The Singapore on Thames question - Do you sincerely want to be rich?

Quoting Bernie Cornfeld might not be entirely appropriate for a free market think tank as much of his activity was over the edge of what even we think a free market should allow. And yet it is the correct question to be asking about this idea of Singapore on Thames:

If he wants working-class Labour votes the PM can’t promote the rightwing post-Brexit ideal of Singapore-on-Thames

Singapore’s GDP per capita, at PPP exchange rates, is some $57,700. That for the UK is some $39,700. for the avoidance of doubt here, PPP means we’ve already taken account of differences in the cost of things across geography. We’d rather like a near 50% uplift in our real standard of living. We’re pretty sure that most of the country, including those of the working class who generally vote Labour, would like a 50% uplift in their real standard of living. Actually, the only person we know of who thinks that a higher standard of living is a bad idea is Caroline Lucas.

So, the actual question to ask about the Singapore on Thames idea is “Do you sincerely want to be rich?” If the answer is yes then let’s get on with it, shall we? Just this time in a legal manner. As, obviously, Singapore has done.

Having sniped at The Guardian’s subeditors - they are responsible for sub-headers after all - there’s also a little point to have out with the paper’s Economics Editor, Larry Elliott.

Nor is it the case that there has been no state aid for the financial sector, just that it has been delivered in a less overt way. The Docklands Light Railway and the Jubilee line extension that link Canary Wharf to central London are either infrastructure projects or state aid, depending on your point of view.

Not really Larry, no. As your own newspaper has reported the Jubilee Line extension to Canary Wharf was funded by the landlords of Canary Wharf. As the Crossrail station there was also so funded. As the developers of Battersea power station into luxury flats also funded Battersea tube station. As, in fact, Hong Kong funds its entire metro system, from the land value uplift around the stations.

Hong Kong is, we agree, a different place from Singapore yet there really are things we can learn - even apply having learnt them - from these richer places out there in Asia. Like, you know, how to get richer?

ASI Forum will change your life — sign up before it's too late

This is important!

Saturday, December 7th will not only change your life. It will change the world.

That is when the people who will shape tomorrow’s world, including yourself, will see a glimpse of the future.

That's because Saturday is the ASI’s Forum at The Comedy Store in London, where we will explore the ideas for a better future. 

A world in which young people are well educated so they can achieve success. Flying cars make traffic jams as obsolete as the smog they generated. Young people can afford houses they want to live in.

Is this some Corbynist fantasy funded by money grown on trees? No!

It is the reality already happening if only more people had eyes to see it.

On Saturday you can.

Watch how a single tax trick boosts our wealth, how vigilance today will banish the would-be surveillance state, and learn how to penetrate the fake statistics to see the world as it really can be.

They say the best things in life are free. Forum is one of the bestest of the best and it isn’t. But where else can you put the future in the palm of your hand from just £5?

There are still some places, but only if you sign up NOW.

Don’t just sit there.

Do it!

What?

A day of talks from leading thinkers on the underappreciated ideas that explain and could help imrpove the world around us.

Who?

• Anthony Breach (Analyst, Centre for Cities) on ‘Homes on the Right Track – How Green Belt reform can solve the housing crisis and save our environment’

• Sam Bowman (Principal at Fingleton Associates and Senior Fellow at the Adam Smith Institute) on 'The Most Important Tax Cut You’ve Never Heard Of'

• Sophie Sandor (Documentary filmmaker) on ‘Education and The State’

• ...and many many more.

Where?

The Comedy Store, 1a Oxendon St, London SW1Y 4EE

The nearest tube station is Piccadilly Circus (Piccadilly and Bakerloo Lines)

When?

9.30am for 10:00am to 5.00pm, Saturday December 7th 2019

The arrival of the potato

Thomas Herriot, an astronomer, mathematician, ethnographer and translator, is credited with first introducing the potato into England from Colombia in South America on December 3rd, 1586. It was a fateful event.

