The Pin Factory Blog

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. 

24. "A market economy offers people no more than a crass, materialistic life."

What market economies offer are choices and opportunities. They allow people to acquire the wealth that brings new things within reach. In some cases these will indeed be material things. If a person can become sufficiently well off to afford decent housing, enough to eat, adequate clothing and shoes, these are all better than their absence.

But a market economy brings more. It allows people to buy the things that make life more rewarding. They can enjoy music, communicate more readily with each other, travel to places previously out of reach. These, too, are the result of material things. They do not represent a crass materialism, however, because they give the chance to improve life's social interactions and its mind-broadening opportunities. It might take material objects to enjoy music and to visit exotic places, but a person with access to them does not lead a crass life in consequence.

Even beyond the personal possessions that can add to life's experiences, the wealth created by a market economy enables people to afford better services such as health an education. It enables them to enrich their surroundings with fine architecture. Better education opens doors to life's opportunities, and good health brings the possibility of activities such as sports and hobbies. They require material goods to become possible, but the opportunities they offer are far from materialistic.

Wealth is a tool. It enables the holder to trade it for the things they value. Some might indeed use it to acquire more possessions; it is their choice. For others it might be for enjoyment of the arts, the theatre and the concert hall. Some might seek satisfaction in beautiful objects such as antiques of works of art. The wealth created by economic growth gives access to all of these, and it allows us to express our personality by the choices we make.

Although it is now widely accepted that markets and their underlying institutions are the best way to organise economic relations between people, certain fields of human activity have remained stubbornly resistant to such thinking.

The provision of healthcare, for example, is hindered throughout the world by the belief that governments should take the driving seat. As a result, the patients in developing countries have to endure decrepit state-run healthcare systems, while the UN and its agencies promote all kinds of failing centrally-planned initiatives to combat diseases such as HIV/AIDS and malaria. All this is lavishly funded by taxpayers in richer countries, whose money often doesn’t make it past the personal bank accounts of corrupt officials in ministries of health.

In order to help shift the global health consensus towards something more practical, the Campaign for Fighting Diseases have started a blog – www.fighitngdiseases.org/blog. It promises to be well worth reading.

There's an interesting point over at the Globalisation Institute. Tim Worstall quotes the fact in the Telegraph that this year for the first time in human history, more of us will live in towns rather than in the country. He rightly points to the abject poverty of rural life in many parts of the world, but quotes the Telegraph article on what urban conditions mean for some.

Shenaz and her husband, Subir, both in their early twenties, made their living sifting household rubbish for metal, squatting on the floor of their shack searching for anything that might be worth a few precious rupees - an iron bed spring, a brass door catch, a few strands of copper wire - anything that had a price with the scrap dealers. Like millions of others, they had come from a village in rural India to scratch a living in the city...

Shenaz and Subir lived on the edge of an open sewer, in a wooden box not much bigger than two large packing cases, actually and metaphorically at the bottom of India's billion-man economic dust-heap. Surely village life was preferable to this, I wondered? Shenaz smiled. "Here we eat every night," she said, "and we even save some money."

That's it in a nutshell. Poor though it is, it's still better than the miserable and precarious lot of many of the world's rural poor. As Tim says,

That peasant life, out in the villages, that hip wading, is even less attractive. Yes, of course, we all want the lives of those slum dwellers to get better: that means more development, more wealth creation, more trade, yes, you've guessed it, more globalisation.

To be governed … is to be watched, inspected, directed, indoctrinated, numbered, estimated, regulated, commanded, controlled, law-driven, preached at, spied upon, censured, checked, valued, enrolled – by creatures who have neither the right, nor the wisdom, nor the virtue to do so.

– Pierre-Joseph Proudhon

So why do so many nations insit upon having an integrated steel works? Could it be the same reason we Brits started using iron?

As so often, Frank Field speaks great good sense. 

Tsk: once again the media is allowing the petticoats, the artifice, to show.

A possible reason why the reading of literature is in decline: the way that students are taught to read literature. 

It would appear that at least one part of the climate change scare story is incorrect, the possible slowing or ceasing of the thermo-haline circulation. Far from doing that, increased temperatures should strengthen it. 

Yes, really, in some places you need an auctioneers' licence to sell things on e-Bay. For the good of the consumer, of course, although there's more than a suspicion that the professional auctioneers have something to do with it. 

And finally, a selection of most excellent advertisements. 

