Unhealthy pay rises

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Upon opening my newspaper last week I was confronted by two headlines which typify public services within the UK. Firstly, there have been '38% pay rises for top NHS bosses'. This is absurd given the current economic situation and the government's fiscal marginality. But, this was coupled by the second headline that the 'NHS is worse than Estonia for care'. I'm not saying that Estonia is an underdeveloped, backward country, but I doubt their healthcare bosses receive the wages that ours do.

There is no sense in NHS bosses being given such a large pay rise, especially when many others are beginning to feel the strain of the looming recession. It is hypocritical that these massive pay rises for senior officers come from the same government that heavily criticised the investments banks for giving large bonuses to their staff. It could not even be said that these pay rises are 'performance related'- we are rated 13th for healthcare in Europe, well below our similarly wealthy neighbours.

This extra government expenditure has been poorly spent and shows a lack of regard for the efficiency of the NHS. On average, nurses and ancillary staff were only given a 1.9% wage increase. In order to boost the quality of healthcare within the NHS, we need extra nurses and medical staff rather than a growth in managers and extra bureaucracy. 

The solution to the inefficiencies of healthcare in the UK is greater privatisation. This would encourage waste to be reduced and competition would encourage firms to improve the quality of their service in order to increase revenue. Privatisation would also see firms giving greater incentives to medical staff and nurses who have a real impact on patient care, rather than on middle management.

In order to improve our healthcare to levels above that of Estonia, we need more effective strategies than simply pumping cash into the failing NHS.

Blog Review 781

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From the Annals of Great Bureaucratic Decisions. Someone once thought that a Danny Kaye song would encourage people to pay their income tax.

What the Congresscritters are about to spend such taxes on might give people pause while handing it over though.

Estonia and the NHS: proof again that it's not how much you spend but how you spend it.

There is a temptation to think that some journalists' writing might just be influenced by their other interests.

Perhaps it's just that the markets have woken up to what Labour Governments always do to the value of sterling?

There's something odd in the proposed laws about passports and identity papers. It rather opens the door to the police being able to demand such papers at any time.

And finally, the warning becomes the instruction manual.

Is stability our goal?

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To listen to some commentators these days you would think that stability is indeed our goal. Almost a steady state society, one in which things rarely if ever change. We should deliberately curb innovation for example, for this brings with it such unwanted disruption to our stable and (implied rather than ever provenly so) happy society.

This is however, at least I think so, profoundly mistaken:

Foresight and planning were destined to play an ever-increasing role in human affairs, and a readiness to take risks in the hope of a profit in the more or less distant future is a distinctive mark of more advanced humanity.

That's two archaeology professors writing 40 years ago (on the subject of flint knapping actually) and if they can understand one of the basic things which makes us homo sapiens sapiens then why can't the economic and social commentators of our own day understand the point?

That taking risks in the hope of future profit is innovation: markets, amongst other things that they are, are the method we use to sort through which of such innovations satisfy some human desire and thus profit their developers.

Why on earth would we want to constrain one of the very things which makes us human? To deliberately restrain innovation, to attempt to enforce stability, would be doing exactly that.

So no, we cannot say that stability is our goal and we should thus be profoundly suspicious of those who claim that it is or who try to enforce it upon us.

The killing fields

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Just over a week ago Comment Central asked its readers to answer in no more than eight words what their 'single biggest hope was for Obama'. It currently has over 1800 comments, and will no doubt continue to attract more. Mr Obama has promised change and it comes as no surprise that there are many people investing their hope in him and what the dawn of 20 January 2009 will bring. But a few days after this went up Daniel Finklestein posted a further blog titled, "Barack Obama and people who want him killed" in which he asserted his surprise at the negative/borderline psychotic comments that hoped for the demise of the President-Elect. He should not be surprised.

Being President of the USA comes with risk – just ask any of the previous incumbents, many of whom have the scars to prove that the risk is very real. There have been four successful assassinations, Presidents Lincoln, Garfield, McKinley, and of course Kennedy. Attempted assassinations can be found during the presidencies of Nixon, Ford, Carter and Reagan (and if you believe everything you read on the net, Bush, Clinton and Bush). Change brings with it fear, and that is what these people are professing, a fear of that change and the perceived negative consequences if things do change.

The present POTUS has been assailed with threats for the past 8 years. It's not difficult to forget the heart rending pleas of Democrats post November 2004, many of whom were moving North (to Canada, of course), and I'm sure many of them would have liked the life of the President to be expunged swiftly following his re-election. But like all those who live in a democracy should, most knuckled down and got on with their lives, hoping for little, or no, negative impact from policies emanating from the halls of government. Hate in politics is, sadly, natural: the unintended consequences of political decisions undoubtedly harm some and make their lives poorer, and if those people feel trapped with no options left, they will clutch at any action they can take.

Gordon Brown, please take note

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Brian Riedl has written an excellent new 'Backgrounder' for the Heritage Foundation, entitled Why Government Spending Does Not Stimulate Economic Growth.

He points out that in the last 12 months, the US government has " Increased total federal spending by 11 percent to nearly $3 trillion" and " Pushed the budget deficit to $455 billion in the name of 'stimulus.'"

But despite the enormous sums involved, these policies have failed to boost the economy. This is hardly unprecedented: "massive spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates". And yet politicians still believe that more Keynesian deficit spending is the answer.

