24 July 2008
By Eamonn Butler (July 24 2008)
Politicians have to blame somebody for rising oil prices, and with the Olympics coming up we can't be nasty to the Chinese, so the scapegoats of the moment are, of course, the speculators. They are the villains: when prices rise, they bet on further rises, and that simply compounds the price-rise fever.
Italy's finance minister Guilio Tremonti (who calls speculators the "plague of the 21st Century") wants their scalps, invoking Article 81 of the European Treaty, outlawing "anti-competitive agreements".
France's Nicolas Sarkozy, who holds the presidency of the EU, seems to be backing the move. The fact that Article 81 rulings can be made by majority vote is bad news for the UK, which depends on its enormous financial services sector. But the politician's frenzy is based on complete ignorance of what speculators do.
Yes, they take a bet on future prices. But to survive, they have to be highly clued up about the markets they bet on. They don't bet on rising prices unless they think demand is going to outstrip supply.
That makes their bets a really useful indicator of where prices are heading - which enables suppliers to adjust their production in line with the real needs of end users. And it allows suppliers to produce and trade with confidence at known future prices, so reducing the volatility of markets like oil.
The oil price has risen because demand from China and others has gone up but production hasn't. Outlawing speculation won't change that. Let's hope the EU doesn't kill off the UK financial services industry to find out.
Published by telegraph.co.uk here
21 July 2008
By Eamonn Butler (21 July 2008)
A piece in The Guardian predicts what many of us were already thinking: that 30-somethings are going to have a poor retirement. We're all living longer, so more of the government's budget will be eaten up by state pensions.
But then people are staying in school longer (indeed, the government is going to raise the leaving age to 17 shortly); and they are taking more gap years, and spending longer at university doing PhDs and MBAs and so on – all of which means that the proportion of working people in the population is falling. Working families already feel they are paying enough tax, without having to shell out more to pay other people's pensions.
Britain used to have the biggest private pension savings in Europe. Indeed, larger than the rest of Europe combined. The speed with which Gordon Brown managed to kill off this employment-based pension system was quite astonishing. Company pension schemes have been closing all over the place, and workers who would formerly have joined a company pension plan now just don't have the option.
Of course, the government has tried to compensate with its own folly with numerous tinkering schemes, like Stakeholder Pensions, the Personal Account (due in 2012, but likely to fail, according to the Telegraph's Paul Farrow) and the Savings Gateway for lower earners. Trouble is, if people on low incomes save for their retirement, they will just lose benefits. They might as well spend it now and have a good time.
The solution, as the Adam Smith Institute spelt out years ago in a report by pension expert Alan Pickering, is simple. We need to raise the pension age, and index it to life expectancy. The money saved should be used to raise the basic state pension substantially so that no pensioner has to rely on means-tested benefits. Which means that when people save for their retirement, they get the benefit of it instead of the state clawing it back from them.
The knowledge that everything you save for retirement is yours would undoubtedly encourage more people to do just that. Simple, isn't it? Simple, but a solution that requires vision and boldness from the government. Pity it's not going to happen then. See you in the old folks' bread line.
Published in Telegraph.co.uk here
19 July 2008
19 July 2008
A few years ago I bought a book, it was called How to win every Argument: The Use and Abuse of Logic by Madsen Pirie, President of the Adam Smith Institute. It is, without doubt, one of the best book I've bought and/or read. What's great about it is that you can just dip into it anywhere and remind yourself of the techniques in argument that are entirely commonplace in political discussion.
The reason I mention this is because I've just read a piece by Unity on Liberal Conspiracy which, unusually for Unity who I have significant respect for (even if I do have trouble reading his posts to the very end sometimes), is little more than one great big fallacy. The parts in question relate to his conclusion about some obscure organisation called the "Centre for Open Politics". Unity points out that
In reality, the two founding members of the ‘Centre for Open Politics’ are Harry Cole, formerly the Vice-Chairman/Treasurer of Edinburgh University Conservative Future, and Amanda O’Brien who, earlier this year, was listed on campaign blog of Michael Rock, the current national Chairman of Conservative Future, as the Deputy Chairman of Essex Conservative Future.
Moreover, as an article posted at Conservative Home in July 2007 reveals, Cole spent much of last summer working out of Conservative Central Office with the previous Chairman of Conservative Future, Mark Clark, and Justine Greening MP, on the preparations for Conservative Future’s national Fresher’s Week recruitment drive and was even given his own e-mail address on the official conservatives.com domain.
