The Waitrose vs Lidl divide

Apparently there is now a divide in the Tory Party, one characterised by an adherence to the Waitrose, or Lidl, principles. We think this an excellent manner of describing the rift and one reason we do so is that it makes the answer so obvious:

There’s a new divide in the Conservative party: Waitrose or Lidl? But it’s not about which supermarket you shop at. It’s how you view a potential trade deal with the US.

As talks get under way across the pond, the cabinet is split between those who wish to prioritise British farmers and those who want their constituents to benefit from cheaper produce on the supermarket shelf.

This isn’t a rehash of remain v leave. Instead it’s about which part of the Tory voter coalition gets priority treatment: traditionally Tory rural constituencies or the post-industrial, “red wall” seats that the party won for the first time last December.

For those not entirely up with the details of the British class divide Waitrose is somewhere along the spectrum to Whole Foods in an organic, cruelty free and nicely fashionable sense, Lidl toward Dollar General and the pile it high and cheap form of retailing.

Or, as it is being used here, Waitrose is nice and kind to producers - in that fashionable sense - at cost to consumers, Lidl prioritises the interests of consumers. And that is the central question over the subject under discussion. Free trade puts the consumer first and protectionism pampers the producer by making everything more expensive to buy, consume or eat.

Now that we’ve got it laid out this way the answer is, as we say, obvious. For we have the example before us of the British retail scene - both Waitrose and Lidl thrive and survive. Those willing to hand over the money to boost their ethical concerns get to do so and do do so in their millions. Those who don’t don’t and also don’t in their millions. The only people unhappy with this outcome are those who would impose their own preferences on others but given that they’re anti-liberty we, as liberals, can ignore their desires.

That is, the solution to this dilemma over free trade is that there is no dilemma. For free trade allows both groups to do as they wish and not free trade does not. Therefore free trade it is then.

Establishment economics turns out to be wrong. Again

When one of the leader writers for The Times gives us his considered views on matters economic we can - and should - assume that this is the establishment talking to us. This is what those who, in general, run the country actually believe. That it’s wrong is somewhat disconcerting although it does aid in explaining why we’ve such problems with the way the place is run.

So it is with Oliver Kamm and his views on the minimum wage:

Finally, minimum wage legislation in Britain, where the price of labour has a floor, is widely regarded as a success, as labour markets are far from perfectly competitive. Big employers have a degree of market influence that enables them to pay wages below the equilibrium price. They can afford to pay higher wages without increasing unemployment.

This is the monopsony argument. And, if it were true, it’s a reasonable argument in favour of a minimum wage. It is widely believed, in that establishment, that it is true. But it ain’t. We have good evidence that it ain’t too:

The first rule of economics, of course, says that if you raise the price of something, you’ll reduce demand. And this means shorter hours and job losses for some of the low paid.

The Low Pay Commission pretends this won’t happen. Its chairman Adair Turner says: “Our analysis suggests that previous upratings [to the minimum wage] have largely been absorbed without adverse effects.”

Can I give Mr Turner some advice? Try reading your own report matey.

In particular, appendix 3, which starts on page 213 of this pdf. It contains a survey of employers who were affected by the rise in the minimum wage in 2003. It shows that: 37 per cent of them cut staffing levels, whilst only 4 per cent raised them; 31 per cent cut basic hours worked whilst 3 per cent raised them; 28 per cent cut overtime hours; 81 per cent said their profits fell; and 63 per cent said they raised prices.

This, of course, is exactly what basic economics would predict. It corroborates this research, which shows that where the minimum wage bites hard – for example in care homes – it does reduce labour demand.

Which raises the question: how could anyone ever have thought otherwise?

The general view - among the people who matter, that establishment - about the minimum wage is that it does not harm employment prospects, that there is no cost to it. This general, establishment, view is wrong.

