The Pin Factory Blog

What previously was a matter of professional self-regulation is soon to be taken over by new government-regulated bodies. The conduct of GPs, in particular, will soon be subject to much greater bureaucratic scrutiny thanks to pending government legislation. The legislation will enforce the appointment of a ‘responsible officer’ for every doctor’s office in the United Kingdom.

This is all about risk. By comparison: GPs in Germany pay only about 400 Euro per year for professional insurance. British GPs pay as much every month. The best explanation for this huge discrepancy seems to be the strict gatekeeper role of GPs in the UK. Whereas in Germany everybody is eligible to see a specialist of his or her choice, in Britain NHS (and even private) patients need a referral from their GP for each contact with a specialist. This inevitably results in delays for state-of-the-art diagnosis, often leading to unnecessary suffering and postponed treatment. This is certainly the weakest point of the paternalistic NHS system, which incorrectly prides itself on equal access to health care.

Trying to mend this with a validation system overseen by an imposed, personal ‘responsible officer’ for each doctor is likely to make things even worse. GPs managed to retain their basic freedom as self-employed contractors in 1948 when the NHS was set up, but are set to lose as responsibility for their conduct is transferred to a state-regulated officer. Inevitably, doctors will be infantilized in the same way as NHS patients have always been – and patients’ access to specialist care will be limited even further. Because GPs just don’t have the same diagnostic equipment at their disposal as hospital doctors, putting them in charge of specialist referrals is, at best, an imperfect system. But putting government-sanctioned ‘responsible officers’ in charge is even worse - ‘responsible officers’ will not be able to make effective clinical decisions because they will, most likely, not even be trained doctors.

A market-based solution would be to give patients open access to specialist care. They would be happy to exercise their natural responsibility for themselves.

Reports that the Department of Transport is kick-starting a ports privatisation programme should be welcomed. There are currently over 50 Trust Ports, all steeped in history. Most are subject to legal complexity: a similar situation applied to the many former Statutory Water Companies prior to water privatisation in 1989.

Dover, a leading Trust Port, is effectively up for sale, with a tentative £300 million price tag. Obvious bidders include the French ports sector - given the heavy freight volumes between Dover and Calais - and other UK ports companies. In fact, apart from the publicly-quoted Forth Ports, which – though Scottish-based – owns Tilbury, most major ports are owned by private equity, whose shareholders place a high premium on their solid earnings. Indeed, the UK’s leading privatised ports group, ABP, was bought out by private equity in 2006 for an impressive £2.8 billion, partly due to its property assets.

At Dover, a local consortium is to the fore; whether it can prevail against the larger funds wielded by both French ports groups and private equity is doubtful. Other Trust Ports may be up for sale, including Blyth, Harwich, Milford Haven, Poole, Shoreham and Tyne. More generally, it is encouraging that the Coalition is pursing privatisation, both through the sale of High Speed 1 and by launching into the complexity of Trust Ports – experienced lawyers in this arcane area should expect heavy bonuses.

In the ASI’s recent publication, The Party is Over, it was estimated that £16 billion could be raised from privatisation sales – prior to any disposals of the Government’s bank shareholdings. The £1 billion earmarked from the sale of Trust Ports may need upgrading.

Given that the venerable Dame Vera Lynn of ‘the white cliffs of Dover fame’ has already set out her views about the planned Dover sale, is the process now underway?

I have to admit that I'm having trouble understanding the Naomi Klein phenomenon. The part I do understand is her fame as the author of a book called No Logo, which turned her into a global brand name for those complaining about global brands. Fame, yes, but I am suprised to find out that it's not as a disproof of the contention that only the British do irony. Looking at what she actually writes confuses me further:

Even in the wealthy United States, most people earn less than the average income.

We'll assume, in kindness, that she means the mean average (for of course the definition of the median is that 50% minus one person does indeed earn more), but even then it's a very strange statement, one to which the answer is, of course! Income is bounded at the bottom at zero (while it is possible to have a negative income in a year, as I know, we don't actually count incomes in that manner) and not bounded on the up side, the mean average therefore always being higher than the median and thus higher than what the majority earn. Even given this, quite what it has to do with the wealth or not of the US escapes me. 

That means it is in the interest of the majority to vote for politicians promising to redistribute wealth from the top down.

That contention being true only if economies are a zero sum game: only if the amount of income or wealth possible is fixed. As even a cursory glance at historical incomes will show, whether we look 500 years back or 50, this simply isn't true. Thus it would indeed be in the interest of the majority to vote for policies which increased the size of the pie rather than simply reslice it.

