Can he fix it? Yes he Khan

The new Mayor of London Sadiq Khan has a tough job on his hands. Though London is thriving, the capital faces some serious headwinds. I explored some of these in a series of articles for Forbes.

As I wrote for Forbes: 

Ask any young Londoner who wasn’t born with a silver spoon in their mouth about the biggest challenge of living in London, and the reply will be near unanimous: the cost of housing. A growing population, constrained by a greenbelt with insufficient new builds has pushed prices, wallets and purses to breaking point. Many young people have no prospect of getting on the housing ladder.

Khan vowed not to build on London’s greenbelt in the election campaign, but hopefully this was just political posturing to nullify Zac Goldsmith’s green credentials. At least 50,000 houses need to be built each year for the next decade just to meet demand, but Khan has so far only prioritised redeveloping brownfield sites. Though we might be able to squeeze 365,720 new homes out of brownfield land within the Greater London Authority area, it would be difficult, expensive and take up to 10-15 years to repurpose for housing. However, as analysis from Centre for Cities has shown, more than 430,000 homes could be built at suburban densities, close to train stations and on just 2 per cent of London’s greenbelt. But it’s not just housing. We also need more commercial property. The rising cost of business rents is depressing enterprise, investment and growth.

Besides building, Khan needs to continue Boris Johnson’s work of ensuring London’s public transport is fit for purpose. It might cost a lot of money, but given that all private capital has been crowded out of the sector, all we can do is throw money at the problem until someone comes up with a better idea of idea. Khan’s idea of freezing Londoners’ fares isn’t top of the list.

In his role as representing Britain’s largest city, Khan should also lobby central government hard. Immigration policies and the inability to access the right talent are critical issues for entrepreneurs and start-ups. Pat Saini of Penningtons calls for the introduction of a Third Party Sponsorship (TPS) visa, which would “allow overarching entities such as accelerators, incubators and venture capital firms to sponsor migrants on behalf of companies in which they have invested or for whom they are providing services/resources and to bring the necessary skills to the UK for the benefit of that company.” We suggested something similar for entrepreneurs in our report Made in the UK.

Khan might not have the charisma of Boris, but if he gets stuck into the nitty gritty of policy he could go one better than having a bike named after him – he could make London the best city in the world to live and work.

How might Britain change by 2050?

Scott Sumner notes that the USA's demographic profile in 2060, which some people on the right are worried about, looks quite a bit like Texas's profile today:

Neoreactionaries seem to think the America of 2060 will be a particularly inhospitable place for white people. And yet white folks are moving to Texas in droves. Indeed the only other state that comes close (in terms of absolute population growth) is Florida, which also has lots of blacks and Hispanics (but not very many Asians). The Texas economy is also highly successful. Even during the oil bust, people continue to move to Texas and its population continues to grow rapidly, up by nearly a half million (almost 2%) in the most recent year (mid-2014 to mid-2015). The unemployment rate is only 4.2%, close to the 4.0% considered optimal by Bernie Sanders. And this was accomplished despite the hemorrhaging of oil jobs.

In the UK, some people are worried about the number of Muslims. Pew Research reckons that by 2050 about 11% of the population will be Muslim, which is about double what it is today. London is about 13% Muslim, and it's among the best cities in the world. There isn't any major civil unrest, though Tower Hamlets (which is 30% Muslim) has had some pretty serious problems with its politics.

Those Muslims aren't evenly distributed around the country, though: about 40% of England's Muslims live in London and the others are mostly in cities like Bradford, Birmingham and Luton. Perhaps if London's Muslim share of population doubled it would be quite a bit different to how it is now, which people might not want.

This is mostly driven by birth rates, not by immigration – there isn't actually a large amount of permanent Muslim immigration to the UK anymore. It seems like people concerned about this should want more, not less, immigration from places like Eastern Europe.

Didn't we already solve this blood minerals problem?

