Blog Review 783

2454

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A shocking new discovery in the field of health care. Really, why didn't anyone think of this before?

A revealing case of do as I say rather than do as I do.

Not everything is looking rosy over in the Obama camp. Too many lawyers for a start, always a bad sign.

Netsmith has some experience of Russia and this explanation of the situation seems spot on.

More on the perils of bailouts.

And why we shouldn't be bailing out the auto companies.

And finally, Brown explains the economy.

Bailing out Detroit

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According to The Economist, Detroit, the heartland of the US car industry, is currently ‘running on empty’ with GM having spent nearly $15bn of their spare capital. The car manufacturers are claiming that $50bn of taxpayers money is needed in order to keep them afloat through troubled times. It may seem like a simple solution to numerous problems at once: such a large capital injection could support the worst affected firms and prevent unemployment rising within the area. But this is only considering the short-term goals, rather than the overall health of the economy. By bailing out the US car industry, the government will be sending out the wrong signals to other firms: they can run inefficient business models without facing financial repercussions. Many US commentators have argued that GM would be better off filing for chapter 11 bankruptcy and fundamentally restructuring their business, and it is hard to disagree. A federal bail out only delays the inevitable. Moreover, unemployment in Detroit is not a product of the current downturn. There has been unemployment there since the car making industry became automated. The problem of unemployment will not be solved by simply putting cash into the car producers' pockets. More sustainable, long-term solutions are needed. The inefficiencies and failings of an industry cannot be repaired by throwing money at it. Ultimately these markets need to be freed in order to allow firms to react to such problems. For example, if the role of the unions were reduced (something which seems unlikely under an Obama presidency, it has to be said), the firms' costs could be lowered allowing them to compete with foreign manufacturers in domestic markets. It is particularly instructive to note, as Michael E. Levine did in yesterday's Wall Street Journal, that thanks to the United Auto Workers' 'Jobs Bank' programme (which guarantees nearly full wages and benefits for workers who lose their jobs due to automation or plant closure) GM currently supports more retirees than workers. No wonder they are in such trouble.

Recession, regulation, and rubbish

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Well, it turns out that the UK is in for an even deeper recession than originally suspected. The CBI (Confederation of British Industry) says unemployment may rise to 2.9 million in 2010, instead of the 1.8 million previously forecast. The UK economy shrank for the first time in 16 years between July and September of this year. CBI warns this is far from over; the size of the economy could decrease by 1.7 percent in 2009, which is a staggering change from the 0.3 percent predicted in September.

CBI blames two major factors for the economic slowdown that lies ahead, which is expected to cause five quarters of negative growth. First of all, the banking crisis has diminished the accessibility of credit and credit insurance for all kinds of businesses. Secondly, the negative reports about the economy resulted in a decrease in consumer confidence, reducing the demand for products and services.  This declining consumer spending, in addition to less investment spending and significant drops in inventory, will be the largest contributors to the downturn.

Unite, the UK’s largest union, has come up with a plan to stimulate the economy by increasing public spending and instituting stricter regulation of the financial sector. But why would one want to do that when too much box-ticking regulation helped get us here in the first place? While they hassled firms and companies with nonsense procedures and stipulations, stifling innovation and impeding progress among businesses, regulators completely neglected the bigger issue of financial stability. Although some regulation will surely be needed, the economy will fair much better if companies have more say in their operations and management, and regulators get back to focusing on the big picture.

Ultimately, as long as competition and free market ventures are put on the backburner, the bad news will just keep coming.

Blog Review 782

2450

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For those screaming about how all those toxic derivatives need to be regulated, perhaps regulated out of existence. Worth noting that they only exist because of previous regulation.

It isn't, as many seem to think, quite a certain thing yet that the Tories will win the next election.

So, if the Detroit Three (for they are no longer the Big Three car makers) do get bailed out, what is it that we actually want them to do?

Why libertarians (indeed, liberals of every stripe) should celebrate the existence of the gender pay gap.

It would appear that not much has changed in Haringey over the years.

Timeline Twins: Watching Star Wars today is like watching It's a Wonderful Life (1946) in 1977.

And finally, the 69mph bedstead.

The gender pay gap

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The Office of National Statistics has released its figures on pay for this year, something which has set off the annual bleating about the gender pay gap.

The Office for National Statistics said that the difference in earnings of women and men in full-time employment rose by 0.1% over the year. For part-timers, the gap increased to more than 36%.

As I've had occasion to mention before, that part-time pay gap is something of a fraud. For it is comparing the wages per hour earned by women working part-time with those of men working full-time, thus conflating two entirely different things. Part-timers everywhere earn less than full-timers, so this is nothing whatever to do with gender. Indeed, from the same ONS ASHE figures we can calculate that the part-time pay gap for women (ie, part-time women compared with full-time women) is 14% and that for men 27%. we are clearly therefore not dealing solely with a gender issue.

However, there's another aspect to this which interests me. From the TUC's briefing paper *on the subject we find on page 14 that (by a slightly different measure) the gender pay gap in the UK is 20%, that in Denmark 18%, in Sweden 16%. So this isn't something that can be explained by the absence of social democracy, the absence of free childcare, the absence of comprehensive union agreements, for those things do indeed exist in those places.

Indeed, it would appear that even sky high taxes, extended maternity leave, compulsory paternity leave and so on, things which are urged here and exist there, don't have that much effect either. In fact, if the average wage is some £23,000 a year then that 2% difference with Denmark is £460 a year, or under £10 a week.

