for electors to vent their contempt for the national politicians, before things return to normality at the general election. By-elections generally do not matter; general elections do. So voters’ actions are perfectly rational.

But few people, even the pollsters, are predicting that things will return to normal at the general election in May 2015. Though Scotland did not vote ‘Yes’ to independence in its recent referendum campaign, the performance of Labour, the main ‘No’ campaigners, was humiliatingly poor. But the Scottish National Party is now piling on support. It now has 90,000 members – roughly half the number that the Conservative and Labour parties are able to achieve, even though their UK-wide base is twelve times larger than Scotland alone. Again, the SNP has often done well in by-elections, but never managed to break through in UK national elections. But now there is a real feeling that normality will not return this time, and that the SNP will steal anything up to 40 Westminster seats from Labour.

The Liberal Democrats, the Conservatives’ coalition partners in government, are meanwhile being humiliated just about everywhere. In the Rochester and Strood by-election, they lost their deposit for the eleventh time running, polling just a few hundred votes. Their core supporters think they have sold out to the Conservatives, while voters who want to send a rude message to Westminster have thought UKIP a much better way to do that. In the past they voted for the LibDems, but now the LibDems are part of the Westminster establishment that they despise.

The main parties, then, find themselves no longer leading the agenda; what will decide the election is how these minor parties fare in May 2015. But this phenomenon is not unique to Britain. All over Europe, minority parties are shaking the political class and winning footholds in the legislature.

What is going on, and why? Perhaps we have to look outside the political process to understand. In commerce, for example, traditional business models have been fundamentally disrupted by the internet. Retailing in particular has been rocked by new suppliers, new ways of shopping and new delivery systems. With things like Amazon Click & Collect, why do we need a Royal Mail – even a private one, as it is now. And much the same is happening in politics too. Small communities can find each other, and organise and mobilise, and cause real problems for the traditional parties.

Given today’s technology, there is no reason for people to settle for off-the-peg goods and services. They can be made to your specification, and shipped direct to your door. Barriers to entry have been swept away, as new suppliers with new ideas and not much more than a website can suddenly enter the market and challenge the incumbents.

It is the same in politics. When people have a choice of umpteen different TV or phone or utility packages, they become increasingly contemptuous of national and local government ‘take it or leave it’ services. When Air B&B or Über enables people to access services in an instant, they wonder why they have to fill in forms and queue up in council offices. What is the point of a Met Office when you can get the weather on your phone from countless other providers?

And national parties find it harder to dominate the national debate, as newspaper sales have been falling, because more and more people get their news from online channels – and not necessarily from the traditional media companies, but from a huge number of new media channels, plus (increasingly) social media and other sources. Activist groups can find each other and mobilise. The domination of traditional media and traditional parties is being eroded by people power.

Through internet and communications technology, we can also bypass government services more easily. Telephones were a nationalised industry thirty years ago, but nobody even thinks about re-nationalising them today. And given the new multiplicity of information and entertainment channels, more and more people are asking why we really need the BBC – that one-time flagship of the British establishment – as a state broadcaster.

The internet also makes it easier to find a private doctor or a private tutor, or indeed to find a job and an apartment. Self-help groups provide help to patients or parents that the lumbering government systems simply cannot provide. Who needs government?

Not many of us, any more. Nearly as many people in the UK (176,632) told the census that their religion was Jedi than there are currently members of the Conservative Party. With falling memberships, party candidates are becoming increasingly irrelevant to most people. They are chosen by a dwindling core of of grey-haired Conservative activists or hard-line-socialist Labour ones, with outdated, intolerant or patronising policies to match.

The politicians’ response has not been to understand these new trends (their attempted use of social media is, as we have seen recently, usually disastrous) but to insulate themselves. Politics is no longer something that successful people in other fields did for a few years as a service to their country, but a full-time career, carefully preserved as such.

No wonder people are upsetting their applecart. And no wonder that they cannot understand why.

The point about visa systems is that they are reciprocal

We don’t do party political partisanship around here so allow us to tip toe very gently through this latest proposal from the Labour Party over visas, tourist taxes and waivers. There’s a significant problem with what is being suggested: the end result will be a tax on British people who decide to go to other countries.

The proposal is the following:

Labour will seek to beef up its pitch to voters on immigration with a pledge to pay for 1,000 extra border guards by imposing a charge on visitors from the US and 55 other countries.

Yvette Cooper, shadow home secretary, will criticise other parties for engaging in an “arms race of rhetoric” on the issue, which has been thrust to the centre of political debate by the rise of Ukip.

But she will accept that the opposition “needs to talk more” about public concerns and will say action to restore public confidence that illegal entrants are being caught and dealt with is “vital for a progressive approach”.

Under the proposals, nationals in countries enjoying a “visa waiver” system of fast-track permission to enter the UK will be hit with a charge of around £10 per visit, which the party said would more than cover the £45m cost of the additional staff.

