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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

An Indonesian answer to George Monbiot's question

Written by Tim Worstall | Saturday 25 January 2014

George Monbiot got very hot under the collar recently about a provision in hte various trade treaties that are under negotiation at present. Arguing that the ability of an investor to take a matter to arbitration was a vile undermining of democracy:

They have good reason to ask. The commission insists that its Transatlantic Trade and Investment Partnership should include a toxic mechanism called investor-state dispute settlement. Where this has been forced into other trade agreements, it has allowed big corporations to sue governments before secretive arbitration panels composed of corporate lawyers, which bypass domestic courts and override the will of parliaments. This mechanism could threaten almost any means by which governments might seek to defend their citizens or protect the natural world. Already it is being used by mining companies to sue governments trying to keep them out of protected areas; by banks fighting financial regulation; by a nuclear company contesting Germany's decision to switch off atomic power.

And here's an example of what it is actually all about:

Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM), the largest U.S. miners, said new Indonesian rules on metal export duties infringe on contracts they have with the government. Indonesia issued regulations on metal exports this month that curbed the shipping of unprocessed ore and placed duties on exports of copper concentrate, a semi-processed ore that’s shipped from mines to smelters. The rules have resulted in delays to obtain export permits, and Freeport plans to defer some production, according to the Phoenix-based company, the world’s biggest publicly traded copper producer. The duties on copper, which begin at 25 percent and will rise to 60 percent by mid-2016, took Freeport by surprise, Chief Executive Officer Richard Adkerson said yesterday on a conference call with analysts. Indonesia, where the company operates its biggest mine, the Grasberg copper and gold operation, accounted for 19 percent of its third-quarter revenue, according to data compiled by Bloomberg. Newmont’s Batu Hijau mine in the country contributed 6.8 percent of the miner’s total sales, the data show.

Indonesia has banned, in hte case of nickel, and heavily taxed, in the case of copper, the export of ores and or concentrates. They want the minerals to be processed within the country. Well, OK, I don't think that's sensible, you may or may not, but what is obvious is that this seriously changes the positions of those companies who have already invested billions into mines in the country. And that's what the right to go to arbitration is about.

If a government says, right, here's the terms upon which you can invest in our country then that's just fine. And it's also just fine if the government decides that it wants to change the law. However, if it does change the law it also has to compensate those who the law change affects. For example, Indonesia is entirely at liberty to nationalise those mines if it should wish to. But it does also have to pay market value when doing so. Similarly, the country is entirely within its rights to ban the export of concentrates. But it must compensate those who have invested on the understanding that concentrate exports would be allowed.

And the only purpose of arbitration is to make sure that the people deciding upon what the compensation should be are not controlled by the government that will have to be doing the compensating.

That's why these clauses exist in these treaties. Essentially, to make sure that governments keep their word.

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An information revolution

Written by Blog Editor | Tuesday 22 September 2009

In out latest think piece, Anton Howes considers the information revolution that could attend a change of government.

Click here to read An Information Revolution.

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An interesting explanation of obesity

Written by Steve Bettison | Thursday 06 December 2007

Obesity is on the rise amongst UK teenagers. Present figures suggest that 30 percent of boys and 26 percent of girls are obese according to their BMI (Body Mass Index), with the Department of Health predicting a rise of up to 6 percent for both sexes.

Many ideas have been put forth as to why this is happening. Most recently, a study by Stephanie von Hinke Kesslet Scholder found that having a working mother is detrimental to a child's weight. Ms Scholder's main finding was that there is a high incidence of obesity in children at 16 where their mothers are in full time work between the ages of 5-7. With the mother spending time away from parenting, the child effectively controls its own diet and the choices it makes tend to be unhealthy. This is also the case with childcare and schooling, both of which fail to give adequate time to the child's nutritional needs. And while there is no immediate affect on the child's weight, a poor diet aged 5–7 sets an apparent precedent that ends in 16-year olds being obese.

