If the TSB screws up then why does the bureaucracy get a chunk of money?

That there's been a monumental Mongolian clusterhuddle at the TSB over their computer systems does not surprise us all that much. For we know - as rather too few do - that the British banking system is built upon layer after layer of ancient computer systems. Some to many of which don't speak to each other. There's a good argument for doing what the TSB has tried to do, which is move over to one single system, one possibly using modern languages, modern architecture and even modern computing boxes.

Although, obviously enough, the argument is stronger if they'd managed to get the transition seamlessly right.

There is however one part of this story that confuses us immensely. Yes, we can see the clusterhuddle. But why does the bureaucracy get a chunk of cash as a result? 

 Both the Financial Conduct Authority (FCA) and the ICO said they were monitoring the situation. The watchdogs have the power to investigate and potentially fine TSB for a system failure or data breach respectively.

We can see the logic about the data breach. Not wholly sure we agree with it but we can understand that logic at least. But a fine for system failure?

 TSB’s botched IT “upgrade” has snowballed into a full-scale crisis, with up to 1.9 million customers locked out of their accounts for a sixth day, MPs demanding action and the bank facing a potential multimillion-pound compensation bill and regulatory fines.

Having botched it we're really rather certain that the TSB will lose a certain amount of custom. Somewhat amusing really, as once the transition is completed they'll be one of the few banks without a system held together by sealing wax and spit but there we go. Still, the punishment for a producer getting things wrong is right there in the marketplace already. So, why the fines?

Seriously, why should government - or more accurately, the regulatory bureaucracy - get cash because someone screwed up? What is the justification for fining someone for ruining their own business?

And what does this do to incentives? If the bureaucracy gets more money as people err then aren't they going to be hoping that people err? Even aiding them into error? 

The TSB is now worth some sum less than it was two weeks ago. Why do they have to pay government for that achievement?

As we've been saying, we need more markets in the NHS

Following the Darzi report we've one of those typical Guardian pieces just insisting that we not only shouldn't, but must not, change the essential structure of the NHS. An insistence which rather fails:

But dig a bit deeper and the arguments of the naysayers begin to crumble. They point to insurance-based systems – like those operated in the US and some European countries – as a solution. But the evidence is clear that these alternatives end up costing more money. The reality is that all advanced countries are facing similar pressures on health and care systems, and ours appears to be managing these as well – if not better – than many others.

These same sceptics say that our system is selling us short by failing to deliver the best possible care. But Lord Darzi finds that over the last decade – despite being the most austere period in its history – the quality of care delivered by our health and social care system has improved. Cancer survival rates are up. A stroke or heart attack is less likely to be fatal. People are more satisfied with the social care they receive.

This past decade is also when we've been inserting more market mechanisms into the workings of the NHS, isn't it? Sure, correlation isn't causation but we've certainly no evidence that more markets means worse, do we? 

Further, we've the experience of the three different NHS structures, those for England, Wales and Scotland. That which has had more markets inserted, as with a colonoscope into a fundament, the English has got better faster than the other two.

That is, the very argument being used to insist that we shouldn't have more markets in the NHS is entirely consistent - at least and we'd argue causation not just correlation ourselves - with more markets in the NHS improving things. And if that's the best argument they've got against those markets then we'd better get on with doing a little more inserting, eh? 

Taking Mr Kim to the Moon

Presidents Kim and Moon holding hands on the border might remind you of a rather odd couple on a first date, but in fact there are four people in this potential romance.

There is Kim and the North Korean establishment, of course. What are their priorities? Peace, of course, would be useful. A million people under arms (and eight million reservists) in a country of 25 million is quite a strain on the state budget. But dictatorships tend to be militaristic, so maybe the regime is prepared to carry that cost. But peace would hold out the prospect of economic sanctions being reduced, and better relations and trade with China too, on which North Korea is highly dependent.

But for Kim and everyone around him, the top priority is keeping the regime in power. While the government apparatchiks in Pyongyang live reasonable well, the rest of the country is far from prosperous. Losing control would mean a massive political disruption, and a big drop not only in their status but in their standard of living.

For the South, peace is the key objective. North Korea has tried invasions before, and keeping enough troops mobilised to resist another is a costly drain on resources, even for one of the richest countries on the planet. Also, there is the threat that something major could go wrong and the Korean peninsula could be plunged, not only into war, but into nuclear war. And Seoul is, of course, only a few miles from the border with North Korea.