Leave aside what the Tories say about it (roughly speaking, “Yah! Boo! Sucks!” as far as we can see) and leave aside the silliness of such hypothecating of taxes (the amount that we should or desire to spend on one particular thing has absolutely nothing at all, whatsoever, to do with how much we can raise in taxation from either that or any other specific thing. All taxation should be flowing into one pot to be distributed. Think, for a moment, if such a visa tax reduced the number of people arriving legally. Would that reduce our need for more immigration officers to deal with people arriving illegally? Not obviously, but under a hypothecated tax system it would reduce the budget for them).

And consider simply the fact that all visa arrangements are reciprocal. If we demand a visa from the citizens of Dystopia then Dystopia will demand visas from Brits. If we offer a visa waiver scheme for visitors from Utopia then Utopia will offer a visa waiver scheme for Brits going there (Utopia, obviously, being that mythical place where the NHS works).

If we impose a charge on people from 55 countries for a visa waiver then those 55 countries will impose a charge on Brits going to those 55 places. And one more thing: we think we’re right in stating that more Brits go to other places than people from other places come to Britain.

So, the net effect will be a transfer of money from Brits to foreign governments. As more of us will be paying to go to 55 countries than citizens of those 55 countries will be paying to come here.

Making foreign governments richer is a very odd indeed method of increasing revenues to pay for services in the UK.

As at the top there this isn’t party political partisanship. It is instead a call for all politicians to understand Chesterton’s Fence. If you see a fence somewhere you shouldn’t pull it down until you’ve worked out why someone built it in the first place. Only when you’ve understood the original reasons, then ensured that they no longer apply, should you proceed with destruction.

Why do we have visa waiver schemes with no charges? Because visa systems are always reciprocal. We charge them and they will charge us, not obviously to our benefit.

This isn’t about the Labour Party this is about a politician not bothering to think.

Banning Blanc from Britain stifles free speech

Sky sources have learned the so-called pick-up artist Julien Blanc will not be allowed to enter the UK.

The decision to deny Julien Blanc’s entrance into the UK has set the precedent that freedoms of speech and expression can be criminalised, if and when enough people sign a petition.

Blanc’s comments are socially reprehensible and offensive to both men and women, but if we do not respect the rights of the offensive, we start risking the safety of any minority viewpoint.

Those upset by Blanc’s remarks have the opportunity to push back in cultural and social spheres; they do not need to call on the government to ban things they find socially disturbing. Private event businesses can take after EventBrite and deny him platforms, people can boycott his events, and viewers can turn their televisions off when he is on-air voicing his opinions.

The market has ways of listening to the moral needs of its customers, and while it is not a perfect system, it can serve to bankrupt those who are morally reprehensible without criminalising them for non-criminal behaviour.

Surely, we must recognise that there is a fundamental difference between the private sphere taking away one man’s platform to be noticed, and the state taking away every person’s platform to speak freely without threat of punishment or criminalisation.

This ruling should not just be a wake-up call to public hysteria, but also a reminder of how flawed the UK immigration system is. The Home Office can legally deny anyone entrance to the country if their character or opinions are not deemed conducive to the ‘public good’.

This is Big Brother at its worst – ‘protecting’ the people from speech criminals, who are a danger to the moral good; let any who speak out be at the mercy of mob rule, and the Home Office.

Mazzucato versus Worstall and Westlake

Marianna Mazzucato’s 2013 The Entrepreneurial State is the most influential book on innovation. Although Mazzucato’s arguments in the book and beyond are many and varied – for example, I’m particularly sympathetic to her scepticism of the uncritical financial support for small businesses – the arguments gaining the most traction are the least convincing and potentially most damaging.

In short, Mazzucato’s thesis is that the state has been the key driver of “innovation” and should therefore take a more active role than they currently do. Central to this, is the policy suggestion that government agencies that fund this innovation should take a cut of the profits from the inventions. Two writers have convincingly unpicked this – the Adam Smith Institute’s Tim Worstall and Nesta’s Stian Westlake.

First, on the point about states driving innovation, Worstall cites William Baumol, who makes the crucial distinction between innovation and inventions. In reference to Mazzucato’s observation that the key technologies that went into making the iPhone were state funded Worstall explains: “Baumol’s point is that the private sector could have come up with these technologies, even though it was the state that did. But only the private, or market, sector could have come up with the iPhone.”

To put it another way, the iPhone is more than the sum of its parts. In an excellent article (worth reading in full), Westlake cites the work of Jonathan Haskel, which “suggests that for every £1 that British businesses spend on R&D, they spend £8 on other intangible investments of the sort that Apple used to make the iPod a success: design, new business models, marketing and software development.”

But perhaps Mazzucato’s biggest mistake is one of policy. As Westlake explains elsewhere, in The Entrepreneurial State Mazzucato suggests that “the state should find ways to share directly in the profits of companies that benefit from government innovation spending. A repayment system needs to ‘reward [the government for] the wins when they happen so that the returns can cover the losses from the inevitable failures.’”