He goes on to draw the conclusion on his own website that this impacts on the credibility of any argument they might make. This is the classic
ad hominem circumstantial
fallacy at play. Rather than taking on the argument it takes on the bias of two people and draw conclusions about the validity of an argument they make upon those circumstances of the arguer.
From a logical point of view this is a really crappy argument. The bias of a person does not itself make an argument made by the person invalid. Just because two people have been involved in X in the past it does not follow that their involvement in Y is linked to X as a 'false flag' operation.
This does not negate that the Centre for Open Politics might actually be what Unity says it is. The point is that the argument to justify the assertion that Unity is making is logically fallacious. Unity goes on to say that he will be contacting
the Electoral Commission, myself, to advise them of Cole’s undisclosed background in the confidence and advising them that there is ample evidence to suggest that Cole has submitted a wholly vexatious complaint.
All the "evidence" he refers to however is circumstantial. Again I stress, this is not an argument that Unity's conclusion is wrong, it's an argument that his route to reaching the conclusion is a logical pile of poo and essentially vexatious reasoning.
Published by Dizzy Thinks here
18 July 2008
by Jane Hall, The Journal (July 18 2008)
As the credit crunch bites and we become more conscious about how we spend our money, what does the future hold for prime food brands like Fairtrade? Jane Hall finds out.
IMAGINE having to permanently forego your morning wake-up shot of Peruvian coffee or soothing cup of Assam tea.
Worse still, muse on what it would be like to never again enjoy the pleasure of eating a banana, drinking pineapple juice or adding an exotic twist to your fruit salad with slices of mango and papaya.
Contemplate what life would be like with no more lemons, limes, grapefruit or lychees. No more demerara sugar, cashews or raisins. And no more organic cocoa.
In short, consider what it would be like to exist with no more imported foods. Could you handle it? They say a ripple in America creates a wave this side of the Atlantic, and the credit crunch is threatening to turn us all into penny-pinchers. Already discount supermarket chain Aldi is cashing in on people’s worries with plans to increase its chain of 400 UK stores to a 1,500-strong empire in the next five years.
The German chain’s expansion plans come amid increasing signs that cheap and cheerful high-street retailers are benefiting from a tightening of the consumer purse strings as inflation hits an 11-year high of 3.8% following a ferocious rise in the cost of living in June.
Now there are fears that inflation may soar as high as 4.5% or even 5% by the end of this year as wage growth stays muted and everything from energy bills and fuel to food prices continue to rocket.
It is premium-priced foods like Fairtrade that are likely to feel the sharp end of the economic turndown as consumers ditch them for their cheaper conventional counterparts.
There is already evidence this is happening. A recent survey found that nearly three in five people said paying up to 45% more for fairly- traded goods is no longer an option.
Add concerns over food miles and climate change to the mix, and Britain is now experiencing a bunkering down not seen since the Second World War and the days of rationing.
Nearly 100,000 Britons are on allotment waiting lists (in Blyth Valley, Northumberland, around 1,140 people are currently hoping to be allocated one of the area’s 900 plots, while in North Tyneside the figure is 1,316 for the borough’s 1,718 strips of land across 53 different sites).
Vegetable seed sales increased by 7% last year and the National Lottery is investing £50m into community gardens and school farms.
But as we look to save the pennies and consume less foodstuffs like Fairtrade, how is this going to affect the Third World producers whose income is entirely dependent on our demand for their fruit, tea, chocolate, flowers and cotton?
Fairtrade sales were worth £500m last year. This compares to £2bn for organic foods.
Any drop-off in consumer interest for Fairtrade goods would therefore have serious implications. Even the free trade-focused Adam Smith Institute warned earlier this year that “farmers who have been promised long-term contracts and sustainable prices may be unprepared to cope if Fairtrade’s stock suddenly falls in the public eye."
Why is this? Because more than seven million people in 62 countries depend on Fairtrade for their livelihood. This is either directly through employment or indirectly by profiting from the schools, hospitals and other benefits.
So is the UK’s dependence on tropical fruits a sustainable one, or are we about to experience an about-turn and head back to the days of our ancestors when they only ate what was in season and had to survive the lean winter months on what had been pickled, preserved and prepared in the months of food glut.