A second objective is the humanitarian one. Families in the South who were torn from their relatives by the Korean War would like to re-establish contact. Being rich, South Koreans are used to travelling round the world to meet friends and relations, as well as for tourism. They cannot understand why it should be so hard to visit family members just a few miles up the road. But it is, because North Korea cannot let in South Koreans who it knows will tell stories of the fabulous riches south of the border—and stoke up resentment against the regime. In addition, South Koreans, who regard themselves as the same nation as the North, simply divided by past wars and current politics, are distressed at the poor living conditions of their compatriots over the border, and would like to bring them in to the economic system that has so enriched the South—which at the end of the Korean war, was literally the poorest place on the planet.

For China, the objective is to maintain a buffer state between itself and the Western-style capitalist country of South Korea. It does not fancy the idea of a capitalist state just the other side of the river. And it certainly does not want South Korean troops and equipment parked on its border, and certainly not the troops and missiles of South Korea’s close ally, the United States. But it wants a North Korean buffer state that behaves itself and does not cause trouble and threaten conflict. When Kim visited Bejing recently, the visuals were all pomp and ceremony and friendship. But you can be pretty sure that Kim was being told to lower the temperature or China would make things even more difficult for him. And here he is already, lowering the temperature. And China might even fear that the US plans to create a defensive shield over South Korea could allow the South to launch a first strike with impunity—and Bejing will know that there are quite a few South Koreans who think there is some merit in that policy.

For the United States, the historic objective has been to help South Korea protect itself from aggression from the North, and from communist politics. It has often said that it will leave whenever the South Koreans ask it to go. But that has become more difficult, now that a resurgent China is throwing its weight around much more. Perhaps, they think, a continuing presence in South Korea might limit China’s bullying of other friendly (and increasingly capitalist) countries in the region. And again, maintaining troops and other personnel in South Korea does cost American taxpayers money.

Many of these aims are not easily compatible—and of course, for each of the four centrally interested parties, there are other aims too. All of which indicates that the new North-South thaw is not likely to produce a whirlwind romance.

As we've said before we really like Aditya Chakrabortty's series on how to make a new Britain

Aditya Chakrabortty, being the modern history graduate that he is, thinks he's writing a series about how to liberate Britain from the clutches of neoliberalism. As we've pointed out before what he's really producing is a paean to the joys of not having central planning. Of letting the little platoons work things out for themselves in their own manner. His findings are remarkably Burkean conservative mixed in with a great deal of what we've been saying over the years.

Take this about school meals for example. Oldham, as he points out not exactly one of the richest corners of the Kingdom, is producing great school meals as a result of the people doing the producing actually caring about what crosses the counter. Well, fine by us of course, who doesn't want the kiddies well fed and happy to be so? 

There is a useful point we should make here though:

“Today we’re the best.” Oldham’s school meals are high quality, wholesome and prize-winning. “What I see now – that’s what I’d give my family.”

Almost everything in these serving trays has been cooked from scratch this morning in the school’s own kitchen. That roast chicken comes from one of 14 birds that Fineran came in at 6am to roast and strip, singeing her own fingers as she did so. The fish cake is baked with catch certified by the Marine Stewardship Council. More options are laid out here than in most office canteens I’ve visited and, from the carrots up, as much of the food as possible is organic and locally sourced.

Bonzer, as one subset of the colonials would say. But note what we have:

Yet in Oldham the school dinner service runs on the principle that those who have the least also deserve the best possible. It delivers that within very tight budgets, spending a rock-bottom 65p on food for every meal and charging a mere £2.10.

This is something we've noted more than once. It isn't in fact what the budget is which is the important thing, it's how the budget is used. What we have here is proof that -  £2.10 is a sliver under the average a rootle around the numbers seems to show - excellent food can indeed be served on the budget available. Therefore not excellent food being served upon that budget isn't about the budget, is it? 

Further, the standard cry that more resources must be made available, Tory Austerity Must End Now doesn't work either, does it? It's not the budget that is the problem, it's either the way it's spent or the people that are doing the spending that is. And isn't that an interesting change from The Guardian's usual insistences?

From sentiment alone to wealth

Adam Smith (1723-1790) is best known for his pioneering work of economics, The Wealth of Nations (1776). But the book that actually propelled him to fame was The Theory of Moral Sentiments, published in April in 1759.

It was a sensation, and it made Smith into hot intellectual property. That's because moralists had been struggling for centuries to work out the principles that made some actions morally good and others morally bad. To clerics, the answer was obvious: the word of God. And believers relied on the clerics' moral authority to guide them. Skeptics, on the other hand speculated about whether we had a sixth sense, a 'moral sense' that would guide us towards good. And so it went on.

