Government to eliminate extremism by passing law against it


Being somewhat conventional, my parents brought me up with conventional views and being stuck in Norfolk, I have not got around to changing them.  I was therefore a little surprised to discover I am now an extremist. The Home Office considers that 1950s opinions are “extremist” in 2015. Obviously most of us want to make life difficult for terrorists but the briefing for the new Counter-Extremism Bill goes far beyond terrorism.  The Home Secretary says “we are determined to eliminate extremism in all its forms”.  One has to wonder what kind of home the Home Secretary is living in if she imagines a parliamentary piece of paper will cause all terrorists to throw down their weapons and speak peace.  And ensure the rest of us invariably use language that our neighbours, and the thought police, consider inoffensive.

What is normal for Norfolk might be considered extreme in Brighton and vice versa. Luckily for Mrs May, UK mental health care is so underfunded, the white coats are unlikely to call.

The ludicrous fantasy of the objective is only worrying insofar as it reflects the mental state of our leaders.  The far greater concern is the scope being given to the police, Ofsted inspectors and all our other guardians to penalise us for a word out of place.

The Home Office spinmeisters will reassure us that the key words are “extreme” and “hatred”.  Norfolk turnips can relax, we will be told, because we are not extreme in the meaning of the Bill, nor do we hate anyone.  But of course that is not true.  We hate terrorists and especially those who kill our neighbours on Tunisian beaches.  We will have to reform.  If we go on hating them, the coppers will be calling.  This is the new policing: if you catch someone burgling your home, as someone did recently in Newmarket, and hold him down until the police arrive, you are the one prosecuted, not the burglar.  Now one will be prosecuted for the hatred as well as common assault.

Much of this is political cant.  Theresa May said (ibid) “As the party of one nation, we will govern as one nation, and bring our country together. That means actively promoting certain values. Freedom of speech. Freedom of worship. Democracy. The rule of law. Equal rights regardless of race, gender or sexuality.” This is nonsense because if we really only had just one set of values our culture could not develop, and no one could say anything beyond the established creed.  Catholics would not be able to argue for marriage being heterosexual.  The whole point of a civilised society is being able to promote one’s point of view in whatever way one wishes.

Yes, there should be some limits to that but not many.  Overstating one’s position is counter-productive and that by itself brings moderation.

The truth of the matter is that the Home Office wants to draw the Counter-Extremism Bill as widely as possible to make prosecutions, however incompetent, stick.  It should be cut back to the Counter-Terrorism Bill and properly thought through.

An alternative for Greece

Three years ago I led an ASI team to compete for the Wolfson prize on leaving the Euro in an orderly manner. We got “close but no cigar”, hearing informally that we made it into the top dozen out of over 600 entries. The current position is more chaotic than anything imagined at the time of the competition, with several overlapping institutional problems.

  • The Greeks need relief and devaluation. Neither is possible under the Eurosystem which they also say they want. They are going to have to choose. Meanwhile, it is unrealistic to expect Tsipras or any Greek government to reverse 170 years of political dysfunction and collect income taxes from tomorrow morning. They can, however, place asset sales with an outside body and (more or less) collect VAT.
  • The Eurogroup (to simplify divergent inclinations) wants to keep the Euro immaculate, that is free of defection or conspicuous violations of its own rules, where they’re fast running out of wiggle room. Policy-makers also fear that further concessions will inflame populism in the other PIIGS, especially Spain where Podemos is leading the pack into the autumn elections. All in all, these objectives contradict each other, leaving the Eurogroup rudderless.
  • The ECB and other official European creditors fear a “haircut” (reduction) on the “principal” (headline sum borrowed). This couldn’t be airbrushed off their balance sheets - unlike grace periods, reduced “coupons” (interest payments), extended payment periods and so on. This makes it hard for creditors to take a lead.
  • For much of the Greek crisis, the IMF has given the impression of dancing to the ECB’s tune. At long last, it now seems to be manning up – none too soon, as it has risked its standing in the face of future defaults in “sovereigns” (state issued debt). It still needs to establish clear policy distance from the Bank, which should be taken to have relinquished its standing as an official creditor by “enabling” (as they say in AA) a defaulter.

This adds up to a catastrophic failure of leadership. Thus the following proposal, an exchange instrument which enables the IMF to take back the lead it should never have relinquished, grants Greece relief, and spares the creditors the worst by giving them a share in recovery.