The potato was a richer food source than grain. This was because grain stalks would collapse if the head were too heavy, whereas potatoes, grown underground, had no such limits. Not until Norman Borlaug developed short-stemmed grains in his Green Revolution, could cereal crops compete.

Farmers had previously had to leave half their fields fallow to allow the soil to replenish itself, but now they could grow potatoes on the fallow land. The result was an effective doubling of Europe’s food supply. The norm had been that city dwellers could survive lean times by having the wealth and facilities to store grains, but rural dwellers lived constantly on the edge of starvation. Now the potato gave them a calorie source that provided a cushion.

The Europeans copied the South American habit of growing potatoes on relatively poor soil enriched by guano as fertilizer. Guano was imported in bulk as the world’s first intensive fertilizer, and launched the fertilizer industry. When the Colorado beetle also entered Europe to prey on the potato crops, farmers discovered that a form of arsenic (originally found in green paint) was effective against them. Suppliers competed to develop ever more potent arsenic blends, and began the modern pesticide industry

Not everyone took to the potato. The Enlightenment philosopher Diderot was less than enthusiastic in his Encyclopedia. He wrote: “No matter how you prepare it, the root is tasteless and starchy. It cannot be regarded as an enjoyable food, but it provides abundant, reasonably healthy food for men who want nothing but sustenance.”

A problem was building, however, in the widespread reliance on a single crop that lacked genetic variety. The South Americans used many different variants, but the Europeans did not. Theirs was a monoculture vulnerable to pests and parasites. Ireland was particularly exposed because the high caloric yield of the potato had enabled land to be split into smaller parcels of land, each of which could just support a family on potatoes. About 40 percent of the Irish ate no other solid food. The same was true of 10-30 percent of people across a huge swathe of Europe stretching from Ireland to the Urals in Russia.

Disaster struck in the middle of the 19th Century with the appearance of Phytophthora infestans, or Potato Blight. It wiped out up to half the crop in Europe, devastating Ireland the most. A million or more died there of starvation, and two million more migrated, mostly to the United States. This represented a loss of a third or more of the population, which never recovered. Ireland today is the only European country with a population smaller than it had 150 years ago.

The lesson has been noted, and although today there are monocultures in some crops like grains and bananas, where the most successful strains are widely cultivated, other varieties are kept in reserve, ready to be deployed if the dominant strain becomes vulnerable to pests.

The potato brought sustenance that ended the recurrent famines that had plagued Europe, but it taught a lesson about avoiding reliance on a single strain of a single crop. Europeans learned that lesson the hard way.

If only the Fair Tax Mark knew what they were talking about

The Fair Tax Mark wants to tell us all that the Silicon Valley giants aren’t paying enough in tax. Their analysis rather failing on two technical points which they, as self-declared experts in taxation, should really know about. Plus, obviously, the economic point that we value organisations producing things for the value we place upon their production - defined as our value in the consumption of them - not how much tax they pay.

That last will obviously not penetrate their tutti nello stato mindset but the two technical points do still invalidate their analysis:

The big six US tech firms have been accused of “aggressively avoiding” $100bn (£75bn) of global tax over the past decade.

Amazon, Facebook, Google, Netflix, Apple and Microsoft have been named in a report by tax transparency campaign group Fair Tax Mark as avoiding tax by shifting revenue and profits through tax havens or low-tax countries, and for also delaying the payment of taxes they do incur.

The first technical point is that the thing being complained about has already been solved. By President Trump in fact. There was an oddity in US corporate tax law - foreign profits were only taxed in the US if they actually came onshore in the US. Thus, if by some clever book-keeping, profits could be parked outside the US and yet tax free from other jurisdictions no taxes would be charged. This didn’t do much good in the long run as such profits could not, cannot, be paid out to shareholders without coming onshore and thus being taxed. But that is what was being done and some $2 trillion - the figure varying dependent on who was asked to do the totting up - was stashed on varied Caribbean islands.

We’re all in favour of this of course but the law has already been changed. Part of the Trump tax changes was that, repatriated or not, those profits are subject to US taxation. There are no pots of entirely untaxed corporate profits any more. The problem being complained of has been solved, by a Republican to boot.