Now I agree, £10 a week is indeed £10 a week, but that diminution of the gender pay gap comes as the result of a great deal of effort and expense. Is it actually worth it? Might it not be worth simply shrugging our shoulders and moving on to more tractable problems, where our efforts will have rather more of a result?

*Footnote 18 also tells us that the TUC uses mean pay to calculate the gap against the advice of the ONS. Using the median would reveal a lower gap, something which would never do.

Understanding the financial crisis

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Here is a good beginners' guide to the financial crisis, courtesy of AfricanLiberty.org:

Hat-tip to The Independent Institute.

Unhealthy pay rises

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Upon opening my newspaper last week I was confronted by two headlines which typify public services within the UK. Firstly, there have been '38% pay rises for top NHS bosses'. This is absurd given the current economic situation and the government's fiscal marginality. But, this was coupled by the second headline that the 'NHS is worse than Estonia for care'. I'm not saying that Estonia is an underdeveloped, backward country, but I doubt their healthcare bosses receive the wages that ours do.

There is no sense in NHS bosses being given such a large pay rise, especially when many others are beginning to feel the strain of the looming recession. It is hypocritical that these massive pay rises for senior officers come from the same government that heavily criticised the investments banks for giving large bonuses to their staff. It could not even be said that these pay rises are 'performance related'- we are rated 13th for healthcare in Europe, well below our similarly wealthy neighbours.

This extra government expenditure has been poorly spent and shows a lack of regard for the efficiency of the NHS. On average, nurses and ancillary staff were only given a 1.9% wage increase. In order to boost the quality of healthcare within the NHS, we need extra nurses and medical staff rather than a growth in managers and extra bureaucracy. 

The solution to the inefficiencies of healthcare in the UK is greater privatisation. This would encourage waste to be reduced and competition would encourage firms to improve the quality of their service in order to increase revenue. Privatisation would also see firms giving greater incentives to medical staff and nurses who have a real impact on patient care, rather than on middle management.

In order to improve our healthcare to levels above that of Estonia, we need more effective strategies than simply pumping cash into the failing NHS.

Blog Review 781

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From the Annals of Great Bureaucratic Decisions. Someone once thought that a Danny Kaye song would encourage people to pay their income tax.

What the Congresscritters are about to spend such taxes on might give people pause while handing it over though.

Estonia and the NHS: proof again that it's not how much you spend but how you spend it.

There is a temptation to think that some journalists' writing might just be influenced by their other interests.

Perhaps it's just that the markets have woken up to what Labour Governments always do to the value of sterling?

There's something odd in the proposed laws about passports and identity papers. It rather opens the door to the police being able to demand such papers at any time.

And finally, the warning becomes the instruction manual.

Is stability our goal?

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To listen to some commentators these days you would think that stability is indeed our goal. Almost a steady state society, one in which things rarely if ever change. We should deliberately curb innovation for example, for this brings with it such unwanted disruption to our stable and (implied rather than ever provenly so) happy society.

This is however, at least I think so, profoundly mistaken:

Foresight and planning were destined to play an ever-increasing role in human affairs, and a readiness to take risks in the hope of a profit in the more or less distant future is a distinctive mark of more advanced humanity.

That's two archaeology professors writing 40 years ago (on the subject of flint knapping actually) and if they can understand one of the basic things which makes us homo sapiens sapiens then why can't the economic and social commentators of our own day understand the point?

That taking risks in the hope of future profit is innovation: markets, amongst other things that they are, are the method we use to sort through which of such innovations satisfy some human desire and thus profit their developers.

Why on earth would we want to constrain one of the very things which makes us human? To deliberately restrain innovation, to attempt to enforce stability, would be doing exactly that.

So no, we cannot say that stability is our goal and we should thus be profoundly suspicious of those who claim that it is or who try to enforce it upon us.

The killing fields

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Just over a week ago Comment Central asked its readers to answer in no more than eight words what their 'single biggest hope was for Obama'. It currently has over 1800 comments, and will no doubt continue to attract more. Mr Obama has promised change and it comes as no surprise that there are many people investing their hope in him and what the dawn of 20 January 2009 will bring. But a few days after this went up Daniel Finklestein posted a further blog titled, "Barack Obama and people who want him killed" in which he asserted his surprise at the negative/borderline psychotic comments that hoped for the demise of the President-Elect. He should not be surprised.

Being President of the USA comes with risk – just ask any of the previous incumbents, many of whom have the scars to prove that the risk is very real. There have been four successful assassinations, Presidents Lincoln, Garfield, McKinley, and of course Kennedy. Attempted assassinations can be found during the presidencies of Nixon, Ford, Carter and Reagan (and if you believe everything you read on the net, Bush, Clinton and Bush). Change brings with it fear, and that is what these people are professing, a fear of that change and the perceived negative consequences if things do change.

The present POTUS has been assailed with threats for the past 8 years. It's not difficult to forget the heart rending pleas of Democrats post November 2004, many of whom were moving North (to Canada, of course), and I'm sure many of them would have liked the life of the President to be expunged swiftly following his re-election. But like all those who live in a democracy should, most knuckled down and got on with their lives, hoping for little, or no, negative impact from policies emanating from the halls of government. Hate in politics is, sadly, natural: the unintended consequences of political decisions undoubtedly harm some and make their lives poorer, and if those people feel trapped with no options left, they will clutch at any action they can take.