Barbara Crowther of the Fairtrade Foundation believes we aren’t ready yet to abandon our love of the exotic. “I don’t know about you, but I don’t want to survive on turnips and potatoes for the rest of my life.
“By supporting agriculture in other parts of the world, we enable growers to provide food for themselves and protect the lands of their community so they’re not bought out by huge developers.
“And if we’re worried about the increasing level of food prices, we should send a positive signal to the growers of those products that we’re prepared to invest in their future, as we’re going to keep relying on them to grow things." But what if Britain decided to go entirely local and seasonal? “I don’t think this would ever happen, as the cost of manual labour in the UK is too high," claims Edson Marinho of Etica, a Brazilian farmers’ co-operative that grows mangoes for Dutch importer and distributor AgroFair.
“But if it did, it would result in chaos: even the biggest producers of Fairtrade goods wouldn’t have anywhere to sell, prices would fall and whole corporations would end up bankrupt."
One alternative to eating seasonally and locally, says Robin Murray of TWIN, an alternative trading company that launched Cafedirect and Divine chocolate, is to grow everything Britain wants in Britain.
“Let’s say we could grow bananas in greenhouses in Kent," says the economist, alluding to the 80-acre Thanet Earth project, which will grow 1.3 million types of fruit and vegetables under seven glasshouses 365 days a year.
“Does that make ecological sense in a lifecycle term? Let’s say it does. Then the banana industry the whole world over would have to be restructured – so should we build houses for Ecuadorians here in the UK to help us grow the bananas they used to grow?"
This notion of responsibility lies at the very heart of Fairtrade, not least because 1.5 million livelihoods in Africa alone are estimated to be dependent upon UK consumption of agricultural and horticultural produce.
But the land that’s used to feed the West could actually be used to feed Africa itself, opponents to Fairtrade have argued, as our purchase of Fairtrade products is coupled with the need to help feed continents that can’t feed themselves.
“They call this Fairtrade," says Anthony Blay of Vrel, a Fairtrade co-operative with 250 hectares of banana and pineapple plantations in Ghana. “But this isn’t a fair world: there’s a huge difference between the price we sell our mangoes for and the prices in the supermarkets in the UK. There is something going seriously wrong here."
While Ghana also grows crops like cassava, tomatoes, okra, peas and millet for internal trade, it has had to start importing rice from China to help feed its population of 23 million.
“If we could feed ourselves with our own food, that would be better," admits Anthony. “But the organic bananas that we export to the UK are too expensive for the average Ghanaian to buy." Vrel ships 5,000 boxes of bananas in five shipping containers to the UK and France every week. The bananas are put into plastic bags, which are themselves sent from the UK, to help them be differentiated from conventionally grown ones, resulting in 100,000 plastic bags being used every week.
While transport actually only accounts for about 10% of food’s carbon footprint, the rising cost of fuel is expected to bump up shipping costs, which in turn will increase the cost of Fairtrade goods.
But forget the future of Fairtrade, says Anthony Blay: he’s not even sure that farming – Fairtrade or not – is an industry that has much long-term projection.
“The toll of climate change is taking effect in a way that it didn’t in my parents’ time," he explains. “There are so many risks associated with farming that I’d rather my children go to school. If climate change continues like this, even more people will fall below the poverty line.
“And then," he says, a note of desperation in his voice, “then what are we going to do?"
Pulbished in livejournal.co.uk here
18 July 2008
July 18 2008
It is unlikely government ministers have the skills or background to run a private company, a new survey has claimed.
A questionnaire of chief executives at the UK's top 100 companies pours cold water on government claims of successful management.
Ben Farrugia, policy analyst at the TaxPayers' Alliance, said: "Comparison with the most successful business leaders in the country reveals that the people running public services lack appropriate experience, have near impossible tasks to do and are never in their job for long enough to engage properly with their departments."
The survey found chief executives recommended managers had at least five years in the post for them to get to grips with the task at hand. This flies against a government culture in which secretaries of state are shuffled between departments every two years or so.
John Reid, for instance, spent the years between 1999 and 2007 being secretary of state for Scotland, Northern Ireland, health, defence and home affairs, as well as being leader of the Commons and minister without portfolio.
The average appointment for senior civil servants stands at two years and eight months.
