No, really, you don't get to do that. Tsk, tsk.

The current economic slowdown is going to increase poverty we are told:

Million more Britons pushed in to poverty by Christmas, warn charities

That rather depends upon how you’re measuring poverty. By the usual standard, relative poverty as being in a household on less than 60% of median income, it’s highly likely that poverty will fall. For median income is certainly going to fall while the incomes of those at the bottom - being largely based upon benefits that aren’t going to fall - won’t. We’d not insist that this relative poverty will fall this year, not insist, but it is possible and we’d argue that highly likely.

So, what other measure are they using here at the IPPR?

200,000 more children are among those expected to be below pre-virus poverty line, as job losses hit family incomes

Ahh, no, you don’t get to do that, that’s a bad faith argument, one tantamount to casuistry. For that is a switch from a relative measure of poverty to an absolute one. Poverty of under 60% of household income now is a relative measure. The use of what was under 60% of household income at some point in the past is an absolute measure. That’s actually what the official and current definition of absolute poverty is, under what 60% of household income in 2010/11 was.

The importance of this? Britain was less unequal in the 1970s, there were fewer people under that 60% threshold then. But there’s near no one at all today under what was 60% of median household income in the 1970s. By that absolute measure of poverty it has been entirely vanquished. Even the use of an absolute measure from only a few months ago is still to be using an absolute, not relative, measure.

Switching between the two measures just because it’s convenient for your argument is that tantamount to casuistry. For the IPPR does more normally use that relative measure, not an absolute. Tsk, it’s really not something anyone even pretending to be serious should do.

Nick Dearden's at it again

Nick Dearden is the director of Global Justice Now and, as ever, he’s calling for the radical overthrow of international capitalism and all that. Also as ever he’s missing the actual point of how the system works today.

Yet if his government’s actions are anything to go by, it seems more interested in siding with big pharmaceutical corporations than turning vaccine research into a genuinely collective endeavour......The last straw came on Friday, when the government refused to support a World Health Organization initiative to encourage countries to share research on coronavirus treatments and produce any final medicines patent-free. This would mean they could be distributed fairly according to need......Two weeks ago, British officials attempted to water down a resolution at the World Health Assembly to create a global “patent pool”, which would have encouraged the production of patent-free coronavirus drugs. Then, on Friday, they declined to support the new WHO initiative for pooling research......

And so on. Patents are horrible things, capitalists profiting from the poor and, and, abolish capitalism!

Entirely and wholly missing the point of what is going on. Knowledge, like what formulation of vaccine actually works, is a public good. This being a technical terms meaning terribly difficult for a private economic actor to profit from having made it. As profit cannot be made therefore private economic actors motivated by profit will not produce public goods.

So, we invent patents - in other areas copyright does the same job - so that profit is possible and thus private economic actors, motivated by profit, do produce them.

It’s entirely possible to think of other ways this might be done. Government could employ all the drug researchers and thus we get what government makes. Good luck with that if we’re to be appropriately cynical - PHE, given the track record on track and trace, might have something available in 2031. Being more idealistic, OK, perhaps charity, government, acting together, might produce something and then give that knowledge away for free.

Dearden though isn’t saying that. Instead he’s trying to insist that those private sector actors, motivated by profit, should be devoting their assets to this battle for free. Gilead, Moderna, anyone else with anything that might work, should take the hundreds of millions, billions, from their shareholders and make a gift of it to an adoring world.

Well, why would they? That being the bit that Dearden is missing - deliberately perhaps, through ignorance possibly. The entire idea of patents is that we get all that expertise and effort from all those people in those drug companies. Because we’ve already agreed - in our definition of a public good - that without some such action we’ll not get all that effort and expertise addressing the problem we face, the desire for a vaccine.

Dearden is vituperating against the very solution. He wants to abolish the system that produces the cure. Which really doesn’t sound like a good way of gaining justice, now or in the future, global or not.

Note that it’s even possible to do what is being demanded here, confiscate all those patents and declare them free to all. The problem there being that no one will work on the next problem we might face….

You say ‘veggie sausages’, I say ‘Quorn tubes’. Let’s call the whole thing off!

For over a year now, hungry snackers have been tucking into Britain’s (second) favourite sausage roll. With 96 layers of crumbling puff pastry, Greggs’ vegan sausage roll has stirred up a media firestorm. With help from odious adversaries like Piers Morgan, plant-based meat substitutes have caught the gaze of the public eye. So far, it hasn’t blinked.

