Blog Review 925

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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

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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

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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

Quangos vs. society

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It is sometimes difficult to keep up to date with the endless stream of ever-changing quangos that seem to illicitly govern our country. With no democratic mandate or channels for accountability the damage they do to society can be underestimated.
 
The quangos have always been a natural adversary to society but it seems they are now even working against one another. The upper management of the quangos seem to be deserting the sinking ships as fast as possible. Three senior staff at the Equality and Human Rights Commission (EHRC) have left within the last couple of weeks. Maybe this is due to the inherent flaws of such bodies – Is there not a huge paradox in trying to engineer equality of opportunity?
 
The emergence of the quangos was a costly episode in more ways than one under New Labour. We have paid dearly for the dubious honour of having the quangos rule over us. There are roughly 1,162 Quangos in the UK (not even the government knows the full statistics) which run at a total cost of £63bn (equivalent to £2,550 per household). They employ over 700,000 staff – all to do boondoggle jobs which have been artificially created by the government.
 
It is not only our taxes that have taken a hit at the hands of the quangos. Our democratic rights have also been massively depleted. The heads of quangos are appointed, not elected, and as such there are no routes for accountability to the public. Yet they are still used to wield huge sums of public money and massive amounts of power. As such, they are extremely useful tools for the government when it comes to unpopular policies and legislation.
 
The prominence of quangos in our society is yet another example of government trying to help itself and promote self-interest rather than focussing resources towards those that would benefit most.

Blog Review 923

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It might not work exactly the same way here but school vouchers in Washington DC seem to provide better results at one quarter of the cost. Yes, one quarter.

More public private: Freddie Mac and Fannie Mae both went bust as did AIG. Odd how the bonuses at the first two don't generate quite the same outrage, eh?

Isn't it wonderful the way that our childrens' details will have to be put on a secure database. One so secure that MPs' children won't be on it for security reasons?

No, the theory of comparative advantage is not "fraying". You shouldn't believe everything you read in the newspapers.

What the culture of targets actually means within the NHS. Fewer appointments with GPs.

If you really want to stimulate the economy, why not liberalise it?

And finally, Sherlock gets to the bottom of the G20 mystery.

 

Blog Review 924

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One more grenade being thrown at the traditional explanation of the Great Depression's causes. Here higher unionisation and thus higher than market clearing labour rates are blamed.

Just what was it that our politicians were doing before they became politicians. Fell happier about their taking hundreds of billions to stave off a depression now, do you?

It is fun when eminent economists put the boot into other eminent economists, isn't it?

The new head office method of investing passes yet another test. Or, how driving through a motorway interchange proved that RBS was doomed.

Explaining politicians of the left, the right and the centre. The best solution to this problem would seem to be to have fewer politicians with less power.

A battle between the photographer and the police not too keen on being photographed. Unfortunately this is all over there where they have a written Constitution to preserve such freedoms.

And finally, an interesting method of working out how to pay those fewer polticians.

MP's homes: Hoon, Beckett, Darling...

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Housing minister Margaret Beckett is the latest to be caught in the 'three homes' row. (Well, the latest at the time of writing, but they're coming through thick and fast now.) That's alongside Transport Secretary Geoff Hoon and Chancellor Alistair Darling. She was given a grace-and-favour home in the grand Admiralty House on Whitehall while she was President of the Board of Trade. But she still claimed £106,000 expenses for a 'second home'. Hoon went one further, renting out his London flat while he actually stayed in a grace-and-favour apartment.

Two things are shocking about this. First, I'm sure that these ministers haven't broken the Commons rules. That's because the Commons rules are deliberately written to allow MPs to claim for just about anything, down to barbecues and bathplugs. MPs have always been embarrassed to put up their own pay, so they got round the problem by voting themselves generous 'expenses' instead. But it's not really expenses – it's really under-the-counter pay. What my colleague Dr Madsen Pirie calls 'stealth salary'. And tax free, of course! The Fees Office actually advised MPs how to maximize their cash grab by making their sister's spare room their 'main residence' and suchlike. They thought their expense chits would never see the light of day – which is why they are now so embarrassed.

You would think that MPs would have learnt to live on the front page. Everything they do gets out eventually. And yet they are prepared to act in ways that might be within the rules, but which were dishonourable and underhand, just for money. It's astonishing.

The second shocking thing is the number of 'grace and favour' homes that the Prime Minister can give out to favoured ministers. Such as the palatial Dorneywood, outside which John Prescott was photographed playing croquet when he was supposed to be running the country. He got fired, but he still hung on to Dorneywood! Likewise, when David Blunkett resigned following a shares scandal, he hung on to his government house in Belgravia! These and other examples are cited in my book The Rotten State of Britain. The evil of this system is that it concentrates power and patronage in Downing Street, and it's one of the reasons why  MPs are such lickspittles – they all want to become ministers and share in the perks too!

Against quantitative easing

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The current chaos in the world economy is not a crisis of capitalism, but of governance. Few people like economic downturns, especially the politicians who are blamed for the economic stagnation and job losses, and are punished accordingly. Monetary authorities at the behest of governments have played fast and loose with money and credit in order to smooth economic troughs.  