Smith's breakthrough was to place our moral judgements as a matter of our deep psychology as social creatures. Human beings, he argued, have a natural 'sympathy' (today we would say 'empathy') for each other, particularly those nearest to them. That empathy enables them to understand how to adjust and moderate their behaviour in order to win the favour of others and preserve social harmony. It is the basis of moral judgements about behaviour, and the source of human virtue.

Writing exactly a century before Charles Darwin's The Origin of Species (1859), Smith was not sure why such beneficial social behaviour should prevail. He put it down to providence: today we would put it down to evolution.

The Theory of Moral Sentiments was an intellectual sensation, a best seller. Churchmen, of couse, did not like it very much. But it impressed Charles Townsend, a leading intellectual and senior member of the British government (roughly the equivalent of the Chancellor of the Exchequer today). He sought an introduction to Smith through their mutual friend, the philosopher David Hume (1711-1776). Townsend immediately hired Smith, on a salary of £300 a year for life, to be tutor to his stepson, the young Duke of Buccleuch. It was a small fortune. And it gave Smith the independence and experience to start writing the world for which he is best remembered today: The Wealth of Nations.

Seriously, of all the ludicrous things to worry about in the economy...

That Amazon's a pretty large company is true, that it's made Jeff Bezos very rich is also so. It's also possible to worry about all sorts of things in the economy. True, we tend to worry more about the amount of everything swallowed by the maw of government than others do but still, there are, we agree, real and valid bits and pieces to worry about.

That Amazon competes with other businesses really isn't one of those worries, but it's being claimed as one: 

But the consumer trust it has built up does not reflect the damage the company does to competitors, partners and workers, according to Khan. “Only looking at a consumer side of a business power is totally ludicrous. It slices the human in half, not looking at them as a worker, producer or supplier.”

Well, as Adam Smith did point out - the sole purpose of production is consumption after all - that is the way w should think of the economy and matters economic. From the point of view of the consumer, what benefits them. But there's a doubling down on this bad idea here:

Without regulation, Amazon will “continue to extract wealth that other businesses are creating”, Khan added.

That's entirely what we want the company to be doing of course. That lust for profit leads to experimentation in how to extract it from us. Another name for which is innovation. Successful innovation - that which extracts excess profits from us - breeds its own competition. Thereby bringing profit down to normal levels, leaving us out here with the consumer surplus of the innovation bred out of the experimentation.

That's actually the point of the system, that some small fraction of the value generated sticks to the entrepreneurs and the capitalists - just enough to get them to keep on keeping on -  while we consumers gain near all of the benefit. Exactly what has made us all so stonkingly rich by any historical or global standard. 

There are even things which made this modern world which we can and should complain about but why this one? Businesses competing with each other make us rich? We're going to whine about that? 

Happy Birthday DNA!

65 years ago two Cambridge scientists looked at their watches and realized they could just make it to the Eagle pub in Cambridge before closing time. They had just cracked one of science’s great problems, and for their friends they drew in beer on the pub table the double helix shape they had understood to depict the structure of the DNA molecule. On 25th April, 1953, 65 years ago today, their paper appeared in Nature magazine, and the world changed.

Their discovery has formed the basis of much medical and biological science since that time, and illustrates yet again Popper’s insight that the future is inherently unpredictable because we cannot predict what discoveries will be made, or what their significance will be. Those who tell us that history is unfolding toward its inevitable destiny cannot deal with that fact or handle its
significance.

Crick and Watson’s discovery has enabled us to reach into the very structure of life itself and to tinker with it in ways previously thought inconceivable. It is a timely reminder among many that the “ultimate resource” is human ingenuity and creativity. Julian Simon wrote a book under that title.

There are those, many of them, who love to wallow in the problems facing humanity, and to write tomes of despair about the bleak future that we face. And there are those like Crick and Watson who push humanity’s envelope further out and who make possible what was impossible before.

Happy birthday, DNA, and congratulations to all those who work to give us an unlimited future in which, instead of limiting our aspirations, we fulfill them.

We're very amused by this illogic about food banks

Food bank usage is up and at least a part of this rise is being blamed upon the roll out of Universal Credit. We're willing to believe that this might be true even if we aren't convinced of it. It's the next piece of logic that amuses us:

However, food banks in areas where the full universal credit service had been in place for 12 months or more were four times as busy, recording an average 52% increase in the number of three-day emergency food packages distributed.