Which is, of course, why that minimum wage is driven ever higher as the people who make that decision have convinced themselves that there is no cost to doing so. There is a cost, it’s carried by ethnic minorities, the young, the untrained. But as none of them are part of the establishment perhaps that wouldn’t change the policy even if our rulers knew about it. It’s left to liberals like ourselves to point out the error.

Cher M. Barnier - that's not for you to decide Matey

Michel Barnier, the European Union’s chief negotiator on matters Brexit, has declared that Britain should not remain the wholesale financial market for Europe after that Brexit:

London should lose its status as a European centre for financial and legal services after Brexit, Michel Barnier has said.

This is a fundamental misunderstanding of why markets exist, who determines that they do and the role of politicians in where they are.

As you can see the statement is that an unelected bureaucrat should decide where people transact. Or, to give a slightly less objectionable reading, that those doing the ruling should decide upon who may transact where. Which isn’t in fact how these things do work.

Markets arise where the people doing the transacting desire them to be. The reason the wholesale financial markets are in London is some mixture of historical happenstance, clustering, the use of the Common Law as the basis of commercial practice, language and however many other things you want to point at. Rulers shouting that it shouldn’t be so won’t have much effect on that.

We’ve also tried this twice now - there have been two great episodes of economic globalisation, up to 1914 and up to today. In both Germany seemed to end up doing the heavy industry and London the financing. Two out of two isn’t a proof but it is indicative of it being more than just happenstance alone.

The important thing here being that where a financial - just as with any other - market is isn’t in fact something that’s decided by anyone, bureaucrat, politician or ruler. It’s something emergent from the decisions of millions and tens of million of people all doing their own thing. Demanding this and that doesn’t work, isn’t a decision for any individual to take.

Money alone won’t get us far with sorting out social care

Most contributions on the social care debate in Britain focus on how the sector needs more money. That is not wrong. The care of elderly people, and younger people with physical disabilities or mental health and learning difficulties, has long been regarded as the poor relation to the National Health Service. 

But in our new report, Fixing Social Care, we argue that money alone won’t get us far, because the whole social care delivery system is broken. Spending more money is like pouring more fuel into an engine that has already seized up.

There are 400,000 people in residential homes—more than twice the number in hospital—and thousands more who get care services delivered to their own doors. Most homes are independent, though some of their clients are funded by the local authorities, who also maintain some residential homes of their own. 

But most homes to which local authority clients are sent are outdated and substandard. Some are converted hotels, with narrow corridors, stairs and poky rooms without ensuite bathrooms. Meanwhile, the ageing population continues to grow. Plainly, a massive building programme is needed. 

Likewise, the services that local authorities deliver to people’s homes are patchy and poor. Families often hire their own carers to fill the gaps. But few of those have any worthwhile qualifications or training.

People have talked about rolling social care into the National Health Service. That would create an unmanageably vast monopoly. We need exactly the opposite—new partnerships with the private sector and the public to rebuild our crumbling homes, make social care insurance affordable, and to create a sustainable system that actually works.

Read Dr Eamonn Butler and Paul Saper’s paper via the link below:

A strange little note on Nigerian health care financing

The Guardian tells us - with the usual shock! horror! - that only 5% of the Nigerian federal budget is allocated to health care:

Nigeria currently spends less than 5% of its federal budget on health.

Compare and contrast to where the British government spends some 8 or 9 % of everything - of GDP not just the budget - on the NHS. Which is to miss the meaning of a rather important word there, that “federal”.

The Nigerian system allocates functions to different levels of government. As we do of course, local authorities here don’t run the Army and do run social care, it’s the same idea even if the distribution is different. If this is to be believed then in that Nigerian system the federal government is responsible for teaching hospitals and teaching hospitals only. The rest of the health care system is handled at lower levels and, presumably, lower level budgets.

You know, like Denmark where it’s regional and communal (ie, of the commune) taxation that deals with health care, or Sweden, where it’s largely the county.