  1. First, the IMF must reinforce its recent shows of independence, seeing off the ECB’s claim of pari passu priority as an official creditor. It must insist that the Bank joins with other creditors in a 50% plus haircut on the nominal value of its holdings of Greek debt or “old paper”. The Greeks themselves have spoken of 30%, following the Fund last week. This is unlikely to be enough for medium-term sustainability. There may also be some malarkey as between private and official creditors. The pain for official balance sheets is less than the nominal haircut as they bought much of their holdings at market discounts; it will be also abated by (4).
  2. Old paper is to be swapped for an exchange instrument or “new paper” with a nominal value reflecting the haircut. This is to be denominated in hard currency, unregistered and negotiable at par for tax payments to the Greek Government. This makes for a liquid secondary market and sets a floor for the value.
  3. New paper is to be undefeased (guaranteed by a third party); but is part-collateralised by (and part-redeemed by the proceeds of) early sales of Greek publicly owned assets under the control of a body answering to creditors. No guarantor is available for defeasement, with the US Treasury uninvolved and the ECB compromised. The asset sales would be the €51bn identified in 2010, of which less than €5bn has been realised; and would underwrite between one quarter and one third of the new paper.
  4. The coupon is to vary with increases in (and defrayed by a first call upon) VAT receipts above a threshold. This follows the precedent of the Paris Club (ie, for private holders of defaulted sovereigns); guarantees the coupon and offers upside to those taking the new paper.

This proposal enables the IMF to resume its proper role after sovereign defaults, that is leading the workouts. It also gives Greece and its people the breathing space they need and helps out the country’s creditors with a share in the improvement in Greece’s economy.


If you want to know why rule by the Great and the Good doesn't work


Consider this from Simon Jenkins as an example of why rule by the Great and the Good doesn't work.

But such is the political arthritis now afflicting Europe’s “technocratic” rulers that they ignored the fact. They concentrate on their one concern: somehow extending Greece’s repayments so German, French and British banks could have even larger loans underpinned. It is bankers, not Greeks, who are being “bailed out”. They want Greek taxpayers to go on paying interest even if the principal is as beyond reach as a tsarist bond.

No Sir Simon, just no.

Of Greece's some €320 billion in debt a couple of percentage points is owed to foreign banks. That's actually what the problem here is: there's no bankers that anyone can go and steal the money from.

The debts are owed to: the IMF, which in effect means the governments of the countries that own the IMF. The ECB, which means the countries that own it (ie, the eurozone governments). The EFSF, which is guaranteed by the eurozone governments. Then there's bilateral loans from ...yes....the eurozone governments.

The Greek banks do own Greek Treasuries, both bonds and bills: and these are all pledged to the ECB as collateral for the cash they need to remain open. This is actually what the problem is in the negotiations. If there were any rapacious capitalists holding any appreciable amount of the debt then they would be haircut without anyone caring in the slightest. That near all of the money is owed to taxpayers of other countries is the problem.

This would have been a valid criticism of the 2010 to 2012 actions, where the banks' debt holdings were largely unloaded onto those taxpayer guarantees. But it's simply incorrect to claim that banks have anything beyond the most minimal exposure today. Whatever this is this isn't a crisis about protecting bankers.

And that, of course, is why that rule by the Great and the Good, by the wise Solons, by a technocracy, doesn't in fact work. For the obvious reason that all too many of them haven't a clue about whatever it is that they're supposed to be managing or making public policy upon.

This is not to say that they're all idiots, of course it isn't, but rule by the ill informed isn't a great step forwards now is it?

Apparently the euro is a neoliberal plot: who knew?


The blame game for the Greek disaster is in full voice over on the left. Apparently it's really all the fault of the neoliberals. Yes, that's us, the people who argue for less government intervention, markets work and so on, we're responsible for the idiocy that a supra-national bureaucracy has erected. Here's Georgie Monbiot as one of the cheerleaders for this argument:

The Maastricht treaty, establishing the European Union and the euro, was built on a lethal delusion: a belief that the ECB could provide the only common economic governance that monetary union required. It arose from an extreme version of market fundamentalism: if inflation were kept low, its authors imagined, the magic of the markets would resolve all other social and economic problems, making politics redundant. Those sober, suited, serious people, who now pronounce themselves the only adults in the room, turn out to be demented utopian fantasists, votaries of a fanatical economic cult.