We're absolutely certain that this coltan, blood minerals, problem has already been solved. I mean didn't they pass a law about it, something that was to solve the point?

House of Cards star Robin Wright has launched a campaign with Congolese and American activists to end the pillage of Congo’s vast mineral resources and break the cycle of devastating wars that have claimed more than five million lives.

The campaign will target US tech companies and political leaders in an attempt to push for greater transparency in the mining of so-called “conflict minerals” such as coltan that have aggravated the violence in the Democratic Republic of Congo. Wright has produced and narrated a new film, When Elephants Fight, to be shown in 50 university campuses around the US as part of what she and her fellow campaigners hope will become a movement for reform under the banner#StandWithCongo.

Dodd Frank included a section about this. Backed by the Enough Project and Global Witness we were told that if all American listed companies had to list whether they were using conflict minerals or not then this would drive said conflict minerals out of the supply chain.

We have been somewhat dismissive of this claim here and elsewhere. But of course we were shouted down, the law was passed and it has come into effect. The SEC itself estimated the costs of this law at $4 billion (yes, $4,000,000,000) in just the first year. We said it wouldn't work and that it was a very expensive way of not dealing with the point to boot. We might even have made the point that a division of Marines would be a cheaper and more effective solution.

Apparently we were right, at least according to campaigners on this issue we were right. and yet their conclusion is to do more of what has provenly not worked.

What was that Einstein quote again? As, yes: "Insanity: doing the same thing over and over again and expecting different results."

Is it too much to ask that we have a little less insanity in public policy?

Will Wilkinson on The Great Enrichment

Over at The Niskanen Center, Will Wilkinson has written an interesting piece on libertarian attitudes to social justice, giving a Bleeding Heart Libertarian take on what Deirdre McCloskey calls The Great Enrichment (Watch her give the annual Adam Smith Lecture on that very topic). 

Here are a few highlights:

Humans may be natural cooperators with a built-in instinct for distributive fairness, but we’re also natural opportunists who will negotiate over everything, including the very idea of distributive fairness, to increase or preserve our shares. “That’s not fair!” is always a bargaining move and only sometimes a fact.

When people talk about “social justice,” sometimes they’re really talking about “distributive justice.” The immense influence of socialist ideology in the 20th century encouraged the idea that social and distributive justice pretty much came to the same thing. But 1991 was a long time ago, and these days when people agitate for social justice, or refer derisively to those who do as “social justice warriors,” they’re likely to be talking at least as much about the distribution of rights and dignity as they are to be talking about the distribution of material resources and economic opportunities. That’s a healthy development.
You know what’s nuts? What’s nuts is that nobody kicks off a discussion of justice, distributive or social, with the fact of the Great Enrichment. Because the upshot of our best accounts of the most important thing that has ever happened to the human race seems to be that equalizing the distribution of rights and liberties, powers and prerogatives, respect and esteem led to an increase in the scope and productivity of cooperation, generating hugely enriching surpluses.

Read the whole thing here.

Our rulers are convinced that we are all morons

This is not an exhaustive search, this is just the stories lifted from one newspaper on one random day:

Ten-pack cigarettes will be banned from Friday after an EU directive comes into force this week while packaging will be forced to become bland and standardised.

Then:

The tradition of throwing a mortarboard into the air after graduation has been scrapped by a university because of health and safety concerns, according to a student newspaper.

The University of East Anglia in Norwich said a number of graduates had been hurt by falling hats in recent years, which gave rise to "avoidable injury", according to a statement published in student newspaper The Tab.

And:

Councils could force tends of thousands of takeaways and coffee shops to get rid of all their seating unless they install a toilet, after a judge ruled a lack of facilities in two Gregg's branches was giving them an “unfair advantage”.

A recent High Court case in which Newcastle Council beat Gregg's in a legal battle over whether local branches of the bakery chain should install toilets has set a "precedent", lawyers say, which means other councils can demand take-aways remove tables and chairs if they do not have washrooms.