It's a quite wonderful example of garbled thinking to my mind, but the real treat comes a little later in the piece. Having implied that the poor were suckered into first the stock market boom and then house buying, both activities which were too risky for them, she then says:

To avoid regulatory scrutiny, the new trend is away from publicly
traded stocks and toward private equity. In November, Nasdaq joined
forces with several private banks, including Goldman Sachs, to form
Portal Alliance, a private-equity stock market open only to investors
with assets upward of $100m. In short order, yesterday's ownership
society has morphed into today's members-only society.

Umm, the Portal Alliance is a market for trading "144a" stocks: those that are deemed too risky to be dealt in by retail investors. The very structure of the market is determined by the Government looking to keep the Mom and Pop investors away from the clutches of the greedy capitalists. And she's complaining?

No, I'm sorry, I simply don't understand. 

I have written before about the failure of the Mayor of London to face up to the RMT Union. Now we are seeing the repercussions of that initial weakness with news that the RMT have voted to strike over pay, working conditions and some 3,000 jobs feared to be at risk.

Workers will begin a 48-hour strike at 1859 BST on 9 June. The response from TfL has been swift and non-conciliatory:

The RMT leadership has failed to engage in any meaningful talks on pay, instead submitting a wildly unrealistic claim - demanding a 5% pay rise for fewer hours in the middle of a recession. On jobs, the RMT leadership knows full well we are seeking to end the duplication of back office jobs and that no front line staff will be affected. Our offer guarantees real wage increases for the next five years. Very few Londoners have that level of certainty for the future.

The battle lines are drawn. If the RMT does not back down, nor should the Mayor. One thing is for sure: Londoners would be near-unanimous in their support for confrontation.

In truth, the fight will not be won until the London Underground is privatized. This is certainly easier said than done; it is the case for most industries that once they have been touched by the inefficiencies of government, putting them back on the straight and narrow is a long and often painful road. Nevertheless it is the only way out of the mess we are in and it should not stop Boris doing the right thing. Let it not forgotten that before his makeover, he was a disciple of Thatcherism. If he could just follow his intellectual instincts as opposed to his political ones, there is no reason why he could not be the person to revolutionize London’s ailing underground system.

Health is an area where the gains of one would not normally come at the detriment of others. If one person is cured, it does not usually involve another person becoming ill. As society becomes wealthier and better educated, most of its members ought to have access to better health and greater longevity, without impeding the ability of others to do likewise.

Alas, the NHS has changed that. Given its universal provision and its necessarily finite resources, decisions have to be made about which treatments and procedures can be afforded and which cannot. In a recent case a leukemia sufferer was denied access to a possibly life-prolonging drug because the NHS regarded the £30,000 a year cost as an ineffective use of resources, given likely clinical outcomes.

The point is that within a closed system of finite resources, each treatment has to be assessed to see if it is worth denying funding to other treatments in order to supply it. Television reporters interview someone demanding extraordinary (and very costly) treatments for their brain-damaged premature baby, without ever alluding to the brutal fact that others must die if it is to be kept alive. In the NHS people have to ask if that extended life is worth more than the ten kidney patients who might otherwise have been saved. They have to ask if a drug which might offer a few extra years to one patient is worth the suffering to dozens of elderly patients who will not receive their hip replacements if the money is spent elsewhere.

The NHS has turned health into a zero sum game, in which the survival of some takes place at the expense of the death or suffering of others. The QALY, or quality-adjusted life year, was devised to facilitate these complex, and some would say repugnant, calculations. Many people also blanch at the way the NHS can withdraw all treatment if people obtain privately the drugs the NHS has refused to allocate to them. Gods might behave like this, but men and women shouldn't.

There has to be a better way, and it might involve encouraging charities and communities to rally round people who lose out on NHS allocations, and raise extra funds to support them. That breaks out of the fixed pie of the zero sum game, and brings in additional resources instead of taking them at the expense of others.

The pressure has risen this week on the Chinese government to address their stance on universal rights and political reform. In the fallout from 
Chinese dissident Liu Xiaobo being awarded the Nobel Peace Prize, the debate has reignited over the Chinese government’s attitude to freedom of speech and its detention of political activists. The issue has escalated over the past few days with the release of open letters to the Chinese government, one from a group of Communist elders and another on Thursday night released by a group of writers, lawyers and activists.

These letters aim to highlight the lack of freedom in the country, attacking the repressive government that not only controls the public’s freedom of speech but also their own officials’. Even China’s Prime Minister Wen Jiabao is not immune, with his speeches that include references to political reform being censored within China. Unfortunately, it appears that so far the impact of these letters has been limited – Chinese Twitter users say that all references to them have been deleted by the government from Chinese message boards. However, with the increasing growth in online social media as a form of communication it is hard to see how Chinese censorship on such issues is sustainable.