So let's look at what a real market fundamentalist, Milton Friedman, said about it all:

The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.

Friedman was of course far too polite to put it this way, but that's clearly a claim that the idiot politicians are about to impose something that won't work, either economically or politically, and something thus that market fundamentalists (or as we like to style ourselves, liberals) simply should not be supporting.

George's basic problem here, as with that gathering chorus over on the left, is that they've got confused. They're against neoliberalism, they know that. And they're against the implosion of the Greek economy. At least one of those is a sensible thing to be against. But because they're against both they insist that one is a facet of the other. When in this case, neoliberalism, market fundamentalism, has been saying all along (and some of us have been shouting this for two decades now) that the euro as constructed simply will not work. Because it doesn't contain enough market, because it's a political construct built without reference to sensible economics.

And we're right of course. Far from neoliberalism being the cause here it's the cure.

We need to get this right about what the Millennium Development Goals have achieved


It's absolutely and gloriously true that these recent decades have seen the largest reduction in absolute poverty in the history of our species. But we need to work out why this is so, so that we can go and do more of that lovely stuff that reduces absolute poverty. And this isn't the answer:

The millennium development goals (MDGs) have driven “the most successful anti-poverty movement in history” and brought more than a billion people out of extreme penury, but their achievements have been mixed and the world remains deeply riven by inequality, the UN’s final report on the goals has concluded.

This is not true. This is to confuse correlation with causality. The MDGs have been around for a time, yes, and they correlate with some of that reduction in poverty. But the actual decline in poverty, the one of those MGD's that was achieved ahead of target, has not been driven by the MDGs. In fact, far from varied chuntering on at the UN being responsible for the reduction in poverty it's been the ignoring of said chuntering that has.

The two things that have led to this vast, and highly welcome, reduction in poverty are the economic development of China and the Washington Consensus. Both, really, being governments getting out of the way and allowing the natural propensity to truck and barter to assert itself. We can in fact prove this in two ways.

The first being that the reduction in poverty hasn't been happening where the UN has been dipping its greasy mitts, it's been in those places that have been taking part in globalisation. Secondly, the reduction in poverty started before, predates, even the consideration of those MDGs let alone their adoption and anyone doing anything directly about them.

This matters because of course, given the success they are crowing about here, they want to make another set of goals. And the correct goal should be to do more of what worked last time, not whatever comes about as a result of the chuntering of the bureaucrats.

What did work last time is that the rich world finally started buying things made by poor people in poor countries. Thus we should do more of this: more globalisation in short. And given that the bureaucrats, the UN, and their targets had almost nothing to do with it all the best thing we should set them as targets is that they should shut up, go home, and let the rest of us get on with making our fellow humans richer.

As we have been and as we'll all continue to do as long as no one interferes.

Five reasons to hate Sunday trading laws

  1. They’re inconsistent and arbitrary. If you’re a waiter, factory worker, nurse, construction worker, taxi driver, bus driver, security guard, journalist or even a retail worker at a small shop you can and often do work at any time on Sundays. The places that have to close at 6pm are ‘big’ shops. Bizarrely, ‘big’ is defined as being 281 square metres or bigger. That doesn’t make much sense and any argument that retail workers are ‘protected’ by Sunday trading laws would also imply that all those other workers are being exploited.
  2. Life isn’t nine-to-five, Monday-to-Friday, any more. Not that it ever was, really. Sunday trading laws inconvenience people who haven’t had time to buy their groceries during the rest of the week, and force them to rely on expensive local shops instead of cheaper supermarkets with more choice. For example, I like to do my shopping at my local Lidl. If I spend Sunday afternoon in the park with my friends instead of doing my shopping, and I need to buy something for that evening's dinner, I have to pay twice the price for a smaller range of inferior products at the Tesco Express down the road instead. That’s annoying. If I had a family to feed, it would be expensive.
  3. The high street – and probably even small shops – will be better off. When Sunday trading laws were suspended during the Olympics, sales outside of London increased by 6.2%. They only increased by 2.8% inside London, probably because people were warned off the crowds. That’s good for smaller retailers too – no self-respecting retailer wants to exist just because her competitors are banned from trading, and more people out shopping means more customers to go round for everyone. They don't seem to have suffered during the Olympics suspension. If you’re worried about online retailers destroying the high street, this is one way to level the playing field.
  4. Workers will have more hours available. It’s easy to talk about ‘protecting’ workers by stopping them from working on Sundays. But what about the ones that want to work then? Employers often end up having to pay workers more to work on Sundays – if you don’t think Sundays are sacred and want to earn a little more cash, the end of Sunday trading restrictions is good news for you. (Back when I was a teenage McDonald’s crew member, Sunday hours were a godsend.)
  5. Lots of people actually like shopping. It’s very common to enjoy trips to the high street or the shopping centre with some friends. If you are interested in food, big grocery stores like Waitrose, Asda and Whole Foods can be interesting places to explore. Browsing clothes shops and buying new things can be really fun. I’ve seen lots of people sneer at this on Twitter, and no doubt it’s terribly gauche, but government shouldn’t be in the business of forcing snobs’ tastes on the rest of us. Some of us actually like consumerism.