We are not, just to be clear, defending the Nigerian government, its practices nor its budget. Rather, we’re pointing out that foreign countries are like the past, they do things differently there. We cannot, let alone should not, understand what Johnny Foreigner is doing simply by referring to our own methods of achieving the same task or goal. This about Nigerian health care spend is only a trivial exemplar - the point stands and is of hugely wider application.

Time to scrap the scrappage idea

The idea of a car scrappage scheme isn’t a good one to start with. Offering some vast sum in subsidies to bring forward by some months the replacement of the car fleet simply doesn’t make sense in the first place. We have evidence of this from the last couple of times this was tried.

Bad ideas do have a life of their own, obviously, so it’s being suggested again:

A scrappage scheme offering motorists up to £6,000 to trade in old petrol or diesel cars for a new electric vehicle would do little to bolster British carmakers, experts have warned.

The plan, which is being considered by Prime Minister Boris Johnson as he seeks to rev up the automotive industry following a lockdown sales collapse and a run of redundancies, would do little to help the UK's biggest carmaker Jaguar Land Rover.

JLR's only all-electric car, the I-Pace, is built in Austria by contract manufacturer Magna, meaning pumping UK state funds into the proposal would do little to save British jobs.

It is possible to advance the argument that it is necessary to stimulate demand from British factories by dunning British taxpayers. We don’t agree but it’s possible to advance the case.

It’s also possible to advance the case - again we don’t agree - that it’s worth dunning the taxpayer for some vast sum in order to bring forward the replacement of the fossil fuel powered car fleet by one electric by some few months at some vague benefit to the climate. It’ll be a trivial benefit and the resources can be deployed to better effect but the case can be - for it is being - made.

What isn’t possible to is try to use both excuses - sorry, justifications. If the desire is to boost production of British factories then it cannot be for electric cars as we don’t make any. If it is to be about the environment then it can’t be about British production.

Which is a bit of a problem really as the climate change justification on its own is far too trivial to support the subsidy. Of course, we think the boosting British production argument is too trivial too but everyone will agree that £6,000 and up as a subsidy to foreign car buying - however green - is ridiculous.

Scrappage schemes are a bad idea in themselves but this one is a real stinker. Don’t do it.

Government's not good at complicated things

This is one of those little problems with the very idea of government. For one of the things we use it for is to deal with those problems that are too complex for us simpler souls to either understand or deal with individually.

Well, OK, but for government to be that solution it is necessary that government be good - or at least better than we are - or even effective at doing those complex things. This not being something greatly in evidence:

The Government’s flagship passenger quarantine scheme risked descending into chaos after even a Home Office spokesman admitted it was “very hard to imagine how it would work in practice”.

Almost all travellers arriving in the UK from Monday are being threatened with fines if they fail to fill in an online form at ports of entry and then decline to self isolate for two weeks.

But according to a leaked Home Office document seen by the Telegraph, there is no method for Border Force officials to ensure if details submitted are ‘genuine’ and fines for inaccurate entries will only be issued if they are ‘manifestly false’ such as claiming you are called ‘Mickey Mouse’ and reside at ‘Buckingham Palace’.

All rather plans of mice and men.

Much else that has been recently done - say, masks didn’t work, do work, shouldn’t be used or should be but by medics only, are now compulsory and so on. It’s the ability to outwit a damp paper bag that is in doubt here. Meaning that sure, we humans do face complex problems and we do have to deal with them as best we can. It’s just that government isn’t often the way to do so.

We know we've said this before but they're still not grasping the point of trade

This is not a point specific to the shadow environment secretary, nor even to the Opposition. Far too many across the political spectrum manage to get this point wrong.

Luke Pollard, the shadow environment secretary, said: “It is unacceptable for the government to allow our high food standards to be compromised and our farmers undercut in any future trade deals.

The entire point of trade is to undercut the domestic producers. Just as the point of having market entry to to enable people to undercut extant producers. That’s all entirely the point of the activity.

What we call “trade” just being the extension of markets across national borders.

