Apparently the euro is a neoliberal plot: who knew?
The blame game for the Greek disaster is in full voice over on the left. Apparently it's really all the fault of the neoliberals. Yes, that's us, the people who argue for less government intervention, markets work and so on, we're responsible for the idiocy that a supra-national bureaucracy has erected. Here's Georgie Monbiot as one of the cheerleaders for this argument:
The Maastricht treaty, establishing the European Union and the euro, was built on a lethal delusion: a belief that the ECB could provide the only common economic governance that monetary union required. It arose from an extreme version of market fundamentalism: if inflation were kept low, its authors imagined, the magic of the markets would resolve all other social and economic problems, making politics redundant. Those sober, suited, serious people, who now pronounce themselves the only adults in the room, turn out to be demented utopian fantasists, votaries of a fanatical economic cult.
So let's look at what a real market fundamentalist, Milton Friedman, said about it all:
The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.
Friedman was of course far too polite to put it this way, but that's clearly a claim that the idiot politicians are about to impose something that won't work, either economically or politically, and something thus that market fundamentalists (or as we like to style ourselves, liberals) simply should not be supporting.
George's basic problem here, as with that gathering chorus over on the left, is that they've got confused. They're against neoliberalism, they know that. And they're against the implosion of the Greek economy. At least one of those is a sensible thing to be against. But because they're against both they insist that one is a facet of the other. When in this case, neoliberalism, market fundamentalism, has been saying all along (and some of us have been shouting this for two decades now) that the euro as constructed simply will not work. Because it doesn't contain enough market, because it's a political construct built without reference to sensible economics.
And we're right of course. Far from neoliberalism being the cause here it's the cure.
We need to get this right about what the Millennium Development Goals have achieved
It's absolutely and gloriously true that these recent decades have seen the largest reduction in absolute poverty in the history of our species. But we need to work out why this is so, so that we can go and do more of that lovely stuff that reduces absolute poverty. And this isn't the answer:
The millennium development goals (MDGs) have driven “the most successful anti-poverty movement in history” and brought more than a billion people out of extreme penury, but their achievements have been mixed and the world remains deeply riven by inequality, the UN’s final report on the goals has concluded.
This is not true. This is to confuse correlation with causality. The MDGs have been around for a time, yes, and they correlate with some of that reduction in poverty. But the actual decline in poverty, the one of those MGD's that was achieved ahead of target, has not been driven by the MDGs. In fact, far from varied chuntering on at the UN being responsible for the reduction in poverty it's been the ignoring of said chuntering that has.
The two things that have led to this vast, and highly welcome, reduction in poverty are the economic development of China and the Washington Consensus. Both, really, being governments getting out of the way and allowing the natural propensity to truck and barter to assert itself. We can in fact prove this in two ways.
The first being that the reduction in poverty hasn't been happening where the UN has been dipping its greasy mitts, it's been in those places that have been taking part in globalisation. Secondly, the reduction in poverty started before, predates, even the consideration of those MDGs let alone their adoption and anyone doing anything directly about them.
This matters because of course, given the success they are crowing about here, they want to make another set of goals. And the correct goal should be to do more of what worked last time, not whatever comes about as a result of the chuntering of the bureaucrats.
What did work last time is that the rich world finally started buying things made by poor people in poor countries. Thus we should do more of this: more globalisation in short. And given that the bureaucrats, the UN, and their targets had almost nothing to do with it all the best thing we should set them as targets is that they should shut up, go home, and let the rest of us get on with making our fellow humans richer.
As we have been and as we'll all continue to do as long as no one interferes.
Five reasons to hate Sunday trading laws
- They’re inconsistent and arbitrary. If you’re a waiter, factory worker, nurse, construction worker, taxi driver, bus driver, security guard, journalist or even a retail worker at a small shop you can and often do work at any time on Sundays. The places that have to close at 6pm are ‘big’ shops. Bizarrely, ‘big’ is defined as being 281 square metres or bigger. That doesn’t make much sense and any argument that retail workers are ‘protected’ by Sunday trading laws would also imply that all those other workers are being exploited.
- Life isn’t nine-to-five, Monday-to-Friday, any more. Not that it ever was, really. Sunday trading laws inconvenience people who haven’t had time to buy their groceries during the rest of the week, and force them to rely on expensive local shops instead of cheaper supermarkets with more choice. For example, I like to do my shopping at my local Lidl. If I spend Sunday afternoon in the park with my friends instead of doing my shopping, and I need to buy something for that evening's dinner, I have to pay twice the price for a smaller range of inferior products at the Tesco Express down the road instead. That’s annoying. If I had a family to feed, it would be expensive.