Westlake outline three convincing reasons why this wouldn’t work: “it would be nightmarish to administer; it imposes costs on exactly the wrong businesses, creating both a presentational and a practical problem; and it’s worse than an already existing option – funding innovation from general taxation.” Westlake’s last point cuts to heart of the problem. As Worstall has pointed out in a response to Mazzucato’s response to his criticism of her work:

That governments sometimes produce public goods should not be a surprise. That’s what governments are for in fact. To provide collectively those things that cannot be provided through voluntary cooperation. To then complain that government doesn’t get extra rewards for doing the very thing we institute it for seems most odd. That’s why we pay our taxes in the first place: in order to get those public goods. Why should there then be some extra appropriation when all government is doing is what we asked it to and paid for it to do in the first place?

Philip Salter is director of The Entrepreneurs Network.

The deep web, drug deals and distributed markets.

On Thursday a conglomeration of law enforcement agencies including the FBI, Homeland Security and Europol seized the deep web drug marketplace Silk Road 2.0, just over a year after the takedown of the original Silk Road site. San Franciscan Blake Benthall was arrested as site’s alleged operator (under the alias ‘Defcon’), and charged with narcotics trafficking as well as conspiracy charges related to money laundering, computer hacking, and trafficking fraudulent documents. The authorities allege that Silk Road 2.0 had sales of $8million each month, around 150,000 active users, and had facilitated the distribution of hundreds of kilos of illegal drugs across the globe.

The bust formed part of ‘Operation Onymous’, a ‘scorched-earth purge of the internet underground’ which led to the arrest of 17 people, the seizure of 414 hidden ‘.onion’ domains, and the shutdown of a number of other deep web markets. Law enforcement unsurprisingly refuse to reveal how they managed such a raid, leaving to some worry that they have been able to bypass the protections of the anonymizing software Tor, which is used to access deep web sites and to obscure users’ identities and location.

Despite the success of Operation Onymous, many deep web markets remain online. Activists liken the shutdown of hidden marketplaces to a hydra: every time a site is taken down others spring up in their place, and thrive from the media publicity of busts. Indeed, the number of drug listings on hidden marketplaces has grown significantly following the takedown of the original Silk Road. Regardless, law enforcement is determined to stamp out the sites, with a representative from Europol warning  “we’re a well-oiled machine. It won’t be risk-free to run services [like these] anymore’.

But what if there was no-one responsible for running such services? Sites like the Silk Roads met their demise because they have a centralized point of failure — get to the server and you can seize the site. Allegedly, cryptographic chunks of Silk Road 2.0’s source code had been pre-emptively distributed to 500 locations across the globe, to enable the site’s relaunch in the case of a takedown. Given the far-reaching impact of Operation Onymous, whether this happens or not remains to be seen.

To be truly immune to government takedown, a marketplace would have to have a decentralized, distributed structure, much like torrent networks and the bitcoin protocol. Enter OpenBazaar, which uses peer-to-peer technology to bring ‘secure, decentralized  markets to the masses.’ In running the OpenBazaar program, each computer becomes a node in a distributed network where users can communicate directly with one another. A reputation system will allow even pseudonymous users to build up trust in their identity, and naturally, all transactions are done in bitcoin.

The biggest issues plaguing hidden marketplaces are those of trust and enforcement; if goods or payment fail to materialize, you can hardly just contact the authorities. Some sites get around this problem by offering an escrow service, with the money being centrally held until a buyer confirms their goods have arrived. The problem with this approach is that it leaves customer’s money vulnerable to scams, hacks, and state seizure. With a decentralized system like OpenBazaar, no such central escrow system is possible. Instead, buyer and seller nominate a third party ‘arbiter’ (who could be another buyer, seller, or a professional arbiter for the site) to preside over the transaction. Payment is initially sent to a multi-signature bitcoin wallet, jointly controlled by the buyer, seller and arbiter. Funds can only be released from this account to the seller when 2 of the 3 signatories agree to it, allowing the arbiter to adjudicate any dispute.

In such a distributed system, there’s no central body to authorize posts and transactions. There’s also no central server to target. Law enforcement would have to go after all buyers, sellers and computers running the OpenBazaar software to bring the system down.

OpenBazaar is still in beta mode, with a full release expected in early 2015. Teething problems are likely and the design could prove problematic; even within highly decentralized systems there’s a tendency towards the concentration of power, and whilst robust, decentralized networks are often inefficient and expensive to maintain. There’s no doubt the authorities are watching, though, and it will be interesting to see their reaction should OpenBazaar succeed.

The software is a re-work of the edgier DarkMarket concept developed at a Toronto hackathon earlier this year, and its developers are keen to highlight its use for selling things like outlawed books and unpasteurized milk over drugs and guns. Certainly, there’s value in any global bitcoin marketplace which avoids punitive exchange rates and transfer fees, and like the Lex Mercatoria, can be relied on to provide a level of transactional security when state institutions can not. However, whatever its legitimate uses no state will be comfortable with the idea of a censorship-proof site. The problem for them is that they might just have to get used to it.