The 5th Plenum of the Communist Party of China began this weekend in Beijing, and it is hoped by the signatories of both papers that their actions will influence the speed of political reform. The letter released yesterday claims that, if it truly wants become a “great nation” and a key player on the world stage, China must embrace universal rights. The Chinese government cannot insulate its internal repression from international scrutiny any more – though it currently appears that the Chinese government is resisting calls for political reform, external and internal pressure can’t be ignored forever. Let’s hope that the risk taken by these few brave men and women in speaking out is not in vain and that someday China will become a country where universal rights prevail and the people are free.

Suppose you were an idiot and suppose you were a member of Congress. But I repeat myself.

Mark Twain

The Nobel prize is sufficient to fund the EU agricultural policy's destruction of food markets and third world countries for 14 minutes.

— Johan Norberg (@johanknorberg) October 12, 2012

Should we elect our leaders by lot? There's an ad in the current edition of Standpoint magazine saying just that, and calling for a 'people's parliament' and 'citizens' juries' which apparently, we are told, make much better policy decisions than so-called experts.

I've often said that I'd prefer to be governed by the first twelve people in the phone book than by 650 career politicians and hundreds more party placemen posing as peers. But only so long as none of them actually want to do the job. The problem in any system of government is not how to choose our leaders, but how to restrain them. An elected government with unlimited powers is no better, in my book, than a government chosen by lot with unlimited powers. And I don't think that members of the general public, taken jury-service style off the street for a short stint in government (it couldn't be a long one, because they've all got jobs and businesses to look after) would make better decisions than career politicians. At least the careerists know there are limits - they may be in office now, but eventually they'll have to live in opposition. But people who are parachuted into government for a few weeks or months will be focused entirely on the present. The future won't be their concern.

However our leaders are chosen, we need rules to keep them in their place. In Britain, we developed these rules over many centuries, largely through struggles between kings and commoners (or kings and aristocrats). Trial by jury, habeas corpus, double jeopardy - all the rules that ensure our leaders can't just grab us, torture us, stick us in jail and forget us without some form of due process of law that involves ordinary people as well as officials. The trouble is, in the last ten years all that has been torn up. However we choose our leaders, those basic rules of personal liberty need to be reasserted.

So, 22 crisis summits on since the eurozone crisis erupted, are the problems now solved? Hardly. France was very keen to push towards much deeper economic integration of the eurozone. Germany, which will end up paying for it, wasn't so sure. What we have ended up with is an agreement to create a single eurozone bank regulator, sometime in the summer.

The problem isn't just that summer may be well too late. Record numbers of Spanish households and businesses have been defaulting on their debts, the Greek government needs more cash to stay afloat, and southern Europeans have been putting their spare cash into bank accounts in the north or property in the UK. Nothing seems to have changed since 22 summits ago.

Being British, I find it hard to be objective about the French, but their idea is actually basically right. A monetary union can only hold together if you have a fiscal union as well. That is, a centralised tax and welfare policy. That is because in a monetary union, states cannot devalue. A country that produces its own currency can respond to economic problems by devaluing – much as happened in the UK during the years after 2007. That makes its good cheaper abroad, boosting exports, and at the same time makes imports costlier, so people economise on them. Eventually, the country starts to recover. But states such as Greece and Spain cannot devalue. When crisis hits them, they really suffer.

The US has a monetary union between its 50 states – they don't all produce their own currency – but it is also a fiscal union. If there is a problem in one state, such as a devastating hurricane, federal funds go out from Washington. That buys the breathing space for the local economy to recover. The eurozone could in theory become such a monetary and fiscal union, and the problems of the Club Med countries could be alleviated – but only by turning the eurozone into an effective superstate, like the US federal union. The trouble is that Americans think they have a lot more in common with other Americans than, say, the Germans think they have in common with the Greeks. So few countries would submit willingly to that central control.

The compromise thrashed out this week is that there will be no all-out fiscal union, but a step towards it – a banking union with a single bank regulator, namely the European Central Bank. The idea is that the ECB can prop up failing banks in the troubled states, and so avert a financial crisis, without anyone going so far as to say tax, welfare and spending policy should be completely centralised.

The argument is that the ECB can exert some discipline on hopeless banks like those in Spain, or cash-starved banks like those in Greece. And maybe a touch of discipline like that would be useful. However, to put all the eurozone's banks in one regulatory basket is asking for trouble. Central banks have not proved themselves to be good regulators. The Federal Reserve, set up to end bank crises and closures, managed to close down the entire US banking system itself in the early 1930s. The Bank of England managed to turn a drama into a crisis by squeezing down on UK banks in 2008, just as they were running out of money – hardly fulfilling its role as 'lender of last resort'. It might well do a better job of regulating banks than the Financial Services Authority, which didn't even see the crisis coming, but it is hardly a shining example.

And this is the snag in the eurozone. A one-size-fits-all banking regulator will not actually fit everyone. And when it does make a mistake, the mistake will be catastrophic because it will affect the entire eurozone, not just a single country. It is asking for real trouble.