- The high street – and probably even small shops – will be better off. When Sunday trading laws were suspended during the Olympics, sales outside of London increased by 6.2%. They only increased by 2.8% inside London, probably because people were warned off the crowds. That’s good for smaller retailers too – no self-respecting retailer wants to exist just because her competitors are banned from trading, and more people out shopping means more customers to go round for everyone. They don't seem to have suffered during the Olympics suspension. If you’re worried about online retailers destroying the high street, this is one way to level the playing field.
- Workers will have more hours available. It’s easy to talk about ‘protecting’ workers by stopping them from working on Sundays. But what about the ones that want to work then? Employers often end up having to pay workers more to work on Sundays – if you don’t think Sundays are sacred and want to earn a little more cash, the end of Sunday trading restrictions is good news for you. (Back when I was a teenage McDonald’s crew member, Sunday hours were a godsend.)
- Lots of people actually like shopping. It’s very common to enjoy trips to the high street or the shopping centre with some friends. If you are interested in food, big grocery stores like Waitrose, Asda and Whole Foods can be interesting places to explore. Browsing clothes shops and buying new things can be really fun. I’ve seen lots of people sneer at this on Twitter, and no doubt it’s terribly gauche, but government shouldn’t be in the business of forcing snobs’ tastes on the rest of us. Some of us actually like consumerism.
Which aid is worthwhile?
In the second edition of "How to Win Every Argument" I introduce 12 new fallacies, one of which is the False Zero Sum Game. This is the fallacy of supposing something to be in fixed supply when it is not. Some suppose that if some countries are to grow richer, others must become poorer. In fact wealth is not in fixed supply; it can be created.
Another fallacy I did not include is the inverse of this one, where people suppose an unlimited supply of something limited. Given that countries will not allocate the whole of their GDP to foreign aid, a limited aid budget is available. The question is "How can it be spent most effectively?" One answer is that supplied by the Copenhagen Consensus established by Bjorn Lomborg. Distinguished economists meet every 4 years to assess how to prioritize limited funds. Its rigour has earned it a reputation for fairness.
In an article published a year ago, Matt Ridley described how Lomborg handed the UN Open Working Group slips of paper representing worthwhile projects and had them place them in order of priority. They were startled, coming from a mindset that "everything is important." Lomborg then had 60 economists calculate the cost-effectiveness of different targets, and list their likely benefits:
1. Every dollar spent on reducing malnutrition yields $59 in benefits. Better fed, children's learning improves and they become more productive members of society.
2. A dollar spent combating malaria and tuberculosis brings $35 in gains. These diseases cause sickness that reduces the ability to do productive work.
3. A dollar spent fighting HIV brings $11 in returns, and so on.
By contrast, each dollar spent on programmes to limit global warming to 2 degrees Celsius brings only 2 cents in benefits.
In his article Ridley lists his own top priorities, adding boosting preprimary education, which he suggests might return $30 per dollar spent. He suggests that universal access to sexual and reproductive health would save mothers' lives and lower birthrates, yielding perhaps $150 per dollar spent on it. Finally Ridley suggests that expanding free trade could deliver "phenomenal improvements to the welfare of the poor in surprisingly quick time." "A successful Doha Round of the WTO could deliver annual benefits of $3 trillion for the developing world by 2020, rising to $100 trillion by the end of the century."
It is a rewarding discipline to compare the effectiveness of different projects, and to explore which ones would do most good with the limited funds. It has the potential to make aid more effective at achieving worthwhile goals.
Some people just don't understand what capitalism is
Another one of those delightful whingefests over at The Guardian. The mobile phone means that, what with texts and emails and the like, we are all on call all the time. This is not though, the fault of the tech, but of capitalism:
The problem is not tech: it’s capitalism. Admitting the real source of the problem creates an opportunity to address it. Capitalism has adroitly managed to evade responsibility and neatly slip its leash, but we should be able to exercise greater critical thinking than that and bring it to heel. Capitalism and tech are deeply intertwined, of course, but let’s not confuse the two.
Yes indeed, let's not confuse the two. So, what actually is capitalism? No, it's not just a compendium of all that Guardianistas hate. It's not even a solid description of our own current society. What it actually is is a description of who owns the productive assets in a society: the capitalists or some other group of people? And do the capitalists own all said productive assets? Nope: so we're not even in a fully capitalist society.
It’s capitalism that took advantage of this opportunity to work it, turning it into something that could be used to control employees and keep them constantly within arm’s reach. The person who refuses to be constantly available or who exercises discretion in terms of the kind of work performed after hours won’t last long at a company and certainly won’t advance in terms of salary and rank.
There are decidedly non-capitalist organisations in our society. All of government for example. The NHS, John Lewis, the Co Op, the remaining Building Societies and so on. All lawyers (they're partnerships, not capitalist organisations) and on and on. It wouldn't be out of order top insist that some 50% of our society is not currently capitalist.