Much of this surge in meat alternatives is a result of an explosion in consumer awareness about the environment. Britons are increasingly mindful that livestock production degrades the planet. The evidence wholeheartedly agrees.

Inevitably, the methane-belching meat industry feels threatened by the unfamiliar competition. And, as always when bloated political institutions can pontificate limitless regulations, cronyism ensues.

Among the most pernicious examples of this are the regulatory squabbles over whether the substitutes should be allowed to don the labels of steak, sausage, escalope, burger or hamburger. Proponents argue that these labels cause customer “confusion”. This semantic policing has already engulfed France and is creeping into the EU and the United States too.

What should replace the “confusing” labels? “Veggie discs”, ”Quorn tubes”, ”soya slices” and “seitan slabs” are at the top of the EU’s list. One might reasonably ask why, if the EU’s decision was uninfluenced by nervous meat companies, the suggested labels sound so unappealing. The EU has nothing to hide in this regard. In one decision regarding plant-based milks” (Verband Sozialer Wettbewerb eV v. TofuTown.com GmbH), the EU created new regulations built to inhibit “competing substitute products”.

Of course, courts in the EU and U.S. provided no evidence of any customer confusion. “In all of these battles”, writes law professor Steph Tai, “what we see is a fight not for consumer certainty over particular terms, but for access to certain commonly understood places in our diets”. Humans have used non-literal analogies to describe food for as long as we’ve been eating it. “[i]n Mandarin, mianjin, or wheat gluten, means literally ‘wheat meat’”, writes Tai. “Similarly, the Bengali word for jackfruit translates as ‘tree mutton.’”

If Britain’s EU negotiations wind up with our supermarket shelves stocked up with “soya slices”, it would be a tremendous shame. In any case, Britain should learn from the EU, U.S. and France that handing unfettered regulatory jurisdiction to the nanny state breeds nothing but illiberal cronyism. By reducing state regulatory power, we thereby take back control from big business, and give it back to the consumers.

Amos Wollen is the winner of the under-18 category in our Young Writer on Liberty 2020 competition.

We can't help but think this is rather missing the point

A piece in The Guardian extolling those who stepped up to aid during the recent unpleasantness. People who volunteered to call the lonely, deliver prescriptions, check on neighbours, provide food to those without incomes and all manner of those little platoon actions.

You know, that reminder that by and large we’re generally just plain good folk. Things that need to be done get done motivated by no more than the milk of human kindness and the knowledge that we are all in this together.

However, the second part begins to disturb, for it’s a list of the “support” that is to be given by government to these activities. Only begins to disturb for we’re quite willing to believe that some of the things done by volunteers or private economic actors are ripe to be put on a more organised, even governmental, basis. This has, after all, been historically true - we’ve no problem with the idea that the occasional street sluicing by the well meaning was replaced with municipal drains. So, to examine what is being voluntarily done to see what can be done better is just fine.

But by the end it all rather seems to go off the rails.

Lady Barran is the minister for civil society

The entire point of the very concept of civil society is that this is what we do without government, ministers or central direction. Meaning that we can just about imagine a member of the Lords whose job is to police the government’s, or the bureaucracy’s, interference with civil society - yelling “Don’t touch that you fool!” at anyone who offers “support” from the centre - but we find it very difficult to understand that we’re collectively employing someone whose job is to kill civil society by assimilating it into its opposite, the government.

To note that civil society is managing to take care of things is to recognise that we don’t need to change things in order for them to be taken care of. Why do we need a minister - unless this is their job, to keep repeating that hands off mantra - for that?

Quangos to bring UK economic recovery

A tango is a passionate dance for two, leading to procreation. A quango is an unelected body of people who tell everyone else what to do and/or spend our money. Past form indicates no aptitude for business, still less revitalising it. Yet Whitehall plans leaving it to quangos to boost the economy.

Key to recovery is our SMEs and start-ups. Large companies can take care of themselves although both large and small would be helped by low taxes, tax incentives and cutting regulation – easier post-Brexit. Two main initiatives have been indicated: increasing public sector funding of R&D from 0.55 percent of GDP to at least 0.75 percent and a new “London Transition Board”.