We are too stupid to know whether we'd like to buy our cancer sticks by the ten or the twenty. After 16 years of education at the hands of the state we are all too stupid still to be able to throw our hat in the air. And we're definitely too stupid to be allowed to sit down and ingest a pastie if we cannot, in the same place, sit down to expel a pastie. 

This simply is not how adults rule themselves. It is, however, how those regarded as morons will have rule imposed upon them. The reason it happens this way is, of course, just a little more complex than the total contempt for the intellect of the electorate held by the elected classes.

It is that there are undoubtedly things that government can do, there's also a class of things that must be done. The things that we actually wish government to do are those which only government can do and which also must be done. Unfortunately those are also the difficult things to do: things which severely tax the limited intellectual capacity of those who would rule us. Therefore they don't do them: instead they do the simpler things which do not need to be done by anyone, let alone government. And then they can pat themselves on the back and claim their incomes, expenses and pensions for having ruled us.

What we need is to return government to doing only those things which must be done and which can only be done in that manner. For example, having nationalised the provision of health care it is incumbent upon government to organise health care:

A system of “bribes” which saw GP earnings soar to six figures worsened patient care while increasing death risks for some conditions, a major Lancet study suggests.

Experts said the controversial £1bn-a-year “pay for performance” scheme introduced under Labour constituted an “incredibly expensive experiment” which had failed.

Yes, same newspaper, same random day. Given that they can't actually do the tough stuff they have been hired to do they instead just treat us as morons and do the easy stuff and claim success.

This is not how a nation of adults rules itself. Time for us to return to the days of yore when we were trusted both to make out own mistakes and also to glory in our own successes. We could make this some grand call for an eruption of civil liberty but as an interim stage we'd like to just gently work toward the idea that government treat us not as the morons and children they currently do. Given that we currently pay some £700 billion for the pleasure, we're most certainly all taxed as adults, we don't think this is too much to ask for.

The Sun makes Beyoncé sweat

This week man-devil Sir Philip Green was in the papers yet again, dragging Beyoncé down with him. Following the destruction of BHS the media have been quick to pick up on the latest moral balls-up from super villain and Felonious Gru lookalike Sir Phil. 

An investigative piece from The Sun this week revealed that the workers manufacturing Beyoncé’s new athletic clothing line, Ivy Park, work up to 60 hours a week on just £4.30 per day. 

The Sun claims that the garments are being produced in inhumane conditions at the MAS Holdings factory in Sri Lanka, although the brand has denied the claims of poor conditions and assured that Ivy Park has a rigorous ethical trading program. 

Despite not being a Bey, or Bee, or whatever unsettlingly twee name the ravenous Twitter mob has given themselves, I don’t think Beyoncé is in the wrong here, and thus by proxy I suppose neither is Sir Philip unfortunately. 

It’s completely understandable that when you hear of sweat shop workers getting paid pittance and working in grim conditions for exorbitantly long hours your immediate reaction would be the desire to protest with your purse and spend your money on clothes “truly ethical” in their manufacture. But that’s where you’d be wrong, it would be a terrible thing for you to do. 

Anti-poverty campaigns can sometimes work as a blunt tool and end up hurting the people they mean to help in these situations. We have to remember that working in a sweatshop is often a considerably better economic option for those workers than the next best thing, namely subsistence farming in many cases, or other low paid factory jobs. It’s worth noting that while £4.30 a day wouldn’t get you far in the UK, the MAS Holdings workers making Beyoncé’s ugly sports bras are actually on double Sri Lanka’s minimum wage.

Sweat shops are not a good option, but they are the least bad option currently available to many people. Washing our hands of the situation and just closing the sweatshops would make their workers worse off, potentially much worse off. If we want to help people, we should give them new options, not take away existing ones.

One MAS worker also found Ivy Park’s message of female empowerment deeply disingenuous, a fair point when you’re making £100 leggings by day and staying in a boarding house with terrifying unisex showers by night. She said: “When they talk about women and empowerment this is just for the foreigners. They want the foreigners to think everything is okay.” And frankly it’s not, we need to give these women more options, but the answer isn’t taking the best one they currently have away to make ourselves feel better.

