Less Than Meets the Eye


When you read the fine print of the G20 agreement, it shouts 'heroic hypocracy, unreliable sums, weak promises, meaningless language and self-serving commitments' according to the City financial analyst Miles Saltiel in a briefing paper for the Adam Smith Institute.

The hypocrisy is signalled by the communique's call for 'propriety, integrity and transparency'. It's hard to take that seriously when at the same meeting, China and Russia signed up to open markets, and Saudi Arabia agreed to family-friendly employment policies.

As for the sums, the headline '$1.1 trillion of financial stimulus turns out to be more like just $25 billion of new money. The IMF's '$500 billion' and the '£250 billion' in Special Drawing Rights are just an underwriting commitment, with no new cash. The '$100 billion' fund for the world's poorest is largely all announced already, and will come from private rather than government sources. The extra '$250 billion' for trade finance is also mostly a re-hash of old commitments, with less than $25 billion of new money to subsidize trade finance. The '$6 billion' to be raised by selling the IMF's gold reserves boils down to a $2 billion trickle over three years.

Promises to the poorest countries, and commitments to free trade, look weak when the Doha trade round lies derelict. And despite some fine language, there is no clear solution to the problem of toxic bank assets. Meanwhile the proposed international unification of accounting rules is, says Saltiel, 'about as likely as the Second Coming.

"The G20 leaders are more concerned about their domestic problems than their international responsibilities," concludes Saltiel. "They turned up in London for a photo opportunity. Their talks convey a sense that there is little they can do to change events. And they are right. Eventually, the world economy will trade its own way out of the current confusion, as it always does."

To read Less Than Meets the Eye click here

Censoring the Adam Smith Institute


If it were not for Google Alerts I would never have found this website. In fact, if the number of comments are anything to go by, nor would anyone else. Titled ‘Censoring the Adam Smith Institute’ it contains an article to end all parodies of statists, showing with clarity exactly what we are all up against.

Apparently the author of the blog has:

Asked the Netherlands Interior Ministry to censor the website of the Adam Smith Institute, www.old.adamsmith.org. The Institute is the most influential free-market lobby in the United Kingdom. As with earlier censorship proposals, I requesting listing on the national police blacklist, which results in blocking by providers.  For the procedure and the background, look here:

The request is based on three grounds:

  1. The Adam Smith Institute seeks to subject others, against their will, to "free-market economic and social policies
  2. The organisation did in fact succeed in that, and had great influence on the Thatcher regime
  3. The organisation obstructs the work of regulatory authorities in the financial sector, by harassing them, lobbying against their functions, and by depicting them as 'enemies of freedom' - and in doing so, it facilitated massive fraud and mismanagement.

He has also asked that the “Justice Ministry to issue exclusion orders on the Institute's President Dr. Madsen Pirie, and its director Dr. Eamonn Butler, barring their entry into the Netherlands, on the grounds that they obstruct the work of the financial regulatory authorities. That request is problematic since they are presumably EU citizens, and can benefit from that status in immigration law (although they undoubtedly despise the idea themselves)."

Lunacy, yes; but with the way that freedom is going, the future might just hold such dark visions of justice.

Blog Review 926


A fascinating paper. Which works best in exploration, public or private? And given the answer, what implications does this have for NASA and the ESA?

Netsmith once bought some old coins to melt for their metal value. So discussing the way in which governments give away an option with their coinage makes sense.

Where the Irish first tread.....although do you think that British politicians should be limited to only a 10% pay cut?

What at first appears to be a strange religious ceremony becomes, in the right hands, a solution to the Middle East.

How to beat the smoking ban.

An awful lot of other so called safety laws don´t work either.

And finally, spelling, musings and sarcasm.


Green budget, stupid budget


Now Alistair Darling and Mervyn King have told him there's no money left for another fiscal stimulus, it seems Gordon Brown is desperately searching for some policy gimmicks to shove in the forthcoming budget. And it looks like his latest big idea is a 'green new deal', which will be "a job creator, a quality of life improver, and an environment-enhancing measure", as he told The Independent.

The trouble is, the money has to come from somewhere. Government cannot give to any one sector of the economy – however deserving – without first taking away from the private sector as a whole. If they tax, then they take away funds directly. If they borrow, then there's less capital available for businesses to access. And however they do it, the government is using resources that would otherwise have been supporting jobs and companies elsewhere in the economy. No new purchasing power is created.

These green jobs that Brown says he'll create will only come at the expense of jobs in other sectors that are not so politically appealing. And the businesses he 'stimulates', will only be stimulated because others are deprived. 

Moreover, are these green industries going to create wealth or are they just going to be a sink for the taxpayers' money? Even if they are profitable, who's to say the same resources wouldn't have been put to more productive use elsewhere? Government is notoriously bad at picking winners. In fact, they're much better at picking losers.

None of this is to say that I don't think the 'green economy' has a future. I do. The possibilities technological advance brings are endless. But they will be better realized if they're subject to the competitive forces and discovery processes of the market, than if they are simply the playthings of politicians chasing headlines.

Peter Kellner at TNG


Tuesday's meeting of The Next Generation group at the ASI was addressed by Peter Kellner, President of the polling organization, YouGov. He told everyone that if they were looking to do spread-betting based on his insights, it would have to be a very broad spread in that anything was possible from a narrow Labour lead to a Tory landslide.