The result has been a long period of continuous growth, but one achieved by flooding the markets with cheap money and easy credit. It accumulated, sending false signals which led to asset bubbles such as that in housing, and to credit so easy that people became careless about their ability to repay. Markets did not behave recklessly because they lacked proper regulation; they acted on false information which monetary authorities sent into them. The regulation was certainly inappropriate, in that it reassured people that inherently risky activities and investments were safer than they were in fact.

Quantitative easing is now hailed as a solution, which it is not. We are to respond to the excess of easy credit by printing more money, sending more false signals into the markets about the level of real demand. The result will be to build levels of inflation into the economy which will be difficult to take out. We are told this will prevent the ten years of deflation which the Japanese economy suffered, but there is little sign of that deflation, and ominous signs that expectation of inflation are creeping in. Inflation-protected bonds are up 8 percent in the last few months, but the regular ones show no change.

Nobody likes unemployment, but economic downturns do weed out businesses using capital inefficiently and predicting demand incorrectly, and replace them by ones which do not. They improve the overall health of the economy, whereas lifelines to sustain ailing firms do not, despite their popularity with politicians.

Amid much smoke and spin the G20 achieved little not already announced or in process.  We should be thankful it failed to endorse the massive new fiscal stimulus that some proposed. This has been a cyclical downturn, and a bad one because previous ones were held at bay by political manipulation. Yet recovery will come.  For some countries it will be this year, and for most others it will happen next year. Future growth will be achieved by capitalism and free trade, not by government demand management and micro-tuning; they are not clever enough and do not know enough.

The staggering levels of government debt and liabilities can be cleared eventually by economic growth, but the huge monetary growth already built in, with more promised, will continue to distort the economy for years to come, and will retard and confuse the recovery instead of aiding it.
 

Privacy: Clear history

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From now on, the 'Private Browsing' and 'Clear History' buttons on your internet browser are redundant. Under a new EU regulation, every email sent and every website visited by people in Britain are to be stored by internet service providers for use by the state. Britain was instrumental in pushing through this regulation, under the guise of 'anti-terrorism' action. But if past 'anti-terrorism' laws are anything to go by, it won't catch any terrorists, but it will be used by the police to criminalize ordinary people.

In the face of public outrage, the Home Secretary has already had to back down from her plans to log every email, phone call and website visit on a Home Office database. But now of course it's happening through stealth by way of EU regulation. This is a massive assault on liberty. Already, if you are arrested – and we can now be arrested for any offence, however minor – the police routinely confiscate your computer and go on a fishing trip to see what they can find. Now they don't have to: they can simply demand your past email and browsing history off your internet provider.

This will inevitably lead to blackmail and abuse – as in the case of the teacher who was arrested and put on the sex offender's register because he had accessed a website that merely had links to child porn – links that he did not access. Rather than take the matter to court, he accepted a caution. So he lost his job for not looking at child porn! Other people have faced charges because they were quietly following an innocent link when some porn site popped up on them. And remember that with the European Arrest Warrant, you can be extradited from the UK to any EU country – Greece, for example, where you can be held for months or even years without trial while your case is 'investigated'. From this week, we really do have a police officer looking over our shoulder – able to examine every email we send and every site we access – and throw us into jail if they don't like the sound of what you're writing or the look of what you're viewing!

MPs expenses: An explanation

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Today we received this helpful explanation from Sir Owen Reddy-Cash MP, Member of Parliament for Soakingham, which gives the lie to media hyperbole about MPs' "expenses".

Dear ASI: I was disappointed by your recent blog making fun of my colleagues, Jacqui Smith and Chris Hoon (and Derek Conway and the Wintertons, etc., etc.) over their claims for second homes, barbecues, sinks, porn films, etc., etc. You people call yourselves economists but you obviously know very little about money, and nothing at all about the value and proper remuneration of public servants, such as Members of Parliament.

You cannot seriously believe that anyone would volunteer for a job that involved as much as 35 weeks' work a year, and almost four days' labour each week, for the paltry salary of £64,766. And you must know that every time the House of Commons suggests raising that figure to something more reasonable, the Daily Mail launches a campaign of smear and vilification.

Obviously public opinion should not stand in the way of what is right for our legislators. That is why, a few years ago, we came to the obviously sensible arrangement of taking our pay, not in salary, but in a form that would not excite such tabloid headlines. We calculated that MPs should be paid £305,059 in today's currency. Deducting the £64,766 awarded by the top people's pay body, that leaves £240,293 to find from this other source. Take out 40% in lieu of tax, and you get £144,176 which happens to be precisely what, on average, we claim. Not a penny more, not a penny less. We are scrupulously honest in this.

So you see, £305,059 is the proper salary for MPs, and that is exactly what we get. I can't see why you complain that we spend the money on £1,000 fireplaces or buy two washing machines in two years. Or employ our spouses and student children, for that matter. We don't ask how you spend your earnings. It's our money, and you just confuse the issue by calling it 'expenses'. It's no more than the appropriate rate for our very thankless job. Yours, etc.