Imagine, just imagine, that there were one monopoly producer of some desired item. We’d all agree that it would be a good idea if other people were allowed to come in and start producing that item. Even where we wouldn’t - there are cases - we’d still agree that the consumer would benefit from such competition. The producers might not like it, they might even be worse off as a result, but consumers would gain.

This idea of trade is simply extending the same logic to what can be produced by foreigners. And the results are the same too. Domestic producers might not be very happy about it but consumers will benefit.

That is, the very point of the process concerning trade in food is to undercut those farmers.

Seemingly trivial but a useful warning on not believing The Guardian

As we all know believing Polly Toynbee on numbers, economics, tax, is unlikely to get us very far. She is a polemicist, a very good one, but polemics are’t quite the place to be trying to get facts or balanced worldviews.

So, this is not all that much of a surprise:

And the phenomenal share option taken by Ocado’s top executives amounts to £88m – while the pay ratio from boardroom to average staff wage is a staggering 2,605%, says the High Pay Centre.

Hardly staggering. As the High Pay Centre itself says:

An annual assessment of FTSE 100 pay packages shows that median pay for chief executives fell by 13% between 2017 and 2018. However, the average (median) CEO salary of £3.46 million a year is still more than 117 times that of the average (median) UK full-time worker earning £29,574.

That is, Polly’s claim is that that staggering pay gap at Ocado is less than a quarter of the FTSE100 average. Entirely true that this isn’t what she thinks she’s saying and we don’t expect better anyway. But it is a useful guide to how seriously we should take The Guardian on matters of tax, economics, even arithmetic. For they do have layers of editors, copy is checked before it is printed and none of them grasped the simple error here.

2,605% is 25 or 26 times (depending upon how you want to do it, more or of) which is indeed less than the 117 times that is normal. Yes, of course it’s an error but it’s the sort of error which is revealing of the knowledge of those making it. That then leading to us worrying whether they all understand this point they make:

Public sentiment has always strongly favoured clamping down on tax cheats and making the richest pay their fair share. Any companies profiteering from coronavirus will get short shrift: no better time for the Treasury to abolish avoidance and take in all the money that is due.

Abolish tax avoidance? Meaning, abolish people obeying the tax law, as it is written, as Parliament presumably meant it to be and as HMRC and the courts agree said law should be used? Why would we want to do that?

Or perhaps Polly and The Guardian don’t understand tax or the law just as they have problems with that arithmetic?

We wouldn't call this a radical idea exactly

Concerning Pablo Iglesias in The Guardian:

Spain rekindles a radical idea: a Europe-wide minimum income

As ever with the Podemos leader it’s less radical than it sounds. The idea is that each country sets a minimum income - probably 60% of median income - and if any income falls below that then it gets topped up. This is really just another name for Milton Friedman’s negative income tax and given that that is well over half a century old it’s not new nor radical. It also fails for the same reason Friedman himself realised his scheme would do so. It’s too expensive.

Things like universal basic income, minimum incomes and all that, they’re entirely possible. Even within the size of the current welfare state bill. It’s just that they’ve got to be basic, really, really, basic, for them to be affordable. Something like 60% of median isn’t affordable.

There’s also that point that a minimum income, as opposed to a universal one, plays merry havoc with incentives as the taper will produce fierce tax and benefit withdrawal rates as people approach that minimum income.

There is also this:

“But the fundamentals are similar,” said Iglesias, envisioning a system where each country would set out a minimum income based on its standard of living, with EU funds deployed to prop up the scheme.

While such a proposal would be likely to see a larger proportion of EU funds flow to countries such as Spain, Iglesias brushed off suggestions that the proposal could exacerbate existing north-south faultlines.

“I don’t agree that these kinds of measures are only beneficial to the south and not the north,” he said, arguing that all member states would benefit from protecting their most vulnerable and the resulting boost in consumer demand.

He’s asking that Germany - a shorthand for the richer Northern European countries - pay for this. Which really isn’t all that new nor radical at all, is it? It’s also, how shall we put this, unlikely to happen.