They are wrong. As Riedl puts it:

Government spending fails to stimulate economic growth because every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. Thus, gov­ernment spending "stimulus" merely redistributes existing income, doing nothing to increase produc­tivity or employment, and therefore nothing to cre­ate additional income. Even worse, many federal expenditures weaken the private sector by directing resources toward less productive uses and thus impede income growth.

[Hat-tip to the National Center for Policy Analysis]

Blog Review 780

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Quite amazing, Netsmith thinks we have our first example of Obama Derangement Syndrome (ODS) and of course it comes from the left. From John Pilger in fact.

Very strange indeed. Didn't we actually fight a war to ensure that the Falklands wouldn't have a constitution like this?

Identifying where it all went wrong in the UK: in the education system perhaps?

Another potential victim of the credit crunch: microfinance.

Sell the expensive land and buy the cheap stuff. Why not?

Why shouldn't everyone have the school choice that Barack Obama does?

And finally, if there's no public interest in sex tales why do sales soar when newspaper publish sex tales?

Sir Bob Geldof

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Sir Bob Geldof, a good businessman, he's done sterling work in raising money to alleviate famine and poverty and I even liked one or two of the songs he wrote and sang. But there's still some work to be done in informing him how the world works. On the Tobin Tax:

This levy, even if it is cut to 0.005 per cent would limit volatility in small economies whilst generating enormous sums for the poor. It would also cost taxpayers nothing.

That's so amazing as to be fantastical. A tax which raises billions and trillions yet doesn't cost the people who pay the tax, the taxpayers, anything? I have a feeling that our gentil and parfait knight is a tad confused here, for such a thing is not possible.

Second, we need to institutionalise the means by which profits from carbon trading can be channelled to development. As Germany has already shown, this is a vast market. It involves creating incentives for polluters to pollute less while generating resources for development. It is a smart, painless way to create revenues and jobs while bringing the poor into the global economy. A Europe-wide scheme is planned, but in Washington it should be seized upon as an effective mechanism for growth and development. It, like the Tobin tax, is tax neutral to the consumer while curbing overproduction of carbon dioxide and helping the world’s poorest.

Again, there's a desperate confusion of ideas here. Certainly cap and trade (or a carbon tax) would generate funds. It is also possible that those funds could be used to pay for development. But if you use those funds to pay for development you cannot then state that it is tax neutral to the consumer. If you take $x squiddley billion from the taxpayers of the industrialised countries to send to Africa then $x squiddely billions are being sent from the taxpayers of the industrialised countries to Africa. It matters not whether you get it from income tax, from a carbon tax, from the auction of permits, it simply isn't tax neutral for you've just taken $x squiddely billions from those taxpayers.

The only way such schemes can be tax neutral is if other taxes are reduced by whatever amount is being raised: in which case there are no resources being generated to pay for development. Still, he is at least (partially) sound on trade:

Third, this new round of globalisation must not be accompanied by a return to protectionism. Make Poverty History called for progress on debt, aid and trade. Trade is the area in which the least has been delivered.

Quite, voluntary exchange is how wealth is created, let's get on with it, shall we?

Cutting debate

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Talk of tax-cuts has caused a ripple of debate among Conservatives. While Labour and Liberal Democrat MP's and supporters appear to have tied their flag firmly to leaders Brown and Clegg – despite such policies being anathema to many – there is much debate within the Conservative movement on whether Cameron is treading too lightly in his tax promises. The back-and-forth between Guido Fawkes and Danny Finkelstein has so far been the most public example of this.

In reaction to Liberal Democrat and Labour promises of tax-cuts, the Conservatives have so far only promised to scrap National Insurance for one year for employers who hire new workers unemployed for three months or more. Lower spending on unemployment benefits would pay for this. Prior to this Cameron promised to freeze council tax by cutting back on government advertising and consultancy fees; as well as take the family home out of Inheritance Tax and nine out of ten first-time buyers out of Stamp Duty by introducing a levy on non-domiciles. Tax-cuts? Yes, but only just.

With the battle lines between Finkelstein and Guido firmly drawn, it is worth considering whether there is any way of reconciling their arguments. Essentially they disagree over what they consider to be the public's perception. Finklestein is arguing that the Conservative Party shouldn't offer tax-cuts because the public wouldn't trust them (especially with public services), whereas Guido postulates that the public is ready for a tax-cutting agenda. But perhaps there is another way of looking at the issue?

In this debate, Finklestein and Guido take tax-cuts as the starting point in their arguments, whereas if one starts with government waste then Finkelstein's fears can be allayed and Guido's desires met. Even taking the black hole of the NHS out of the equation, government waste is truly profound. If the Conservatives were true to their philosophy they would build the argument for tax-cuts on the back of a significant scaling back in the size of government. As such, they would claim to be the party whose tax-cuts add up, as opposed to the party loading up debt with a tax on the future.

Which begs the question: does the Conservative Party actually believe in smaller government?

Quote of the week

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While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets and free people... [T]he answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe.

President George W. Bush

Blog Review 779

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Why we really don't want to save the Rust Belt by bailing out the car companies.

Why we do want to bail out the banks even while we don't bail out the Rust Belt.

One view of a debate upon paying for sex. Another view of the same debate.

On getting things precisely bass ackwards....or the professionalisation of care.

A book recommendation for those who want a reasoned and reasonable guide to economics.

There might be an argument for more or different regulation in finance....but there's none at all for airlines.

And finally, a surprise, a politician who saved us money.