The government’s funding of R&D, i.e. potential economic drivers, is through “UK Research and Innovation” (UKRI), a quango formed to supervise ten others in 2018.  In 2018/19 UKRI distributed £6.4bn of our money on research and innovation through ten subsidiary quangos, £403M on staff and £484M on other overheads. Seven of the quangos are academic but the one most relevant to business (GDP) is Innovate UK.  The process for applying for business grants is dauntingly complex and, being “state aid”, governed by Brussels for another four years after the end of this year if transition is completed then. There are also 12 competitions to encourage particular sectors and a maze of other “funding opportunities”. The nub of it, if one perseveres that far, is that each application is scored, arbitrary box by irrelevant box, by three assessors and the highest scores get the money.  There should be only one test of a new SME; is it going to grow into a success?  Experts may be able to spot reasons why it will fail but almost certainly not why it will prosper.  Dragons’ Den provides a much better model: 15 minutes with the entrepreneur(s) will give more insight than any amount of boxes and paper.

Box ticking seems very reasonable, at least to the Whitehall mind, but it is not how the free market works. In the first of two personal experiences, we submitted a neuroscience research application to the relevant quango.  Two years later, it was refused on the grounds that the research was cutting edge (why was that a negative?) and would almost certainly fail.  By then we had achieved funding from elsewhere and a successful outcome.

The second example is Baileys Irish Cream, now world brand leader in its category. The CEO of our Irish company knew the Irish Treasury Minister who was desperately seeking increased exports.  Over a glass or two, he agreed that the export profits on an agricultural product would be free of tax for ten years if we could create a new one.  Baileys was conceived and judged by all and sundry, i.e. consumer research and the board of the parent company, to be a no hoper.  We had learnt by then that these were encouraging signals and success soon followed.  Baileys would not have survived the Innovate UK assessment process.

UKRI is not business oriented even when dealing with businesses. Dragons’ Den do not judge innovation until it has had some evidence of commercial success however small. They want to understand if and how the start-up will make money. “Return on investment” is mentioned just seven times in the 144 page UKRI 2019 Annual Report but only to do with pensions and financial technicalities on leases.  To a business person, investment and innovation are simply means to future profits – clearly an alien concept to UKRI.  There seems to be no tracking of the outcomes of grants made.  How many made money and survived?  How many failed? It would be interesting to know how the subsequent performance of successful applicants compared with those who were rejected but persevered nonetheless.  My money is on the latter. UKRI sees itself as Father Christmas handing out presents to the children who write the nicest Dear Santa letters.

Nor do the accounts distinguish grants given to purely academic from private sector commercial applicants, apart from noting that awards went to 2,647 SMEs in 2018/9 (p.137). The vast preponderance of UKRI “performance indicators” report support for academia and measures relevant to that such as the number of PhDs and journal articles. Of course some academics claim that building the country’s knowledge base subtly leads to greater wealth but UKRI makes no effort to justify that.  Within business, cash flow arises essentially from marketing, i.e. from the user/consumer. In my 20 years at London Business School, not a single marketing PhD student came from a British university.

It is tempting to suggest that the best contribution that UKRI could make to reviving the economy would be to close itself down. That will not happen but the private sector grant money could be divided between the 38 Local Enterprise Partnerships (LEPs, see below) and public sector funded by the universities that, in essence, it supports.

The other major quango-led boost to the economy is the London Transition Board (LTB). This follows the London Economic Action Partnership (LEAP) which was set up in 2017 and “spent £44m of public money in 2017-18, aiming to ‘identify strategic actions to support and lead economic growth and job creation in the capital’. By end 2018/19, £445M had been committed but it is difficult to distinguish economy-boosting expenditure from social improvement. The range of items supported and quango relationships is mind-boggling.

The LTB provides another, same-again, layer to that and will also operate in parallel with the London Recovery Board which “will plan and oversee the capital’s wider economic and social long-term recovery, developing a strategy and plan of action to reshape London to be fairer, more equal, greener and more resilient than it was before the crisis.” Enough already! 

One of the reasons governments foist these quangos on the economy is the lack of business experience in the Cabinet.  The last two Cabinet ministers with substantial business experience were Geoffrey Robinson, outed for lending money to Peter Mandelson in 1998, and Michael Heseltine who fell out with Margaret Thatcher in 1986.

Whilst this blog does dismiss quangos as a useful way for government to stimulate the private sector, there are other valid means beyond tax incentives and de-regulation, namely infrastructure.  The big banks could be arm-twisted to being more responsible and responsible to SMEs. As discussed in a previous blog, helping small business investors (angels) interact with new and small businesses has to be positive and so are tech hubs.  From early days in Italy to Silicon Valley, bringing expertise geographically together can spark surprising growth. 