There is also research to suggest that while sweatshops are far from providing the “empowerment through sport” Beyoncé’s clothing line promises, sweatshop work does actually help improve women’s lives in other arenas; delaying marriage, delaying young childbirth and extending schooling, particularly amongst teenage girls. 

If we really want to help workers in developing countries lift themselves out of poverty we should buy more of what they produce, not less, and not just Fairtrade either. The boycotting of sweatshop-produced items or the campaigning for closure of factories can in fact have devastating effects and push the poor further into poverty.

So for now at least you can wear your Beyoncé branded swimsuit to the park with peace of mind that you’re not actually making it any worse, for workers anyway. 

There's a reason fintech companies like the European Union

The Guardian tells us that those unicorns, those privately owned and venture capital funded companies over in the tech sector, like the European Union and wouldn't want Britain to leave it. There is, of course, a reason for this over and above that general love of a centralised European superstate. That reason being that much of the London scene in this sector is, given the background of The City itself, involved in financial technology. And there's one specific rule that greatly aids such fintech within the EU:  

None of Britain’s so-called unicorns, private companies with a valuation above $1bn (£710m), will support Britain leaving the EU, the Guardian can reveal.

Of the 14 companies on the list, five have come out as explicitly against Britain’s exit from the EU, while the rest either remained officially neutral or declined to comment on the matter.

Taavet Hinrikus, the co-founder of the financial technology (fintech) startupTransferWise, said: “We believe it would be crazy for the UK to leave the EU, both for businesses and consumers.”

Funding Circle, another fintech startup, said: “A successful, well-functioning Europe is crucial to a business like ours and we believe this is best achieved by remaining part of the EU.”

That rule being that if you have a licence to offer financial services in any one EU country then you, by definition, have a licence to offer that in every EU country. This is as opposed to the US system, where you must gain a new, and different, licence state by state.

So, yes, an obvious reason why fintech would like the EU. 

We might not think that we want to make such a momentous decision as Brexit or not purely on the desires of one small section of the economy of course. But we could also observe that it's not in fact necessary for Britain to be in the EU to gain that benefit for British companies.

As an example, Facebook, still an American company we are pretty sure, started its money transfer network here in the EU, not in the US, on exactly that licencing basis. They gained a money transfer licence through their Irish subsidiary and were good to go across the EU. And of course, this is something possible for any company to do, unicorn, British based or not,, Britain in the EU or not.

There are indeed things that are useful and possibly even good about the EU. And one of the joys is that you don't actually have to be a member of the EU to take advantage of them.

Slack in the USSR

It's funny how some things just slip down the memory hole. It's now been more than a quarter of a century since the Soviet Union collapsed, so it feels like ancient history. It's completely intangible, and the world it inhabited is totally gone. We know the USSR failed, but does anyone think much about why and in what ways?

Lucky for us, Jose Luis Ricón has, in a series of posts, combed through the evidence on communist Russia's healthcare, GDP growth, and food consumption.

On healthcare, he concludes:

The Soviet healthcare system heavily underperformed most of the countries that we can use as meaningful comparatives. Relative to other countries that began from the same situation of poverty as the SU, its performance wasn’t better than the systems of those countries. After the 70s, health outcomes deteriorated, and the utter failure of the system became apparent.

Despite the high number of hospital beds and physicians, the Soviet Union wasn’t able to deliver better healthcare outcomes to its population, relative to developed countries, even though they made great improvements in the 20-50s era. This should make us wary of making hasty comparisons based just in some indicators instead of considering the bigger picture.

On GDP growth:

Given this data, the Soviet Union was the mediocre economy economists say it was, not a healthy, growing, superpower. If the USSR had an impact in the world, it was due to its size, natural resources, population, and strong military, not because it was more productive than other countries.