The chief executives also asserted the importance of experience in the sector the organisation works in, but government department are usually so vast and varied it is near-impossible to be properly experienced in the sector.
The Department of Culture, Media and Sport, for example, has 63 subsidiaries covering everything from heritage sites to the 2012 Olympics.
The chief executives also valued experience of senior management, leading the Taxpayer's Alliance, who conducted the survey, to point out that none of the current Cabinet have managed a large business, and that only one in seven MPs has any management experience at all.
But Dr Eamonn Butler, director of the free-market Adam Smith Institute, says the two cultures aren't comparable.
"When an executive says something, he expects it to be followed up, but when a minister says something it's the beginning of negotiations," Dr Butler told politics.co.uk.
"It's one of the reasons business people don't understand Westminster. They assume there's a chain of command. But in politics people have all sorts of different views and things take place through discussion," he added.
Published in Viewlondon.co.uk here
17 July 2008
by Ruth Lea, Senior Fellow in Economy of the Adam Smith Institute (July 17, 2008)
Council workers' call for a better pay deal are understandable, but we would all pay the price
The sight of council staff striking for inflationary pay awards of around 6% is as depressing as it is predictable. I appreciate, of course, that consumer prices inflation is rising, led by higher food and fuel costs, and many people's living standards are now falling. After a period of 10 to 15 years of uninterrupted growth and rising living standards this is a nasty shock for us all. And it is a particularly nasty shock for the less well off, including pensioners, who spend proportionately more of their limited budgets on food and utility bills.
But this is not all. Some people are now losing their jobs. Every day there is more bad news – for example in the house-building sector – but few parts of the economy will be immune as the economic slowdown tightens its grip. The unemployment claimant count rose by over 15,000 in June and, bluntly, this is but the start of a protracted period of worsening employment prospects. It is worth noting that the public sector is the least vulnerable section of the economy when it comes to insecurity of employment.
The chancellor argues strongly against inflationary pay awards throughout the economy – whether in the public or the private sectors. He is quite right. He knows that if the pick-up in prices inflation leads to higher wages then there is a real risk that an inflationary "wage-price spiral" becomes embedded in the economy – as it did to devastating effect in the 1970s. And the Bank of England has made it abundantly clear that if inflationary pressures build up further, they will raise interest rates. The economy needs higher interest rates like a hole in the head.
Inflationary settlements in the public sector do not, in themselves, directly trigger off a wage-price spiral, as their goods and services are not, on the whole, sold on the open market at a "price". Instead the provision of public services deteriorates – fewer school books for example – and/or council tax bills rise. But high pay awards in the public sector can increase pressure for inflationary pay awards in the private sector. And – surely the clincher – council staff workers must realise that they will be condemned as irresponsible and unfair if they push for high pay awards when their private sector friends may be losing their jobs.
Life is not pleasant for many at the moment and it's going to get worse. We're all in this together.
Published in The Guardian here
16 July 2008
By Eamonn Butler (July 16 2008)
Cameron's "Chapter 11" idea seems to have come from a list of weekly headline-grabbers rather than through a long think-tanking process.
Still, with the UK economy heading south, its timing is perfect.
The idea of Chapter 11, which refers to a section of the United States Bankruptcy Code, is that individuals and firms can stave off bankruptcy and keep control of their assets while they reorganise themselves out. Individuals must agree to debt counselling and a repayment schedule. Businesses have to state all their financial information and file a recovery plan.
Does it work? Well, some of the highest-profile Chapter 11 beneficiaries have been America's airlines, including Northwest and Delta (which went on to merge), ATA (which eventually failed), US Airways (limping along) and United (still in huge debt).
It might have prevented the sudden shock of bankruptcy, but what eventually happened is probably what would have happened anyway. And America's airlines still look bloated.
Compare that with the UK, where the threat of failure is much more acute, and where competitive, cost-conscious airlines like Easyjet and Ryanair are setting the pace.
But the real problem with the UK's bankruptcy regime is not this. It's the fact that HM Revenue & Customs are first in the queue to be paid when a business fails. Not surprisingly, the biggest filer of bankruptcy petitions is HM Revenue & Customs.
But the real problem with the UK's bankruptcy regime is not this. It's local authorities who willingly bankrupt people unable to pay a £1200 Council Tax bill, and HM Revenue & Customs, who have every incentive to force small traders out of business and pocket a fat bonus for the tax they recover, rather than working to help them through difficult times.