Working mothers should be applauded. They boost the economy and significantly reduce child poverty. It is unfortunate that there may an externality to this that affects their offspring's health, but this is an issue that should be addressed. Ideally, women should be able to provide for their children while enjoying flexible working hours (as well as support from their partners). There seems to be a degree of political consensus around this at the moment. However, in a 21st Century economy there is no need for government intervention to bring this about. Flexible working hours legislation, for example, is unnecessary; businesses and their employees should have the freedom and the rationale to draw up their contracts accordingly.

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An interesting point on prohibition

Written by Tom Bowman | Monday 03 November 2008

I received an interesting booklet in the post this week from the Transform Drug Policy Foundation, an outfit that presses for reform of drug law in the UK. I can't say I agree with them on every single point – their proposals could, arguably, leave the drug market over-regulated and thus fail to eradicate the deeply harmful illegal trade. But nonetheless, it's good to have someone campaigning for good sense on such an important issue.

The arguments against prohibition are well rehearsed, and will probably not be new to readers of this blog. To sum them up in a series of bullet points (more or less borrowed from the IEA's excellent Prohibitions):

  • Prohibition places markets in criminal hands
  • It increases the risk of already risky activities
  • It criminalizes people who would not otherwise be criminals
  • It divert police resources away from activities that actually harm third parties
  • It increases public ignorance
  • It doesn't actually work (i.e. if you can't keep drugs out of prisons, how can you keep them out of a free society)

Another interesting point against prohibition, which I had not previously thought about much, is mentioned in Transform's booklet:

[I]llegal markets under prohibition always tend to cause concentration of available drug preparations which are more profitable per unit weight. Just as under alcohol prohibition the trade in beer gave way to more concentrated, profitable and dangerous spirits, the same trend has been observed over the past centuries with opiates – from opium (smoked or in drinkable preparations) to injectable heroin, and more recently with the cannabis market being increasingly saturated with more potent varieties. With coca-based products the transformation has been dramatic... It was prohibition which first cocaine powder onto the streets in the first place, and finally produced high-risk smokable crack.

Wouldn't it be nice if politician's understood and appreciated the law of unintended consequences?

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An international development policy that works

Written by Sam Bowman | Tuesday 20 April 2010

Today sees the publication of my briefing paper on the Conservative party’s international development policy. Unfortunately, the Conservatives have signed up to a number of bad ideas. As well as several wasteful gimmicks – among them an X-Factor style approach to spending aid money and a ‘poverty tourism’ programme to send gap year students to Africa – the Conservatives have failed to break with the worst aspect of Western international development policy: development aid.

My briefing argues that the Conservatives’ commitment to spending 0.7% of national GDP on international development aid is a mistake that will exacerbate poverty in the developing world. The biggest cause of Africa’s failure to grow since the 1960s has been economic mismanagement by African governments. Aid money insulates these governments from the costs of their bad policies and prolongs the misery of their citizens. I recommend that the Conservatives wind down development aid if they form the next government.

The Conservative policy does have some strengths, however. Most notably, they have committed themselves to the unilateral reduction of agricultural subsidies and import tariffs on goods from the developing world. This is a brave and commendable stance that challenges special interests to the benefit of British consumers and foreign producers, although Britain’s membership of the EU will presumably limit their freedom of action in this regard.

In the paper I go on to suggest that the promotion of freedom of movement be extended to people as well as goods, which would help Britain to attract the best minds from around the world. This would enrich the British economy and facilitate growth in immigrants’ home countries in the form of remittances, which account for a huge transfer of wealth to the developing world’s poorest people and bypass the problem of government mismanagement. International development has not been a major issue at this election, but will be important to the next government. My briefing paper offers a new approach to development that uses the free market to help the world’s poorest to help themselves. You can read it here.

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An open letter to the government on the Lobbying Bill

Written by Sam Bowman | Tuesday 03 September 2013

The government's Lobbying Bill is a serious threat to free speech and will curb the activities of think tanks, charities and other groups whose participation in political debate is vital for the political system to work openly. That's why we've co-signed the letter from other think tanks, below, urging the government to drop this bill.