The second technical point is that they’re doing their counting wrong. Something of a distinct problem for people attempting to do that beancounting.

The report finds that there is a significant difference between the cash taxes paid and both the expected headline rate of tax and, more significantly, the reported current tax provisions.

You cannot - usefully at least - compare cash taxes paid with expected taxation because corporation tax is due in arrears. The amount of tax for the financial year 2016 is actually due in the financial year 2017 and so on. When companies are growing fast, something we’d agree the SV Six tend to do, this means that there always will be a low tax rate for we’d be comparing tax paid for 2016 with tax due for 2017, that latter being a much larger sum. It’s even possible to test this. When the profits stutter - as has happened to at least one of the companies - then the tax rate rises substantially as the tax payment for the earlier, more profitable, year is handed over in one where the tax due at headline rates falls.

It’s entirely true that we disagree with the Fair Tax Mark on everything, including the cuteness or not of kittens. But we do think it would be helpful if they were aware of the details of the subject under discussion and, just possibly, were able to count properly.

Gary Becker

On December 2nd, 1930, Gary Becker was born. One of the most influential economists of his day, he received the Nobel Prize for Economics in 1992. Much of his influence came about because he used the methods of economics to analyze human behaviour for the first time in areas such as family life, crime and sociology. As a professor of Economics and Sociology at Chicago, he was among the leaders of the so-called third generation of the Chicago School.

In his “The Economics of Discrimination” (1957) he studied racial discrimination in employment, finding that employers who discriminate against minorities deny themselves access to low-wage labour and thus raise their costs and lower their profits. Employers who do not discriminate against minorities, on the other hand, increase their productivity.

His work on crime as equally trail-blazing. He examined how criminals assess rationally how far their likely gains might be offset by the possible costs of being caught and punished. In fact, criminals make economic calculations that can be altered if the chances of apprehension are increased, or the penalties suffered in consequence are raised.

Becker was one of the early and leading exponents of the notion of human capital. Milton Friedman described him as “the greatest social scientist who has lived and worked in the second part of the twentieth century.” Investing in a person’s education and training was similar, Becker said, to investing in new plant and machinery. It was something that, properly done, could be expected to bring returns.

He applied economic analysis to family activities, looking at their division of labour, the allocation of parental time to children, and the steps they gook to maximize preferences. He treated the household as if it were a business engaged in the production of meals, shelter and childcare. His work took economics deep into sociology and anthropology.

We knew him through the Mont Pelerin Society, where he served as its President from 1990-92, and found him always courteous and ready to discuss his ideas, especially with the young people attending its conferences as guests. In addition to his Nobel Prize, he was also awarded in 2007 America’s highest civilian honour, the Presidential Medal of Freedom.

He was a leader among the scholars who took economics out of its abstract academic towers and into the real world of homes and families, and into prisons and crime gangs. In doing so, he and his colleagues had a positive impact on the disciplines they entered, fields such as sociology, criminology, and demography, as well as on economics itself.

Those pensioner drug addicts

An interesting little commentary upon the nation’s drug woes here. The number of pensioners requiring treatment for the use of currently illegal drugs is rising substantially:

The number of hospital admissions for pensioners with drug-related conditions has increased sixfold in the past decade, NHS figures have revealed.

Charities have said that more older people living with addiction, and that the social isolation of older people can exacerbate problematic drug use such as opium, making it more difficult to recover.

Perhaps it is the anomie of late stage capitalism that is causing this. Although we have a rather simpler explanation:

“The challenges for older opiate users are that many of them have been using for years which makes it more difficult to recover as the behaviour has become so ingrained.

If people survive decades of taking opiates - and we’re at about the right time to find this out, given that the explosion in usage was about that generation ago - then drugs aren’t as harmful as it is often said they are, are they?

The very fact that we opiate users are surviving to be pensioners is another feather in the cap of the argument that we should deal with the problem simply by legalisation.

