The Pin Factory Blog

One of the most heartening things about the Northern Rock bank fiasco is how determined the UK's government is not to nationalize it.

In past decades, a Labour administration would have thought nothing of nationalizing a bank, and maybe a few of its customers and suppliers to boot, because the Labour Party believed in public ownership. Indeed, its constitution aspired to seek control of the 'means of production, distribution and exchange'. Clement Atlee's Labour government of 1945 nationalized the Bank of England, the railways, coal, gas, electricity and steel in speedy order.

Some Labour supporters still hanker for those days. But not Labour ministers. Certainly not after the last move to renationalize something that Mrs Thatcher had privatized – Trade Secretary Stephen Byers's replacement of the Railtrack infrastructure company with a new body, Network Rail. It's proved unaccountable and hugely expensive.

The minister who had to try to make this costly train crash work was of course Allister Darling, who is now taking all the Northern Rock flack. Having loaned the bank £35bn to prevent worried savers forming queues outside its door, he is now staring at another £15bn, perhaps, to take it over and try to turn it into a saleable proposition. That's a bill of around £1800 per taxpayer.

But absolutely nobody in government is suggesting that the government should continue to run the Northern Rock indefinitely. So as I say, that's heartening. Now if only we could convince them that governments controlling things is just as bad as them owning things...

The evidence continues to come in. If we want a better health care service than the NHS we're going to have to pay attention to patients' incentives. Thus, to introduce co-payments for treatment. Free at the point of use isn't efficient and is thus inequitable.

We've said it before and no doubt we'll have to again. We really don't as yet have the best copyright system possible.  

So if politicians don't actually do very much, why do we have politicians? 

Tsk, silly Netsmith. So that they don't have to be subject to the same laws as the rest of us, of course. 

A truly stunning calculation, quite horrific.

Well, yes, of course the BBC is biased: just not perhaps in quite the way that you expect. 

And finally, Trevor Phillips would like to have a law that doesn't involve lawyers. Good luck there Trev. 

At last, Britain's Conservative Party is getting in touch with its masculine side. And doing very well as a result.

David Cameron spent a year turning his rather unpromising colleagues into something that more resembles a team, that seems engaged with the issues that affect ordinary people's lives, and that in part is almost human - or at least gives a convincing impression that it might be. Along the way he mightily irritated a number of Conservative supporters who picked up the message that health and education just needed more cash, louts should be loved, and tax cuts were right off the agenda.

None of it stopped the Conservative Party's drift eastward (or even east-southeast) in the opinion polls, but what a difference an election makes - even one which UK Prime Minister Gordon Brown bottled out of. Suddenly some real policies had to be produced. Particularly one or two that would induce Conservative supporters to get out and vote, rather than just stay home in disgust. Shadow Chancellor, George Osborne, picked a fairly innocuous one - that only millionaires should pay inheritance tax. And whoosh! Suddenly the opinion polls were going north-northeast.
It's happened again. The Conservatives are now seven points in front of the Labour government, thanks in great part to their latest policy promise - getting the scroungers off welfare.

It's a policy almost as feeble as the inheritance tax one: the idea is that only after two years would people be faced with the choice of doing community work or losing part of their social benefits. Under the plans we put forward in Working Welfare, benefit claimants would face immediate work requirements – and if they did nothing, they would get nothing. Nonetheless, Conservative supporters (and quite a few others) are just fed up working hard and paying taxes when they see other perfectly able folk sitting around doing nothing on their money, so the Tory proposals have gone down well.

Some pundits say the Conservatives have to go back to being soft and cuddly so that they might woo over LibDem supporters. But the new approach seems to be working perfectly well, thank you very much.

The pilot of an aerobatic biplane landed in the recently mown field of a Scottish farmer to make a few adjustments to his engine. While he was tinkering with his machine, he noticed the Scotsman and his wife watching with a great deal of curiosity. The Scotsman asked the pilot how much he would charge to give both he and his wife a ride.

'Well', said the pilot, 'Normally I charge $50 dollars each, but if you are both completely quiet throughout the flight, the ride will be free of charge. If I hear the least amount of noise, you will owe the full fare.'

The couple quickly climbed aboard, and the pilot taxied and took off. Immediately, he proceeded to put his plane through all of its paces: barrel rolls, stalls, spins, split S maneuvers, you name it and he did it. The couple in back were completely silent throughout the thirty minute flight.

Upon landing, the pilot said, 'I really have to hand it to you for keeping quiet through all that!'

'Aye', said the Scotsman, 'but I'll admit, ye almost heard me when the wife fell out.'

9. "It is wrong to allow bright children to go to special schools. This deprives the ordinary schools of their beneficial influence." 

If you regard children as the property of the state, existing to serve it, then it is explicable why the bright ones should be regarded as a scarce commodity, and rationed accordingly. The idea of allocating their "beneficial influence" equally through society follows from the same twisted logic. It is a pity that this is only applied to intelligence. Why should not the good-looking children be shared out equally, so their peer group has equal access to the pleasant sight of them? Perhaps the kind ones should be spread so that all may benefit equally from their sweet disposition?

The vicious notion is that children, whether bright or not, should be regarded as the instruments of the ends of others, instead of ends in themselves. Children do not exist to serve the purposes of the state, it is the other way round. The concern should be with what is of benefit to the individuals concerned, rather than with how they can be made to serve some ideological view of society.

Behind the idea often lurks the doctrine of egalitarianism, and the feeling that children really ought not to be brighter than each other. With this comes the determination that nothing should be done to encourage it. And this involves the rejection of special schools where the bright children can feel the competitive challenge of their peers, and be pushed even further.