We wish to highlight our grave concern about the Government’s Lobbying Bill, a piece of legislation that poses a significant threat to legitimate campaigning freedom of speech, political activism and informed public debate.

Part II of the bill threatens the ability of charities, research and campaigning organisations to inform the public debate, fulfil their missions and raise awareness of important issues. The current drafting would capture a huge number of organisations who would not presently be considered as relevant to electoral law and who do not receive any state funding. It also threatens to dramatically expand the range of activity regulated far beyond any common sense understanding of commercial lobbying.

We do not regard the Cabinet Office’s assurances as sufficient given the widespread legal doubts expressed from across the political spectrum. It cannot be a prudent approach to legislate on the basis of assurances that enforcement will not be to the full extent of the law. The exceptions offered are unclear and unconvincing.

The lack of clarity in the legislation further exacerbates its complexity, while granting a remarkably broad discretion to the Electoral Commission. The potential tidal wave of bureaucracy could cripple even well-established organisations, while forcing groups to reconsider activity if there is a perceived risk of falling foul of the law. This self-censorship is an inevitable consequence of the bill as it stands.

We urge the Government to reconsider its approach and to urgently address the fundamental failings in this legislation.

Yours Sincerely,

Mark Littlewood, Director General, Institute for Economic Affairs
Simon Richards, Director, The Freedom Association
Tim Knox, Director, Centre for Policy Studies
Matthew Sinclair, Chief Executive, Taxpayers’ Alliance
Jo Glanville, Director, English PEN
Emma Carr, Deputy Director, Big Brother Watch
Eamonn Butler, Director, Adam Smith Institute

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An ounce of prevention...

Written by Jan Boucek | Saturday 27 March 2010

altAn ounce of prevention is worth a pound of cure. For the NHS, this could mean billions of pounds of annual savings and so the commissars who run the place spend a large amount of money advertising, hectoring, nagging and even ordering people to get healthy. Of course, what they dare not try is good old fashioned bribery by appealing to people’s financial self-interest.

If the NHS wants to get serious about improving public health before urgent treatment is required, they could take a look at private health insurers. For example, PruHealth operates a points scheme where customers move from bronze to silver to gold status by undertaking certain activities. The higher the status, the lower the annual insurance premium.

Take a married couple in their 50s. Depending on the level of cover chosen, the annual premium for bronze status is around £3,000 but silver status drops that premium to just under £2,000. It takes 1,500 points to move from bronze to silver and there’s a variety of ways to do this.

An annual full medical screen for both partners scores 1,200 points. A rigorous, monitored, exercise regime gets 1,500 points. Eating well can earn up to 1,000 points. There’s traditional online questionnaires on lifestyle and stress assessment which is easy to complete and scores 400 points.

To be sure, PruHealth ties these activities to specific companies such as counting Nectar points spent at Sainsbury’s on fruit & veg. People could cheat with the answers on the questionnaires but the mere act of annually reviewing key elements of a healthy lifestyle does force an honest personal assessment. All in all, though, saving £1,000 a year is an effective driver for monitoring and improving one’s health.

The NHS should set up something similar. It could be as blatantly commercial as PruHealth’s with corporate sponsored partnerships or perhaps something more unique – a meaningful tax refund for given levels of points scored.

Unfortunately, such creativity seems beyond the imagination of the current top-heavy, command-and-control NHS. Actually paying people to stay healthy? A working computer system to keep track of points? Partnerships with for-profit companies? The excuses would go on and on.

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An overdose of headlines

Written by Dr Eamonn Butler | Friday 18 April 2008

I'm suffering from an overdose of headlines again.

This time, the scare is vitamin tablets. A Copenhagen University among 230,000 people, we're told, says that taking vitamin pills might not do you any good and might actually do you positive harm. Really?