Start-ups and SMEs are small and therefore local. In addition to the value of the grants, they carry a huge cost burden for those preparing applications and the quangos dealing with them. Each LEP could use the money it receives from UKRI and elsewhere to negatively tax funding by business angels, i.e. their investments topped up by 20 – 30% up to a maximum. LEPs are themselves quangos but their involvement would be limited to acting as conduits and central government could direct the funds to the LEPs most in need and who make the best use of the funding.  The angel receiving top-ups would be required to report by each SME after five years. There are lessons here for revitalising the north.  So, infrastructure yes, quangos no.

Close, nice try, but no cigar

There is an amusement in watching justification being built on the fly. One that’s being trialled at present is that all this concentration upon economic efficiency leads to an inability to respond to an emergency. Thus we should all agree to be more inefficient so as to be able to respond to an emergency like the coronavirus:

Coronavirus is our chance to completely rethink what the economy is for

Gosh:

The pandemic has revealed the danger of prizing ‘efficiency’ above all else. The recent slowdown in our lives points to another way of doing things

And this other way?

But there were also economists, such as the Englishman William Hutt, who went against the Keynesian consensus and pointed out that there were some things – fire extinguishers, for example – that were valuable precisely because they were never used. Having large stocks of PPE, underemployed nurses, or a lot of spare capacity in ICUs, falls into the same category. Idle resources are what you need in a crisis, so some degree of inefficiency isn’t necessarily a bad idea.

There is an element of truth here, of course there is. And yet which sector of the economy has just performed best? Where has that reaction to the current problems been absolutely stellar? That would have to be the supermarket sector. The entirety of the eating at work, eating out, sector closed overnight. All of that commercial supply system, thehowevermanycaloriesadayitwas, now needed to be redirected into the retail supply system, those supermarkets. There were stutters, certainly, and yet there’s been no actual shortage of anything. A shelf that’s empty until someone can get the lorry around from the depot is not what we’d describe as a shortage in this case - not given the experience some here have of the Soviet retail system.

Which part of the UK economy prioritises, measures itself near exclusively by, that efficiency? The supermarket sector with their just in time deliveries and all that.

That is, an organisation that is flexible can manage both that responsiveness and that efficiency. As we’ve just seen and as we’ve just spent a couple of months eating our way through.

Trying to manage a pandemic in a world of just-in-time production lines and precarious labour brings these issues into sharper focus.

Which is where we really do have to say nice try, close, but no cigar. Because the sector that relies most on JIT is the one that has done so superbly. Precisely and exactly because it is a flexible system, one designed to be able to respond in near real time to changes in demand and or supply - rather a feature of JIT systems.

The amusement? Labour that is not precarious is difficult to move around and retask, isn’t it? And labour which is precarious is, by definition, that labour that can be sent off to do something else as supply and or demand change. Workers only lightly attached to their current task is exactly what aids a system in being flexible to changing circumstances.

No, we’d not say that this justifies the precarity. But it is amusing to see someone claiming it as a constraint upon the necessary reaction to a pandemic when it’s actually part of the solution.

Come spend your year with us!

Almost a year ago today I had the incredible luck to google ‘Gap Year Economic Internships’ and find the ASI Gap Year page. And even more fortunately, just a day before the deadline as well. Feeling the impulse to go for it I sent off an application and quickly found myself in one of the most peculiar and enjoyable jobs I think I will ever have. 

If someone had told me what it would be like to work here before I started, I would not have believed them.

While my peers were slaving away in their local pubs to earn enough money only to bleed thousands on trying to escape coronavirus lockdowns after just two weeks in Australia, I was enjoying the metropolitan Westminster life complete with wine tastings, glitzy events and, most importantly, free drinks at the MoG. 

From meeting MPs to ‘giving comments to the press’ and even appearing on radio, my school friends could only look on with envy as the sum of their year amounted to cleaning up vomit in their local’s loo.  

While the perks are great, you also spend your time being productive both in output and personal development. Being part of the process of writing briefing papers will give you research and formatting skills necessary for success later at university. The opportunity to research and write articles will also allow you to explore your favourite niche political and economic topics which, even if they don’t give you a possible head start in your degree, will make you more rounded and informed about the world you live in. 

The combination of the confidence and skills you learn throughout this year will make you invaluable to future employers. 

ASI President Madsen Pirie often quips that ‘the question is not whether our gap year students are ready for the world, rather, whether the world is ready for them.’ 

