The Pin Factory Blog

It is not uncommon to observe a fellow citizen who, in an extraordinarily self-righteous manner, points out how people of other countries suffer under censorship. It is regrettable that this affection for the freedoms of the inhabitants of these other countries rarely extends to the freedoms of our own.

Jon Stewart of the Daily Show recently exclaimed that ‘England is awesome’ in one his broadcasts. This particular segment of his show is, however, illegal in Britain. The problem? He used footage of Cameron and some quite unfriendly MPs in the chamber to support his admiration for the British Parliament, and it is apparently illegal to use parliamentary footage in a satirical/comedic context in Britain. This is ridiculous to say the least, but this form of censorship is unfortunately not limited to our politicians.

The monarchy is another institution that is overly protected against witty minds. One recent example of this occurred a few months ago when the Australian Broadcasting Corporation intended to air a satirical Royal Wedding Commentary. Clarence House, the official residence and office of Prince Charles, reportedly ruined these plans, and certain coverage restrictions were suddenly put in place. It was now the case that footage from Westminster Abbey could not be used ‘in any drama, comedy, satirical or similar entertainment programme or content’.

If you are the current or future head of church and state, you should expect to be the target of satire and comedy. And so should politicians. Restrictions of the kind considered above only make the satirical coverage more sharply ridiculing. For example, in their coverage of the royal wedding, Jon Stewart and his team decided to use an animation of the ceremony instead. The hilarious (but not 100% family-friendly) result can be found here.

When the politicians and the monarchy are too touchy, we ought to stand up against censorship. Luckily, the rules do not seem to apply to other countries, so I will browse the Internet and enjoy an uncensored version instead. Or, alternatively, I could catch a plane to one of ‘Chad, Somalia, Saudi Arabia, Syria, and Yemen’ where, Jon Stewart claimed, they do not censor a satirical news show.

Research conducted by the Forum of Private Business shows that the cost of red tape has reached a staggering £16.8 billion, or an average of £14,200 per firm. This is despite the government’s promise of a ‘red tape revolution’. A few of the many interesting results from the survey are the following:

• Small employers share a burden of £5.1 billion per year due to tax-related regulation, the largest regulatory burden.
• The responses of the Forum members suggest a loss of £29.8 billion due to missed business opportunities caused by red tape and the administrative work linked to it.
• 21% of the respondents claim to have performed worse as a result of ‘the time and cost they spend on compliance’.

The conclusion is that businesses...

...are concerned that overall legal requirements placed on smaller employers have increased since the Coalition came to power. There also appears to have been no improvement in the guidance, explanation and support small firms are given when new laws are introduced.

This is unfortunate on its own, but even more unfortunate at a time where we really need private sector growth.

Although the press is currently caught up in its own misery caused by the hacking scandal, Westminster should not be at the centre of the news. More than ten million people are currently lacking food in the Horn of Africa, and estimates show that one million children are at severe risk of dying. If the EU had refrained from its heavy protectionism we might be in a different place to the sad, avoidable reality of today.

European farmers are assured of their livelihood by the generous subsidies that the Common Agricultural Policy (CAP) provides. This causes major inefficiencies, but that isn't the only problem. The attempt to unsustainably keep European farming alive prevents poorer farmers from selling profitably in the EU, which contributes to squalor in the poorest nations in the world. Despite efforts to gradually reduce these lethal subsidies, the direct consequences will be apparent for many years to come.

In a piece in Bridges Weekly Trade News Digest published by the International Centre for Trade and Sustainable Development, the lack of investment in infrastructure, irrigation, machinery, and fertilisers is emphasized as one major problem in the drought-striken region. Years of dumping subsidised European exports in Africa partly cause this in two ways: firstly, the presence of unfavourable and unfair market conditions has significantly lowered any entrepreneurial incentive to invest as low expectations persist. Secondly, a downward pressure on prices has caused a great share of the farmers in the region to employ unsustainable harvesting techniques. This gradually drives down profits.

In 2006, British households paid an additional £832 in grocery bills as a result of the major subsidy scheme, and throughout the first ten years of this millennium, the CAP has nearly accounted for half of the EU’s entire budget. The EU is one of the biggest practitioners of protectionism in history.

Directly addressing the current famine in Africa in the context of his new book Human Encumbrances: Political Violence and the Great Irish Famine, Dr David Nally of Cambridge University recently stated that:

To tackle global hunger we must… address the legal and institutional structures that directly restrict certain people’s ability to subsist. The reason that this is not done is because these same structures guarantee the high standard of living that many of us have become accustomed to.

Indeed, European farming relies on a frequent dose of life-saving financial support from the EU. This kind of financial support, however, is exactly the kind of institutional structure that restricts the ability of entire populations in specific regions to subsist, and it is time to vehemently oppose European protectionism. According to the European Commission, the annual budget for direct payments, a substantial part of the CAP’s budget, is likely to be cut by 2% per year between 2013 and 2020. Ongoing reforms of the CAP are steps towards the inevitable end: its complete abolition. Now we just need to speed up this process.

In a recent report (PDF) published by RenewableUK and Energy & Utility Skills, the authors suggest that the wind and marine energy industries have the potential to contribute heavily to job creation given that a correct policy and legislative framework is implemented. Although this is an encouraging message, we ought to study the lessons to be learned from Denmark, the once so promising first mover in renewable energy.

Three market development scenarios, measured by the extent of deployment of wind and marine energy, are set out in the report. By 2021, the low growth scenario envisages the support of 44,000 jobs, medium growth is anticipated to result in the creation of 67,200 jobs, and high growth may well create 115,000 jobs, most of which require a particularly skilled workforce. These numbers account for full-time employees whose jobs are directly or indirectly (i.e. in the supply chain) created by the growth of these industries. For this growth to be possible, however, the authors call for substantial investments in the workforce in order to facilitate the provision of much needed skills.

If this growth, partly at least, relies on government involvement, we must be aware of the achievements and failures of foreign governments. In 2009, CEPOS, an independent Danish think tank, dared to slaughter a sacred cow when it commissioned a report (PDF) on wind energy in Denmark. The main argument of the report is that the successes of Danish wind energy are heavily overstated. More specifically, the use of government subsidies to support the development of wind energy has merely detracted labour from other sectors, and Denmark will as a result fail to observe a net increase in employment in the long run.

If the figures below are correct, CEPOS has certainly highlighted an important issue in policy-making in this specific area:

Allowing for the theoretical possibility of wind employment alleviating possible regional pockets of high unemployment, a very optimistic ballpark estimate of net real job creation is 10% of total employment in the sector. In this case the subsidy per job created is 600,000- 900,000 DKK per year ($90,000-140,000). This subsidy constitutes around 175-250% of the average pay per worker in the Danish manufacturing industry.

In terms of value added per employee, the energy technology sector over the period 1999-2006 underperformed by as much as 13% compared with the industrial average.

This implies that the effect of the government subsidy has been to shift employment from more productive employment in other sectors to less productive employment in the wind industry. As a consequence, Danish GDP is approximately 1.8 billion DKK ($270 million) lower than it would have been if the wind sector work force was employed elsewhere. [Emphasis mine]

Thus, had the market forces been allowed to function freely, the resources could have been used more efficiently elsewhere. It should be mentioned that the authors of the report published by RenewableUK and Energy & Utility Skills emphasise the promotion of incentives for private sector investment in wind and marine energy industries. Whilst this is essential, there is a risk that private sector initiative will drown in government subsidies. The politicians should indeed allow the wind and marine energy industries to flourish, but let us not accept an unwise use of subsidies that is bound to destroy the long-run potential.