Which aid is worthwhile?


In the second edition of "How to Win Every Argument" I introduce 12 new fallacies, one of which is the False Zero Sum Game.  This is the fallacy of supposing something to be in fixed supply when it is not.  Some suppose that if some countries are to grow richer, others must become poorer.  In fact wealth is not in fixed supply; it can be created.

Another fallacy I did not include is the inverse of this one, where people suppose an unlimited supply of something limited.  Given that countries will not allocate the whole of their GDP to foreign aid, a limited aid budget is available.  The question is "How can it be spent most effectively?"  One answer is that supplied by the Copenhagen Consensus established by Bjorn Lomborg.  Distinguished economists meet every 4 years to assess how to prioritize limited funds.  Its rigour has earned it a reputation for fairness.

In an article published a year ago, Matt Ridley described how Lomborg handed the UN Open Working Group slips of paper representing worthwhile projects and had them place them in order of priority.  They were startled, coming from a mindset that "everything is important."  Lomborg then had 60 economists calculate the cost-effectiveness of different targets, and list their likely benefits:

1.  Every dollar spent on reducing malnutrition yields $59 in benefits.  Better fed, children's learning improves and they become more productive members of society.

2.  A dollar spent combating malaria and tuberculosis brings $35 in gains.  These diseases cause sickness that reduces the ability to do productive work.

3.  A dollar spent fighting HIV brings $11 in returns, and so on.

By contrast, each dollar spent on programmes to limit global warming to 2 degrees Celsius brings only 2 cents in benefits.

In his article Ridley lists his own top priorities, adding boosting preprimary education, which he suggests might return $30 per dollar spent.  He suggests that universal access to sexual and reproductive health would save mothers' lives and lower birthrates, yielding perhaps $150 per dollar spent on it.  Finally Ridley suggests that expanding free trade could deliver "phenomenal improvements to the welfare of the poor in surprisingly quick time."  "A successful Doha Round of the WTO could deliver annual benefits of $3 trillion for the developing world by 2020, rising to $100 trillion by the end of the century."

It is a rewarding discipline to compare the effectiveness of different projects, and to explore which ones would do most good with the limited funds.  It has the potential to make aid more effective at achieving worthwhile goals.

Some people just don't understand what capitalism is


Another one of those delightful whingefests over at The Guardian. The mobile phone means that, what with texts and emails and the like, we are all on call all the time. This is not though, the fault of the tech, but of capitalism:

The problem is not tech: it’s capitalism. Admitting the real source of the problem creates an opportunity to address it. Capitalism has adroitly managed to evade responsibility and neatly slip its leash, but we should be able to exercise greater critical thinking than that and bring it to heel. Capitalism and tech are deeply intertwined, of course, but let’s not confuse the two.

Yes indeed, let's not confuse the two. So, what actually is capitalism? No, it's not just a compendium of all that Guardianistas hate. It's not even a solid description of our own current society. What it actually is is a description of who owns the productive assets in a society: the capitalists or some other group of people? And do the capitalists own all said productive assets? Nope: so we're not even in a fully capitalist society.

It’s capitalism that took advantage of this opportunity to work it, turning it into something that could be used to control employees and keep them constantly within arm’s reach. The person who refuses to be constantly available or who exercises discretion in terms of the kind of work performed after hours won’t last long at a company and certainly won’t advance in terms of salary and rank.