The start of Stalin's Great Purge

It was on December 1st, 1934, that a gunman burst into the offices of Sergei Kirov, the Mayor of Leningrad (now St Petersburg) and shot him dead. Stalin used the assassination as a pretext to launch his Great Purge of dissident Communist officials and any party members who did not toe Stalin's official line one hundred percent. In the show trials that took place in the late 1930s, over a million people were put to death after a sham judicial process.

Although Kirov was loyal to Stalin, popular opinion at the time, supported by some later historians, was convinced that Stalin had personally ordered the murder fearing that Kirov's popularity was making him a potential rival to Stalin himself. When Kirov had been elected to the central committee earlier that year, he had only three votes against, the fewest of any candidate, while Stalin had 292 votes against.

What was new about the Great Purge that Stalin now instigated was that, for the first time, members of the ruling Communist Party featured prominently among its victims. Most held party offices of some kind, but the purge of the party was accompanied by a purge of society. Many Bolsheviks, famous for their roles in the 1917 Revolution, were seized and convicted in show trials, expelled from the party and then executed. Many of them "confessed" to being involved in Kirov's murder.

Western left-wing journalists, of the type Lenin had called "useful idiots," covered the trials and reported them as open and fair. What they did not know then, but what is now known, were the methods used to extract the confessions on which the guilty verdicts depended. They included torture by repeated beatings, simulated drownings, forcing prisoners to remain standing, depriving them of sleep for several days, and threatening to  arrest and execute their families.

The whole process was brilliantly conveyed in Arthur Koestler's "Darkness at Noon," which ends with Rubashov, the fictional Old Bolshevik, making a full and public confession after torture to crimes he did not commit, and doing so out of a lingering loyalty to the party. The book ends with his execution.

A vast series of closed trials was held in addition to the show trials. These were of top Soviet military leaders, tried in 1937-38, and executed. This was accompanied by a massive purge of the Soviet armed forces, an event which helps to explain the initial poor performance of Soviet defending forces when the Germans invaded in 1941. Their leadership had been eliminated, and their morale was low in consequence. It took the anvil of war to renew both of these.

Many dissidents opposed to Stalin who had fled abroad were hunted down and murdered by killer squads sent to eliminate them. Leon Trotsky was killed in Mexico. No-one was safe. Robert Conquest refers to this period as "The Great Terror," (the title of his book on the subject), deliberately calling to mind the Reign of Terror that gripped the French Revolution.

It is possible that Stalin was seeking to expunge all forms of Communist thinking except for his own narrow party line, but there is a good case for supposing that he was by then totally paranoid, corrupted by the absolute power that has always characterized communist regimes. The leaders think the cause is so right that it justifies anything to sustain it, even brutality, torture, and mass murder.

The quite appalling level of private contracts in the NHS

We’re told that there’s some terrible amount of privatisation of the National Health Service going on. We agree:

Private firms have been handed almost £15bn in NHS contracts over the past five years, figures show.

The value of contracts given to non-NHS providers, mainly profit-driven firms but also including some social enterprises, has soared by 89% since 2015, from £1.9bn to £3.6bn a year.

Around about and roughly enough the NHS costs £150 billion a year. Thus some 2% of the service is currently being outsourced. We agree that’s appalling, entirely terrible. It should be much, much, more than that.

It is of course Ronald Coase who provides us with the basis here. Why should some things be done within the one organisation, on a command and control basis, others be done using a nexus of contracts with independent market actors? The answer is, well, it depends. There are costs either side, benefits either side and what is the optimal balance depends upon, well, it depends, upon the specifics of what is under discussion.

It also depends upon the state of technology at any one time. The major cost to the outsourcing is what are called “transaction costs”, the price of organising those independents into working with the core organisation. The major technology of the past 30 years has been the internet, the very thing which massively reduces transaction costs. To pluck just one near random example out of the air the reading of, diagnosis from, radiology can now be done online from India. Something not even feasible back then, let alone efficient or optimal.