Following the online tax return debacle, Adam Hart-Davis, the face of HM Revenue and Customs, questioned the way tax is collected in this country. As well as apologising for the online website crashing on Thursday, he described the VAT system as absurdly complicated and said it was a mistake for Gordon Brown to have amalgamated the Inland Revenue and Her Majesty's Customs and Excise in 2005. That move was analogised at the time in the Financial Times with trying to cross a Terrier with a Retriever.

It is worth considering how we got to this state of affairs. The idea has been to save money by replacing the monolithic human system with a complex computerised one. However, implementing the new system has proved more prodigal than its predecessor, with the added disadvantage of putting many people’s personal data at risk. With all the mistakes too numerous to recount, the government is rethinking its affection for these grand IT projects. Given that that the cost to tax payer of abandoned IT projects alone since 2000 stands at £2 billion, this is clearly too little, years too late.

Private industry chiefs have been critical of the incompetence of this government. Rob Steggles of NTT Europe Online arguing: "If an organisation’s web presence fails to perform at a critical time, both reputation and revenue suffer." However, unlike the private sector, HMRC will not go out of business and as such the chaos continues.

The solution is surely to simplify the tax system. In the same interview Hart-Davis argues for a simpler tax system. He suggests that a flat tax system would be both easier for the taxpayer and will ultimately bring in more revenue. He is absolutely right. With a flat rate of tax, a tax return could be completed in matter of minutes on the size of postcard, abolishing the need and unbounded expense of either a bloated bureaucracy or complex computer system.

23. "Many things just cannot be produced by the market system, including such services as defence and law and order."

This may be true, but is not an argument against having the free market produce what it can. Society might decide to guarantee the collective provision of some services, such as defence and the administration of justice. This has little bearing on whether its rail transport or its health should be produced in the public sector.

In any case, market forces can play a surprisingly large role in even the "core" public services. Over half of Britain's police, for example, are private. They work for private security firms which perform police functions. Much military work is contracted to private enterprise, including maintenance of military bases, and the supply and servicing of equipment.

Private justice is used routinely in Alternative Dispute Resolution (ADR), when firms specify in contracts that an agreed arbitrator is to be used in the event of dispute. Privately run prisons are widely used in the USA, and have been successfully introduced in Britain, too. Even the role of central clearing bank, assumed by many to be a core state function, was at one time ably performed by the private Suffolk Bank.

A generation ago in Britain people thought that only the state could deliver mail, connect telephone calls, or collect the garbage, among the dozens of activities it ran. Private businesses do them now.

There is scope for greater use of free market forces in many areas of social provision. The state may wish to guarantee the supply, but it usually finds it more efficient to use private business to actually produce it. Competing private businesses have to attend to consumer preferences and keep up with innovations in both equipment and service. They are not subject to produce capture as state operations are. It makes sense to introduce market forces wherever possible, even in the state's core functions.

Travelling to America has, in recent times, become arduous. Increased security due to the threat of terrorism now means the weary traveller is faced with long lines, impersonal questioning, scanning of index fingers and a snapshot of your face. The duty to protect is a core part of national government, but it always seems that the 99 percent of us that travel to the States with lawful and legal intentions are being treated as though we are all criminals. This has turned many away from travelling to the United States, and things don't look set to improve.

We will now be faced with a new challenge: a 10 finger scanner that the Department of Homeland Security is aiming to have at all points of entry in the US by the end of 2008. These scanners are linked directly to the FBI’s criminal database and automatically scan to see if you are wanted or are on any of their lists, be it terrorist or otherwise. (There have already been wrongful arrests relating to this; I expect there to be more over the coming months). We can marvel at the innovation, but surely we must also ask if it is really needed and should so many innocent travellers have to endure it?

Yes, the state must protect its citizens. But the state is also increasingly showing that they have no processes in place that do not tarnish us all with some degree of guilt. The rise in usage of scanners and ID cards is really a government admission that they do not really know how to protect us. It is time for us to ask for protection from someone with better ideas, and an approach that does not invade our privacy, but only invades the lives of those that wish us harm.

Given the jitters across financial markets it is nice to see that an entrepreneurial German airline is offering a nudist flight from Erfurt to the Baltic island of Usedom. A gap in the market if ever there was one. It reminds me of Seneca’s observation that "the good things which belong to prosperity are to be wished, but the good things that belong to adversity are to be admired" (but from a distance, of course).