So to spend a gap year having fun, gaining prized skills and earning some money at the same time, apply here now.

Abandoning inflation targets isn't the way to promote growth

Jim O’Neil is proposing something that doesn’t actually make sense. That the Bank of England should abandon its inflation targets in order to concentrate upon economic growth. The reason this doesn’t make sense is because it ignores the difference between inflation and growth in the first place:

One of Britain’s most prominent economists has urged Rishi Sunak to scrap the Bank of England’s inflation target to make economic growth its primary goal as Britain attempts a recovery from the pandemic.

Lord Jim O’Neill, a former Treasury minister who is understood to be in talks with the Government about the creation of a new state investment board for the North, called on the Chancellor to change the Bank’s remit to target nominal GDP instead of inflation. In an interview with The Sunday Telegraph, the former Goldman Sachs chief economist suggested the radical move would help engineer a V-shaped recovery from the coronavirus recession.

What we’re interested in is real GDP growth. The difference between nominal and real GDP growth is, by definition, the inflation rate. Inflation, above the rate that greases the wheels of relative price changes, being something that is harmful.

It’s fine to change emphasis, to say that we’d like NGDP to be rising, with some modest portion of that being inflation and the rest real growth, but that’s just setting the same target we already have. We desire maximal real growth with minimal inflation. But to say that we should abandon inflation as a target doesn’t make economic sense. It also doesn’t make political sense as inflation is very much easier to engender than real growth and do we really want politicians to be able to say they’re hitting the targets just by making everything more expensive for us?

Social care comes with a cost we should care about

Everyone agrees that social care has always been the poor relation to hospital care—starved of funds despite a huge surge in the elderly population. And it’s seen as unfair—hospital care is free to all, but families with savings must pay for social care themselves.

So, many people argue that social care should become part of the National Health Service and be provided free to everyone.

But this idea is utterly impractical.

Though much social care is already financed through taxation, most is delivered privately. That’s quarter of a million places in care homes 190,000 in nursing homes—plus all the care delivered to people’s doors. If the NHS took that over, it would be the biggest nationalisation since the 1940s. The compensation bill for care homes alone would be over £30 billion, the running cost would be over £5 billion a year, and the NHS would grow to 2 million employees. 

Nor does it solve the core problem that 80% of our care homes are old and no longer meet current standards—with narrow corridors and poky rooms without bathrooms. Reckon on another £20 billion for rebuilding. Would taxpayers be happy with that, when only a third of them will need any social care at all? Unlikely.

And if social care became free, millions more people would demand it. Like all those thousands who presently look after elderly or frail relatives at home. That addition to already growing demand would overwhelm the system. 

Universally free social care simply isn’t the answer. 

Of all the strange things it is possible to desire

We just think this is one of the truly strange things that someone could aspire to.

First, note that British popular music has indeed been wildly successful. Both as a business and in its primary function of annoying and being incomprehensible to anyone 5 years older than those currently making it. Secondly, note that this has come about through the chaos of entirely undirected personal and private effort. Markets that is, entirely free and bounded not just by no regulation but also no guidance nor even taste.

If British music has a soul, it resides in small venues. In hundreds of pub backrooms, grotty gig venues, DIY spaces and sweat-soaked basement clubs where lives are changed and, occasionally, history made. Alongside more established mid-sized venues, these places are talent incubators, providers of joy and a significant source of economic activity. More important, they also crystallise, if not trigger, profound cultural shifts – and have for almost 70 years.

From the Beatles at the Cavern or the Sex Pistols at the 100 Club, to dubstep focal point FWD at London’s Plastic People (RIP), or Optimo’s legendary Sunday nights at Glasgow’s Sub Club, we live atop a thriving, ever-mutating underground that shapes how the UK looks, sounds and is.

Anarchy in the UK being not just a number 38 chart pick by a popular beat combo but also an extremely successful business model. At which point, the bit we don’t understand in the slightest:

If government fails to intervene, far-sighted councils may water their own grassroots. The Local Government Association has objected to the taskforce’s lack of localism, and London mayor Sadiq Khan has pledged £2.3m to save, among others, music and LGBTQ+ venues. Could Preston or Sheffield steal a creative march on rivals such as Manchester? Will Manchester continue to fall behind cities such as Berlin, where public funds are supporting club culture?

True, all men kill the thing they love but who would be so enamoured with pop music to ask the government to get involved? Seriously, why the demand to destroy the model that has been so productive - in outrage even if not music - for the past 70 years?