Published by telegraph.co.uk here
14 July 2008
By Grace Hammond (July 14 2008)
Those who say a ripple in America creates a wave in the UK looked to have been proved right.
The global credit crunch which was born out of the US sub-prime crisis has hit Britain hard and with more of us conscious about how much we spend and what we spend it on, one of the first casualties appears to be the organic and Fairtrade goods which until a few months ago filled middle-class shopping baskets.
According to a recent survey, paying up to 45 per cent more for fairly traded and organic goods is no longer an option for three out of five of us and concerns over food miles and climate change have resulted in a bunkering down Britain hasn't seen since the 1940s.
However, as we heed the advice of chefs like Hugh Fearnley-Whittingstall to look local, Third World producers, whose income is entirely dependent on our demand for their fruit, tea, chocolate, flowers and cotton, are feeling the effect.
Raking in £500m in sales in 2007, Fairtrade products stand quite a lot to lose with a recession in the West – with even the free-trade focused Adam Smith Institute warning earlier this year that "farmers who have been promised long-term contracts and sustainable prices may be unprepared to cope if Fairtrade's stock suddenly falls in the public eye".
More than seven million people in 62 countries across the world rely on Fairtrade for their livelihood – either directly through employment or indirectly by profiting from the schools, hospitals and other benefits the premiums help provide and while the belt tightening continues over here, according to Barbara Crowther of the Fairtrade Foundation, short-term thinking could be devastating.
"I don't know about you, but I don't want to survive on turnips and potatoes for the rest of my life," she says
"By supporting agriculture in other parts of the world, we enable growers to provide food for themselves and protect the lands of their community so they're not bought out by huge developers.
"And if we're worried about the increasing level of food prices, we should send a positive signal to the growers of those products that we're prepared to invest in their future – as we're going to keep relying on them to grow things like coffee, pineapples and chocolate."
While Britain is unlikely to reach the situation where its shoppers completely shun imported produce, there has been suggestions the country should look towards growing everything we need on home soil. The idea has been gathering momentum with the 80-acre Thanet Earth project, which will grow 1.3 million fruits and vegetables under seven glasshouses 365 days a year, but just because something is possible doesn't necessarily mean it's right.
"Let's say we could grow bananas in greenhouses in Kent," says economist Robin Murray of TWIN, the alternative trading company that launched Cafedirect and Divine chocolate. "Does that make ecological sense in a lifecycle term? Let's say it does. Then the banana industry the whole world over would have to be restructured – so should we build houses for Ecuadorians here in the UK to help us grow the bananas they used to grow?"
This notion of responsibility lies at the very heart of Fairtrade, but opponents have argued the land that's currently used to feed the West could actually be used to feed Africa itself.
"They call this Fairtrade," says Anthony Blay of Vrel, a Fairtrade co-operative with 250 hectares of banana and pineapple plantations in Ghana. "But this isn't a fair world: there's a huge difference between the price we sell our mangoes for and the prices in the supermarkets in the UK. There is something seriously going wrong here."
While Ghana also grows crops like cassava, tomatoes, okra, peas and millet for internal trade, it has had to start importing rice from China to help feed its population of 23 million.
"If we could feed ourselves with our own food, that would be better," admits Anthony. "But the organic bananas that we export to the UK are too expensive for the average Ghanaian to buy, so it makes sense to sell – you need income to live on."
Vrel ships 5,000 boxes of bananas in five shipping containers to the UK and France every week. The bananas are put into plastic bags, which are themselves sent from the UK, to help them be differentiated from conventionally grown ones, resulting in 100,000 plastic bags being used every week.
While transport actually only accounts for about 10 per cent of food's carbon footprint, the rising fuel prices are expected to bump up shipping costs, which in turn will increase the cost of Fairtrade goods.
But forget the future of Fairtrade, says Anthony: he's not even sure the farming industry as a whole has much long-term projection.
"The toll of climate change is taking effect in a way that it didn't in my parents' time," he says. "There are so many risks associated with farming that I'd rather my children go to school. If climate change continues like this, even more people will fall below the poverty line.
"And then," he says, clasping his hands together, "then what are we going to do?"
Pulished in Yorkshire Post here