The trust said many universal credit claimants had come to food banks after long waits for payment and administrative problems pushed them into debt, ill health and rent arrears.

“This completely unacceptable. We need to move towards a UK where no one needs a food bank’s help, not a country where charity provision is the only defence from utter destitution,” said Emma Revie, the trust’s chief executive.

We have a problem therefore we must get rid of the system which solves our problem.

For note what the claimed problem is. Not that Universal Credit isn't generous enough, but that it's incompetently delivered. Well, we can believe that, yes. We've thus got this other system, this charitable one, which makes up for that incompetence. We'd rather consider the problem solved at that point.

But the claim here is rather different, isn't it? The government is incompetent at handing out free money therefore we must rid ourselves of that other, charitable, system which makes up for government incompetence. By, presumably, giving the job to that incompetent governmental system. Government fails so government must do more!

Well, yes, that would all be amusing, wouldn't it, if it weren't for the pain and grief yet more government incompetence intruding into the lives of the poor would cause. Food banks, the Trussell Trust, they actually work at alleviating want. Great, isn't that what we want?

Refresh

Today saw the launch of a new initiative by the Telegraph. 

Refresh is a policy discussion forum, run on social media, with the express aim of reinvigorating support for free markets in Britain. Opinion across much of the UK’s political spectrum is turning against free markets, and young people in this country are continually painted as only being interested in left-wing solutions. Refresh rejects this kind of thinking. It is apolitical, instead it focuses on how capitalism can be harnessed to improve living standards, create freedom and unleash the potential of individuals.

Refresh exists primarily to promote good policy and ideas that, if put in place by governments in Britain, would have a real and positive impact on this country. It challenges closed thinking with radical ideas that cut against the political grain.

Run by Helena Horton and Daniel Capurro at the Telegraph it is a truly refreshing idea to try and persuade the young of the benefits of the free market – not by bribes or gimmicks, not by appeal to identity, but by ideas and argument. Something set out excellently by Lee Rowley MP today. 

We're proud to say that we're part of this. Reaching out to the next generation by presenting them with ideas that will change this country. Specifically aimed at, and written by, those under 35 years of age our writers will be directly engaging and persuading Britain's youth. We're going to see more and more pieces written by ASI staff and friends over the next few months.

But to get you in the mood, here's a piece by Matt Kilcoyne on how it's not it is not capitalists that have led to our broken housing market, but the state – by imposing rationing.  

And here's Sophie Jarvis explaining why, if the Tories want to rebuild the entrepreneurial spirit in Britain, they might need the self-starting, meritocratic, liberty-loving and wealth creating attitudes that immigrants bring to the country. 

Varoufakis makes Marx's mistake- underestimating markets

Yanis Varoufakis has favoured us, in The Guardian, with another of those pieces which just insists that Marx was right. You know, sure, it's hasn't happened for 150 years and counting as yet but it's sure right around the corner today.

None of this should surprise a reader of the manifesto. “Society as a whole,” it argues, “is more and more splitting up into two great hostile camps, into two great classes directly facing each other.” As production is mechanised, and the profit margin of the machine-owners becomes our civilisation’s driving motive, society splits between non-working shareholders and non-owner wage-workers. As for the middle class, it is the dinosaur in the room, set for extinction.

At the same time, the ultra-rich become guilt-ridden and stressed as they watch everyone else’s lives sink into the precariousness of insecure wage-slavery. Marx and Engels foresaw that this supremely powerful minority would eventually prove “unfit to rule” over such polarised societies, because they would not be in a position to guarantee the wage-slaves a reliable existence.

It's a fair old prediction, certainly. But a little earlier Varoufakis tells us:

While celebrating how globalisation has shifted billions from abject poverty to relative poverty,

That is, the wage slaves have done damn well out of the arrangement. As absolutely any examination of historical and current day living standards will tell us.

The reason why is, of course, that Marx underestimated the power of markets. Especially that for labour. He was aware of how it was monopsony - not that the word existed back then but this is what he meant  by monopoly capitalism - in the purchase of labour which would immiserate the workers. We've not have such monopsony, they're not immiserated.

Further, as long as we maintain a market economic system we're not going to have monopsony and thus we're not going to have the immiseration.

Markets are more powerful than Marx thought they were, than Varoufakis thinks they are. Which is why the working classes today are richer than any bourgeois of Karl's time, richer in fact than any bourgeois or even capitalist of any earlier era. That power of markets to ensure that the new created wealth of capitalism flows to us as workers and consumers is also why there's no coming crisis nor revolution.