That change in technology, that lowering of transactions costs, means that rather more should be outsourced these days. Given the resistance of any large organisation to, umm, organisational change we would all expect the NHS to be lagging behind such opportunities to increase efficiency. We don’t just expect it of course, we here insist upon it. 2% of everything is far too small an amount to be outsourcing.

Actually, when we come to think about it, we’d insist that more than the marginal 2% of absolutely anything should newly be outsourced given that technological change. Our own outsourcing of part of our blog to Portugal as an example….

Winston Churchill

On November 30th, 1874, a remarkable man was born as Winston Churchill came into the world at Blenheim Palace, ancestral home of the Dukes of Marlborough. Although the family was wealthy, he himself was not, and at many times in his life, especially in the wilderness years of the 1930s, he supported himself by his writing skills, and received backing from patrons who supported his stance.

He gained early fame as an army officer and war correspondent, including an escape from imprisonment by the Boers in South Africa. During his political career he represented five constituencies, first as a Conservative, then as a Liberal, and finally as a Conservative again.

He was out of power and influence in the 1930s when the UK’s policy was one of appeasement to the growing might of Nazi Germany. Churchill warned of their menace and called for rearmament to resist the threat they posed. When war did break out, Churchill was made First Lord of the Admiralty, a post he had held in the First World War, and became Prime Minister in May, 1940, when Chamberlain lost the support of the House and resigned.

Churchill’s enduring fame is as war leader, the man who stubbornly refused to surrender against superior forces, and who ultimately led his country to victory alongside its Allies. He did many things wrong in his political life, and made many wartime decisions that led to disastrous outcomes. But he did one thing right that made up for all the wrong ones. He held out against the unspeakable evil that was Nazism, and saved the world from what he called “a new dark age.”

Many accolades were bestowed. He was reportedly offered the Dukedom of London, and would have been the first non-royal duke since Wellington. He declined, saying there was no higher honour than serving in His Majesty’s House of Commons.

He was awarded the Nobel Prize for literature for his “History of the English-Speaking Peoples.” It was almost certainly a reward for winning the war, but they could hardly have given him the Peace Prize as a war leader.

A major poll conducted by BBC2 in 2002 sought to establish whom the British thought was the greatest Briton in History. Despite heavyweight candidates such as William Shakespeare, Isaac Newton and Charles Darwin, Churchill topped the poll.

He showed what character can achieve if one is prepared to buck the trend and swim against the tide, holding out for one’s convictions with tenacity. He gambled and won the big one, despite losing several of the smaller ones. The appreciation for him was never stronger than on VE Day, when he joined the King and Queen on the balcony at Buckingham Palace. Earlier that day he had told the cheering crowds, “In all our long history, we have never seen a greater day than this.” He led the nation in making it happen.

How much do we owe the rest of the world over climate change?

That we might owe nothing is a reasonable enough answer. But start by agreeing with the set up here from the IPPR:

The UK contribution to the UN’s climate fund should balloon to £20bn by 2030 if it plans to pay a “fair share” to helping tackle the global climate crisis, according to new research.

A report from the IPPR thinktank says the UK should “shoulder more of the burden” of the global climate crisis because of its major contribution to the world’s rising carbon emissions.

The left-leaning thinktank found that the UK is responsible for the fifth largest contribution of carbon emissions in the atmosphere since the 1750s. The UK is behind only the US, China, Russia and Germany in terms of its global climate impact.

The IPPR called on the next government to radically increase the money it spends on helping to fund green initiatives by almost threefold to match its contribution to the climate crisis with funds to help tackle the environmental breakdown.

Do we owe £20 billion a year?

Think on what the actual climate change solution is - assuming that we still agree with the IPPR just for the sake of the argument. It will be having a method of powering an industrial civilisation without the use of fossil fuels. And what is it that we in the UK have been doing this past couple of decades? We have been driving ourselves into fuel penury by subsidising research into and the scaling up of solar, wind, tidal and so on energy sources. We’ve already been giving that is, in the development of the required technologies. Rather than giving money other governments to splurge upon the problem.

Or, as we might put it, yes, we see that begging bowl but thanks, we already gave at the office.