And on food consumption:

Was Soviet caloric intake higher than the US’?

No. In saying this, I’m saying the FAO is wrong, and that Robert Allen, who based his calculations in FAO data (and used their multipliers), didn’t notice. To say this, I had to go through a full literature review, and I come to this opinion. Before reading my post, you were totally justified in believing that caloric intake was higher. Not anymore. Unless some FAO official tells us why did they used their coefficients, that seem to go against the Sovietological literature.

Go read the whole things!

Can we stop this nostalgia for manufacturing jobs please?

We're told, endlessly, that we must do more manufacturing here in Britain. The underlying argument being that manufacturing jobs are good jobs, that they pay well, and that given that we'd like to have more well paid jobs therefore we must do more manufacturing. This argument is really just evidence of the ghastly conservatism of large portions of the British commentariat. For the truth is that the marginal manufacturing job is not well paid.

OK, so these figures are from the US but the same basic story will be true here too: Recent research by the National Employment Law Project (NELP), however, found that manufacturing production wages now rank in the bottom half of all jobs in the United States. In decades past, production workers employed in manufacturing earned wages significantly higher than the U.S. average, but by 2013 the typical manufacturing production worker made 7.7 percent below the median wage for all occupations. During the same time period productivity in the U.S. manufacturing sector increased at a rate one-third higher than in the private, non-farm economy overall. The median wage for production workers in the manufacturing industry in 2013 was $15.66, with 25 percent of these workers earning $11.91 or less.

The actual figures themselves can be checked in this table here.

There are of course very well paid manufacturing jobs: just as there are very well paid services jobs. But the marginal manufacturing job pays less than the average wage. Meaning that if we expand this sector, move people into it, then we will be lowering the average wage of the country. This is also known as making us all poorer.

We could argue two different ways about why this is so. One would simply be that there's people half a world away willing to do those manufacturing jobs for £1 an hour. That inevitably puts pressure on whatever anyone is willing to pay labour here. The second would be that we appear to value the marginal production of more services more than we do the marginal production of manufacturing: thus we are made richer by having more of those services.

But whichever argument we use to explain it it is still true that the marginal manufacturing job these days is not a well paid job. Thus we're not going to increase the number of well paid jobs by increasing the amount of manufacturing we do.

Who has actually gained from globalisation?

An interesting restatement from Branko Milanovic of his earlier work on who has actually gained from the process of globalisation. In effect, absolutely everyone except those on around and about less than median income in the already rich countries as that chart shows. Or, in more detail, it can be seen here.

Real incomes more than doubled between 1988 and 2011

That's globally of course, but that's a vast improvement. 

...it is still the first time since 1820 that global inequality is deemed to have gone down..

For those that worry about inequality that is also a vast improvement. It seems there really is something to this neoliberal globalisation thing then. In detail:

...but whatever adjustment one does, the essential features –the supine S shape—with the peak around the global median and the trough around the 80th -90th global percentile, remain. It is precisely the growth in the middle, fueled by the resurgent Asia, and the quasi-stagnation of incomes around the 80-90th percentile of the global income distribution where Western middle classes are, that have attracted most attention. 

It isn't quite true that "middle class" bit. Not in the English sense that is, although it might be true in the American. It is really those on less than median incomes in the rich countries, that 80th to 90th percentile. And it's worth noting that they have not become worse off in any absolute sense. Sure, their relative position has declined, given the large rises in income of those both below and above them in the income distribution. But their absolute position hasn't changed at all: that's actually the thing being complained about.

We have a word, or phrase for this. If we're able to make someone better off without making anyone worse off then this is a Pareto Improvement. And Pareto Improvements are thought to be a good thing. And what we've managed to do with this neoliberal globalisation stuff is make 90% of humanity better off, 10% no worse off even if not better off. It's thus, quite possibly, the largest Pareto Improvement ever. And thus, of course, this neoliberal globalisation is a good thing. Even, a Good Thing.