At which point we need to ask: well, are those non-capitalist parts of the society subject to the same texts and out of hours emails? It would seem that they are: therefore it's not capitalism causing all of this, is it?
Unless, of course, one is writing for The Guardian where capitalism is simply the moniker for everything and anything one wants to whinge about.
There might even be real problems with capitalism, could well be real problems with tech: but let's not confuse the two, eh?
Regulating away Britain's best teachers
The latest report from The Sutton Trust (pdf) looks at a topic it last visited in 2003: how the backgrounds of state school teachers compare to those of independent school teachers. Its finding is that there is still a significant difference between the proportion of teachers at state and independent schools that have studied at the UK's best universities. Independent school teachers were also found to be the most likely to have a degree in the main subject that they teach. Here is the percentage of all teachers who attended a Russel Group University, by post-A level qualification:
Most people would expect this result. But what is more surprising, yet garners less attention, is that the heavily-regulated environment of state education hinders its flexibility to hire the same, or better, quality of teachers as independent schools.
There is some anecdotal evidence to suggest that the lack of formal requirements for teachers entering the independent sector actually encourages, rather than discourages, applications from graduates of some of the UK's leading universities, because top applicants wish to enter the teaching sector immediately, rather than pursuing further qualifications.
State schools in England, Wales and Scotland are required to be registered with the NCTL and their General Teaching Councils, respectively. Private schools are free of this requirement and can hire applicants with specialist subject knowledge that want to teach soon after they leave their field of expertise.
In independent schools, teachers are not required to have Qualified Teacher Status, which, according to Elliott Lockhart's 2010 survey "has led some to portray teachers in the independent sector as unregulated, unaccountable and lacking the necessary professional preparation that would make them fit to teach."
As we know from the report and our general experience of the private education market, this is far from the case and actually strengthens the choice of employees that independent schools benefit from. For Scotland, this is particularly concerning as we are about to enact a law (see a recent Telegraph article about it here) making independent schools subject to the same requirements as state schools. So we would practically have no schools not subject to these restrictions.
Right now Scottish independent schools, like is the case in all of the UK's constituent parts, take advantage of teachers registered outside of Scotland and this legislation would prevent that. On top of this, the Scottish government also doesn't engage with Teach First; a programme that is injecting fresh talent into schools in England and Wales and is one of the reasons, judging by the teacher background metric, that state schools have been catching up with independent schools in the last 12 years.
Scottish politicians should reject the Education (Scotland) Bill as private schools are the perfect testing ground for trying out what works and doesn't work. Subjecting them to the same rules as state schools will impede progress and diminish their autonomy - they're independent for a reason.
Solving one of the most pernicious failures of the UK housing market
It appears that George Osborne intends to solve one of the most pernicious failures of the UK housing market. Which is that once you have, through whatever temporary circumstances, gained access to housing subsidies then you get them for life. This is of course a nonsense: there's a huge difference between receiving a helping hand when needed and gaining permanent access to the wallets of the rest of the population. What he's going to do is:
Measures to force middle-class council house tenants to “pay to stay” in their homes rather than rely on taxpayer hand-outs. Rent subsidies for social housing tenants will be removed from anyone earning more than £30,000 outside London and £40,000 in the capital. They will have to pay full market rents or move out, under the plan.
It has always been absurd that temporary circumstances that lead to being granted subsidised housing then lead to a life tenancy on such subsidised housing.
That we do have a system whereby those who need it gain access to housing they otherwise could not afford is obviously going to be a feature of our society. But the idea that some life event, say, divorce, unemployment, whatever, should then lead to permanent subsidy has been a feature all along. Once you've qualified for council or housing association housing and got it, then that's a permanent tenancy. But circumstances change: and there really never has been any good reason why someone should continue to gain subsidy 20 or 40 years after the just reason for its original grant has faded.
An aside for those who claim that such housing receives no subsidy: opportunity cost. Renting something out at less than market rate is itself a subsidy.
We don't want though, to insist that people have to move out of such housing if they get a pay rise: that would be much too high a marginal tax rate. But people who are earning above the average wage (and £30k is well above it) why shouldn't they pay market rent, not be subsidised by everyone else?
Kid's Company seems to not quite get this idea we call "charity"
An amusing little tale from the third sector as we're supposed to call these things these days:
The charity she founded, which specialises in therapeutic support for severely abused and traumatised children, is likely to halve in size, making £14m of cuts and sacking hundreds of staff in an attempt to survive a serious financial crisis.On Thursday night, she said: “Some ugly games are being played. The facts are that the vulnerable children of this country remain largely unprotected. There’s no point in shooting the messenger if the message is uncomfortable. I am being silenced.”