He thought a 2009 election unlikely, and said the outcome of a 2010 election depended heavily on whether the government were perceived to have weathered the economic storms. If people's personal economy (job, spending power) felt good, there would be an upturn for Labour, even if the global economy were still in recession. He could not say how big that upturn might be, but pointed out that the Tories needed to be several points ahead even to get a dead heat with Labour because of quirks in our electoral system.

His basic point was that the uncertainty arose because elections are linked closely to economic ones, and the economy is in uncharted waters.  Although he himself and his TNG audience were concerned about issues, he said the electorate at large was influenced more by 'valence,' whether the parties were felt to be competent and sympathetic, rather than to any specific policies.

He answered questions about which events might influence the election's outcome, and received a chocolate rabbit with his round of applause. The ASI's Next Generation members were delighted to be given Easter eggs in lieu of the usual canapés or sandwiches.

Poverty, equality and hope

It is not people being poor that causes social ills from school failure, teenage pregnancy, crime and short life expectancy, but the fact that some people are poorer than others. It is not the level of income, but the differences between levels that really matter. It follows that fighting poverty is the wrong battle except if it reduces inequality. The right target is inequality and never mind if reducing it were to leave the poor as poor as before. They, and society as a whole, will still be healthier and happier.

This, stripped of rhetoric, is the latest twist in the convoluted chain of arguments for altering a more or less liberal order out of all recognition until justice proper is decisively subordinated to what some call "social" justice. Explicitly shifting the target from poverty to inequality, to the point where poverty becomes irrelevant as long as it is the same for all, is a radical novelty.

There are more potent ways of fighting poverty than soaking the rich. Inducing people to form and preserve two-parent families, if indeed they can be induced to do so, could be wonderfully effective. Another very potent means is to raise the demand for labour, the main or only thing the poor have to sell. One obvious cause of rising demand for labour is capital formation which, in turn, is fed by public, corporate and personal saving. We can't predict what would happen to corporate saving, but we know that public saving is generally negative. Personal saving is typically much greater proportion of high than of low incomes. Hence the same national income unequally distributed yields more saving than if it were equally distributed. By saving more, the very affluent are, so to speak, raising the price they will have to pay for labour tomorrow. In any event, unequal affluence holds out more hope for the poor than equal poverty.

Extracts from Equal Poverty, Unequal Affluence published by Econlib.

Blog Review 925


Amazing how complicated it can all get, isn´t it? We balme the banks for having made bad bets and we blame them when they make good ones, too.

Or we could of course just insist that they lend to the government so that the govt can lend to hte banks which can then lend to the g.....you see how this is going, yes?

One problem with modernisers: they always want to do it their way, not allow others to simply get on with their own.

The problems with reforming campaign finance: the sensible solutions aren´t favourable for politicians and it´s the politicians who get to decide which solutions are deemed sensible...

Why is it that green products really seem to suck?

If you´re really angry at government, why not employ this method to frustrate their latest plan to track your every online move? Or this one?

And finally, the state of British policing today.


The people's bailout


Oxfam has a new report out today, calling for a 'people's bailout'. Their argument is that a fifth of the population already lives in poverty and millions more will become more vulnerable as a result of the recession, and that something must be done.

Of course, Oxfam uses a relative definition of poverty, whereas what really matters is absolute poverty. Poverty is about being unable to satisfy basic needs, not just about having less than others. But let's leave that aside for now, because however you define 'poverty', it is clear that there are already plenty of people in Britain who struggle to make ends meet, and that the recession is only going to make that worse.

What, then, of Oxfam's policy recommendations? On the plus side, they recommend raising the personal allowance so that people on low incomes pay less tax. As I outlined in this briefing paper, raising the personal allowance to £12,000 would take 7 million people out of paying income tax altogether, and be equivalent to giving the average worker an extra £1730 per year in gross pay, making them £100 per month better off. And it would only cost the exchequer £18.9bn – a sum that could easily be covered by quite modest efficiency savings (see here). In short, it's a very good idea.

On the downside, however, Oxfam wants higher benefits, more social housing, and so on. And that poses a few problems. Firstly, such measures are not affordable, especially when the government has already run up gigantic debts. But just as importantly, such measures are likely to make the benefits trap even more severe than it is now. Moreover, Oxfam's call to put welfare reform on hold is very short-sighted: it may be harder to tackle the dependency culture when times are tough, but it's actually more important than ever.

In the long run, we'll only help people out of poverty if we get the economy growing again. And that's going to be pretty difficult if uncontrolled social spending is driving up the taxes on entrepreneurs and employers.

Green capitalism


The CBI is publicly calling for the government to invest more in greening the economy. This was prompted by the low percentage of spending on green issues in the UK's stimulus package. A contributory factor was no doubt the recent withdrawal of several major energy companies from investment in a range of renewable energy schemes, particularly wind farms.

Private sector companies are, by and large, good at spotting opportunities for profit and exploiting them. The message from Shell and others is that the market is not rigged sufficiently well in favour of otherwise uneconomic projects to make it attractive for them to participate. The message from the CBI, on the other hand, is that the government should pass more taxpayers' money the way of businesses to encourage them to invest in economically dubious activities. This doesn't sound like the best way of generating either jobs or prosperity (or, for that matter, power).

Martin Livermore is the Director of The Scientific Alliance