There are decidedly non-capitalist organisations in our society. All of government for example. The NHS, John Lewis, the Co Op, the remaining Building Societies and so on. All lawyers (they're partnerships, not capitalist organisations) and on and on. It wouldn't be out of order top insist that some 50% of our society is not currently capitalist.

At which point we need to ask: well, are those non-capitalist parts of the society subject to the same texts and out of hours emails? It would seem that they are: therefore it's not capitalism causing all of this, is it?

Unless, of course, one is writing for The Guardian where capitalism is simply the moniker for everything and anything one wants to whinge about.

There might even be real problems with capitalism, could well be real problems with tech: but let's not confuse the two, eh?

Regulating away Britain's best teachers


The latest report from The Sutton Trust (pdf) looks at a topic it last visited in 2003: how the backgrounds of state school teachers compare to those of independent school teachers. Its finding is that there is still a significant difference between the proportion of teachers at state and independent schools that have studied at the UK's best universities. Independent school teachers were also found to be the most likely to have a degree in the main subject that they teach. Here is the percentage of all teachers who attended a Russel Group University, by post-A level qualification:



Most people would expect this result. But what is more surprising, yet garners less attention, is that the heavily-regulated environment of state education hinders its flexibility to hire the same, or better, quality of teachers as independent schools.

There is some anecdotal evidence to suggest that the lack of formal requirements for teachers entering the independent sector actually encourages, rather than discourages, applications from graduates of some of the UK's leading universities, because top applicants wish to enter the teaching sector immediately, rather than pursuing further qualifications.

State schools in England, Wales and Scotland are required to be registered with the NCTL and their General Teaching Councils, respectively. Private schools are free of this requirement and can hire applicants with specialist subject knowledge that want to teach soon after they leave their field of expertise.

In independent schools, teachers are not required to have Qualified Teacher Status, which, according to Elliott Lockhart's 2010 survey "has led some to portray teachers in the independent sector as unregulated, unaccountable and lacking the necessary professional preparation that would make them fit to teach."

As we know from the report and our general experience of the private education market, this is far from the case and actually strengthens the choice of employees that independent schools benefit from. For Scotland, this is particularly concerning as we are about to enact a law (see a recent Telegraph article about it here) making independent schools subject to the same requirements as state schools. So we would practically have no schools not subject to these restrictions.

Right now Scottish independent schools, like is the case in all of the UK's constituent parts, take advantage of teachers registered outside of Scotland and this legislation would prevent that. On top of this, the Scottish government also doesn't engage with Teach First; a programme that is injecting fresh talent into schools in England and Wales and is one of the reasons, judging by the teacher background metric, that state schools have been catching up with independent schools in the last 12 years.

Scottish politicians should reject the Education (Scotland) Bill as private schools are the perfect testing ground for trying out what works and doesn't work. Subjecting them to the same rules as state schools will impede progress and diminish their autonomy - they're independent for a reason.

Solving one of the most pernicious failures of the UK housing market


It appears that George Osborne intends to solve one of the most pernicious failures of the UK housing market. Which is that once you have, through whatever temporary circumstances, gained access to housing subsidies then you get them for life. This is of course a nonsense: there's a huge difference between receiving a helping hand when needed and gaining permanent access to the wallets of the rest of the population. What he's going to do is:

Measures to force middle-class council house tenants to “pay to stay” in their homes rather than rely on taxpayer hand-outs. Rent subsidies for social housing tenants will be removed from anyone earning more than £30,000 outside London and £40,000 in the capital. They will have to pay full market rents or move out, under the plan.

It has always been absurd that temporary circumstances that lead to being granted subsidised housing then lead to a life tenancy on such subsidised housing.

That we do have a system whereby those who need it gain access to housing they otherwise could not afford is obviously going to be a feature of our society. But the idea that some life event, say, divorce, unemployment, whatever, should then lead to permanent subsidy has been a feature all along. Once you've qualified for council or housing association housing and got it, then that's a permanent tenancy. But circumstances change: and there really never has been any good reason why someone should continue to gain subsidy 20 or 40 years after the just reason for its original grant has faded.

An aside for those who claim that such housing receives no subsidy: opportunity cost. Renting something out at less than market rate is itself a subsidy.

We don't want though, to insist that people have to move out of such housing if they get a pay rise: that would be much too high a marginal tax rate. But people who are earning above the average wage (and £30k is well above it) why shouldn't they pay market rent, not be subsidised by everyone else?