Kids Company predicted that the proposed restructuring, which it said was triggered after the government signalled that it was to end £5m annual funding, will leave thousands of vulnerable youngsters without support.
That's umm, interesting, isn't it? A £5 million grant cut leads to a £14 million crisis? We can't help but feel that there's a little more, possibly even £9 million more, going on here that just the grant cut.
However, where the plot really seems to get lost is here:
Batmanghelidjh warned that without a regular source of state funding, Kids Company would be reliant on fundraising: “We are doing the most serious work [funded] by cupcake sales and cocktail parties, and I don’t think that is right or sustainable.”
As a result, the charity
Err, yes, that's what charity means. Over here we have a series of things that both must be done and can only be done by government. It is righteous and just that the populace of the country chip in, perhaps in some portion related to their means, to pay for these things through taxation.
Then there's another group of things over here. Which some to many of said populace would like to see done. Which require perhaps coordinated and collective action. But which do not require the power of government to achieve. And there's many ways of organising those things. Corporations do some of them, mutuals others, charities yet another set. But the defining point about these forms of organisation is that they do not have the power of the State to demand, at gunpoint or threat of prison, the money to find them. They must be run in a manner able to persuade people to voluntarily cough up the cash. This is as true of Sainsbury's trying to sell us a banana or two as it is of Ms. Batmanghelidjh suggesting that we might wish to aid deprived children.
This is one of the defining points of a charity, one of the things that differentiates it from said State. And if you're running a charity and you've not quite grasped this point as yet then perhaps you should be doing something else?
If only Steve Hilton knew what he was talking about
It's not looking good for the idea that Steve Hilton is well informed, is it?
My meeting with Luiz was arranged by Citizens UK, the brilliant community organisers who have been such a powerful force in campaigning for a living wage. But my real conversion to this cause was brought about years previously by an unlikely protagonist: Polly Toynbee.
Gaining your information from that source is never going to work out well, is it?
And yet he does get close, only to reject the correct solution:
Some might say that the minimum wage was deliberately set so low that it wouldn’t affect business very much. An increase to the living wage would be a completely different proposition. It is to counter this argument that in my book, More Human, I advocate what I describe as “business-friendly living wage” that requires companies to pay a living wage but cuts their employers’ national insurance by roughly the same amount to neutralise the overall impact. But to be honest, this is letting businesses off the hook. There are plenty that could perfectly well afford to pay the living wage. It’s a choice.
The actual answer is to, as we have been saying here for near a decade now, reduce the amount of tax charged to those on low incomes. We will have more on this later in the week but seriously, what is so difficult to understand about the following? If you want the working poor to have more cash then just stop taxing them so damn much.
The Treasury has lost on RBS whether or not it sells up
One bizarre argument that has come up on Twitter and amongst the media recently is that George Osborne, in his ruthless free market zeal, is determined to privatise RBS, selling off some of the government's stock now, despite this meaning the government will have lost money by rescuing the bank. According to these critics Osborne fails to see the obvious correctness of their arguments and the obvious stupidity of this move because he is blinded by an ideological obsession with privatisation.
This line of attack is nuts. Firstly, you do not make a loss when you realise it; simply turning the equity into cash does not suddenly mean the government has lost out. By analogy: imagine I buy a house for £400,000, but I accidentally drive a bulldozer into half of it, meaning that it is now worth only a quarter of what I paid. When did I get worse off: when I drove the bulldozer into it, or when I sold it? Am I still worth £400,000 until I sell the house for its new value of £100,000?
Secondly, even if you did, there's little to no reason to expect RBS shares to rise above any other asset in the future; the government could easily lose more than the notional £12bn less its 79% stake is worth than when it was bought. There may well be some market inefficiencies (or perhaps not) but even if there are, no one is seriously going to argue that the government is playing one of the super-sophisticated strategies to exploit those inefficiencies by holding onto a FTSE100 bank that it picked up as part of a bailout.
Thirdly, simply comparing price now to price then is ridiculous: the FTSE as a whole has something like doubled since 2008 and 2009 when RBS was bailed out. If the relevant counterfactual is 'risky equities investment' then the government could have made tens of billions of pounds; if the relevant counterfactual is 'pay down debt' it could have saved billions of pounds on debt interest. On a more relevant comparison, the state has lost a lot more than £12bn. But it lost that when it invested and when the price fell.
If it's bad to sell off RBS, that's because there's some special reason why RBS will do better for itself and society if owned by the government. This is quite implausible; actually it seems more likely that owning RBS could twist governmental and RBS incentives, distorting the banking market and harming society overall. It is complete nonsense to say that by selling now Osborne is losing money for the Treasury—it's already gone.