Well, I'm no biochemist, and not even in the pay of any pill producers. But the headline sounded pretty daft to me. And I've never really trusted Danish science after the way they beat up Bjorn Lomborg so mercilessly instead of getting to grips with his arguments. Yet the story was so well-spun by its promoters that I had to read quite a long way down the coverage before I could get a balanced picture.

It took a lot of reading to discover that even the spinners of this story aren't saying that a daily multivitamin pill will do you any harm. They're talking about people taking really big doses of a single supplement - Vitamin A, E, C, Beta-Carotene and Selenium. I discovered that the researchers had started by reviewing 815 (some reports say just 467) clinical trials. But a lot of these were studies on very sick people, whose experience is probably not very relevant to the rest of us. Then, it seems, the reviewers eliminated all but 68 because they showed no deaths. Yes, well that would skew things a bit, wouldn't it? By the time they had eliminated the Selenium studies (which showed a reduction in deaths), they were down to less than half a dozen studies, on which the scary headlines are based.

Well, scary headlines sell newspapers and a balanced appraisal of complicated science doesn't. Ask Bjorn Lomborg.

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An unappreciated generation

Written by Andrew Hutson | Saturday 09 May 2009

altIt was brought up in PMQs this week that British youths are the unhappiest in Europe. 1 in 3 eleven year olds are illiterate and record numbers are turning to drink and anti-depressants. Also, it is this generation who are now going to be forced to pay off the colossal government debt. The story is very negative, but politicians are making it worse, intent on blaming the youth for the state’s failings. Instead, the youth need to be encouraged and made productive rather than demonized and disincentivized.

The welfare state is failing the youth as this story shows. It focuses on a seventeen year old who drinks a litre of vodka a day, spending her £47 per week benefits on alcohol (that must be cheap and nasty vodka!). This is clear evidence that a benefit culture has reached an excessive level in the UK. The 17 year old in the article does not work or attend school – but then why bother when the state will give you free money to spend on whatever you like, illegal or not.

It is immoral that the government can tax hard working individuals in order to encourage the illegal drinking of others. This sends out signals to younger citizens that it is acceptable to expect the right to be bailed out by the state if they don’t fancy working. This is clearly counterproductive towards society; if there is no incentive for young people to work or go into further education, that demographic of the economy will stagnate – making the process of paying off Gordon Browns debt gloomier than ever.

Younger generations are the lifeline of our future economy. Currently the government seems to underestimate their importance, seeing them as scapegoats for their failings in education and burdens on the labour market; set them free and see the benefits they can bring to society.

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An unhealthy policy

Written by Andrew Hutson | Thursday 12 February 2009

It's not difficult to complain about the misdirection and failings of the NHS. The list of problems is seemingly endless: Superbugs, waiting lists, failed computer systems..... One common theme throughout is that these problems have been caused by the poor management and misallocation of resources and Taxpayers' money.

However, news that children as young as 10 will be paid to stop smoking have raised the bar, even by the NHS' shocking standards. This scheme has been set up by the NHS in Brighton and Hove who will reward children with a £15 gift voucher if they do not smoke for 28 days and pass a carbon monoxide test. Pregnant teenagers will also be given £5 if they can prove they are no longer smoking.

I sometimes wonder who comes up with these ideas, and who approves them. This scheme is fundamentally flawed and shows a total lack of regard for taxpayers' money. If a 10 year old has the cash available to spend £5 on a pack of cigarettes will £15 worth of BodyShop vouchers really provide an incentive to kick the habit? Secondly, for any young person considering taking up smoking, this scheme could actually act as an incentive for them to start. They can try smoking and if they don't like it, they can stop and be paid in the mean time.

Children are taught from a young age that smoking is unhealthy and a bad habit to start. If I were a 10 year old, I would be pretty miffed if my classmates who were smoking and subsequently being given £15 whilst I was given no such reward for making a healthy choice.

This type of scheme is indicative of poorly considered government plans that reward and create incentives to act in a sub-optimum way. It is absurd. But no doubt a government department somewhere is cooking up an even crazier one right now.

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