Not only is the view a malicious one to the children concerned, it is adverse to the betterment of society. It is very often the bright children who go on to become the achievers, and develop the new products and processes, and the new ideas that benefit the rest of society. By holding them back when they are young, we may prevent the development of that ability.

What is good politics has, as we know, very little to do with what is good economics (or even sensible such). For example, on the US campaign trail we find the following:

The prospect of many years of big government spending and major tax
cuts in the US appears to be set in stone, after both Hillary Clinton
and Barack Obama suggested plunging up to $70bn-plus of public cash
into the struggling American economy.

They seem slightly to have missed the point (and those arguing over the relative merits of either plan are like bald men fighting over a comb) that neither of the two will be in a position to actually do anything (if either of them ever are) until January 20th 2009: and it'll take them some months at least to get anything done then. Whatever problems the US economy faces now by then it will be different ones. Similarly, the day before we had this as the lead story in the NY Times:

As leaders in Washington turn their attention to efforts to avert a
looming downturn, many economists suggest that it may already be too
late to change the course of the economy over the first half of the
year, if not longer.

Well, yes, interest rate changes take 18 months to work through, both tax and spending changes take at least 6 months to put into place (never mind the time taken to make a difference) so to call this "news" seems a little presumptuous.

Of course, what could be done instead is to look at what actually does help to avert, shorten or mitigate recessions. The unfortunate thing there is that such good economics requires that politicians do nothing (a blessed state of affairs all too rare) but said sensible such is unfortunately bad politics.

For if things will get better without politicians doing anything, why, people might start to wonder why we have politicians at all and that would never do now, would it? 

As has been noted , Paul Krugman has successfully predicted eight out of the last none recesssions. To be fair (as we must) he made his reputation as a trade economist, not a macro one.

A new centre right blog arrives. Multiple authors, many of whom you will have heard of...(/snark)...and looking at it those you haven't as yet are well worth reading too. 

There are those really not all that sure about the automatic opt in for organ donations. Really not sure at all.

Yet another engineering/high tech project vastly exceeds its budget and no, this time it's not the UK Government responsible. Unfortunately, it's the European Union this time, so we still get to pay for it. 

Bring on that global warming! It'll save lives (as Bjorn Lomborg has repeatedly pointed out). 

For a change, ecclesiastical blogging. Really rather like political blogging except perhaps more habitual.

And finally, a summation of the differences between China and India and, well, it is Government work. 

Is there a new interventionism in the air in Britain? Faced with a credit crunch, Chancellor of the Exchequer Alistair Darling has said pretty plainly that he believes it's time for interest rate cuts. That's despite the fact that the Bank of England is supposed to be independent. But then who appoints most of the people at the Bank who decide interest rate policy? Yes, you guessed it.

In response to soaring energy - up to 24m homes face double-digit rises in their fuel bills - bills the Chancellor has also demanded an urgent meeting with industry leaders. And officials and watchdogs like Sir John Mogg, chair of the Gas and Electricity Markets Authority, and Alistair Buchanan, chief executive of Ofgem, are being pulled in for talks.

Again, energy prices are supposed to be depoliticized, and the Chancellor cannot order the (private-sector) energy utilities to cut their prices. But he can kick and scream in the hope that the regulator might do so.

Pricing - whether it is the price of credit or the price of gas and electricity - in this country is a sham. Politicians still have too much influence. This week the Bank held off cutting interest rates, but everyone expects it will do so next month. The political pressure will continue to mount. But then politicians want to fix the immediate problems, and if that simply stokes up inflation later, well, so be it. It's not that the Brown government is suddenly more interventionist than the Blair one. The problem is that its principal members are even more cowardly.

A man who had lived his whole life in a desert was on his way to visit a friend. He'd never seen a train or the tracks they run on. While standing in the middle of the railroad tracks, he heard a whistle, but didn't know what it was. Predictably, he was hit by a passing train and thrown to the side of the tracks, with some internal injuries, a few broken bones, and some bruises.

After months he had recovered and was at a party at his friend's house. While in the kitchen, he suddenly heard the kettle whistling. He grabbed a baseball bat from nearby and battered the tea kettle into an unrecognizable lump of metal. His friend, hearing the ruckus, rushed into the kitchen, and seeing what had happened asked, "Why'd you ruin my good kettle?"

The man replied, "Man, you gotta kill these things when they're small."

8. "Big business only cares about profits."

The implication of this is that everything else is ignored or over-ridden in their reckless and immoral pursuit of profit. It's not even close to the truth. The fact is that business is carried out by business-people who have the same moral constraints on them that other people do. Indeed, because of the nature of their activity, they have rather more.

Business isn't about swindling people or tricking them into parting with what they can ill afford for something they don't want. On the contrary, the business-person gives them goods and services they'd rather have than the money. In return they give up something the business-person would rather have – the money. Both parties gain from the transaction. The overwhelming majority of business-people engage in honest, even honourable activities.

Business activity is based on trust, in that the buyer trusts the seller to deliver the goods, and that they will be of the expected quality, while the seller trusts the buyer to pay for them as agreed.

Of course business seeks profits; that's the point of it. But if it seeks to maximize short-term gains by sacrificing quality and integrity, it's in trouble, and it knows it. Businesses gain new customers and repeat customers by their reputation for fair dealing. It's a long-term strategy to build up and sustain trust. It's against a firm's interest to short-change its customers or fob them off with shoddy goods. Its reputation and its trade will soon suffer.

Big business cannot meet its customers face to face as a small trader can to build up a relationship of trust. This is why it is more important for big businesses to protect their reputation and their brands; it stands in the place of the personal knowledge that characterizes small firms. Business cares not just about profit, but also about keeping its good name.