Bernie Sanders and his very silly Stop Bezos Act

Bernie Sanders has proposed an Act of Congress whereby companies get charged a tax equal to the amount of welfare their employees receive. We’re even seeing admiring glances at this idea here in the UK - when a more silly and counter-productive idea is difficult to envisage.

The major effect here will be that those who might gain welfare payments will not get hired. Which really isn’t the point at all now, is it?

Sanders has also been highlighting some of the 19th-century working practices used by Amazon to control and discipline its workforce inside of its fulfilment centres. Sanders’ bill – the Stop Bad Employers by Zeroing Out Subsidies Act, or the ‘Stop Bezos Act’ – would tax employers like Amazon when their employees require federal benefits.

The Senator is right to push Amazon on this.

No, he’s not, it’s a very silly idea indeed. Here’s the write up, here’s the bill itself.

If an employee of a large company gets welfare then the company is charged that welfare bill. Idiocy.

First, the assumption is that SNAP (food stamps), Medicaid, school lunches and Section 8 housing (the programs mentioned) are subsidies to the employer. They’re not, all are paid upon the basis of income, not work status (some SNAP excepted). Thus they don’t lower wages and cannot be subsidies to employers. Quite the contrary, they raise the reservation wage and thus are anti-subsidies to employers. A simple test of this, abolish those benefits and wages will rise will they?

It’s also true that such benefits are granted upon household circumstances, not individual. So, that single mother of the sick child is never going to gain employment if an employer is on the hook for the Medicaid bill, is she?

But as ever weirdness and foolishness cross the Atlantic so it won’t be long before we have more applauding this idea. Better to stamp on it right now than wait. It’s a very silly idea indeed - but then we’ve election season over there which is why it’s being suggested in the first place.

But the BBC shouldn't be competing with Amazon and Netflix

The BBC is gearing up for another raid upon our wallets:

The BBC is fighting against American streaming giants with "one hand tied behind its back", Lord Hall will say, as he as he warns of a future of television without British shows.

The correct answer is that the BBC can go boil their heads.

Outlining the scale of competition, he will reference studies which found Netflix is spending $8bn a year on content, Amazon is spending $5bn, and Britain’s public service broadcasters combined, including the BBC and Channel 4, are spending £2.5bn.

“Beyond the steps the BBC may take, Britain also needs to do more to support the broader PSB ecology,” Lord Hall will say.

“It cannot be right that the UK’s media industry is competing against global giants with one hand tied behind its back.

We pay taxes so that the BBC can make all those programmes. There is an entirely respectable theory behind this idea, that of public goods. For complex reasons, but reasonable ones, markets unadorned don’t produce perhaps enough of such public goods. That’s the argument in favour of government either promoting their production or actually producing them.

And yes, that actually is the argument in favour of the BBC and its tax funding - yes the licence fee is a tax, Gordon Brown finally admitted it. It’s also the only valid argument in favour of the BBC and its tax funding.

The argument being put forward here is that those market actors are producing lots and lots of what the BBC would or could produce. The BBC should therefore gain more resources (oh yes, this is leading to an insistence that they should gain more of our money) so as to be able to compete. But that’s a violation of our original justification for the BBC, isn’t it? That we’ve a public goods problem here, that the market isn’t producing enough.

We cannot say it’s a public good, therefore tax financing, and also say that we need more tax because the market is producing lots of those now no longer public goods.

Yes, quite, the BBC can go boil their heads.

And to think that some want the utilities to be renationalised

Dependent upon who we decide to listen to we’re told that somewhere between many, most and all of the people would like to see the utilities renationalised. This might well not be a good idea. As our examplar we’ve Stornoway. An area sufficiently remote that it has only the one energy supplier.

You know, a place with, inside our national at least vaguely competitive market, that monopoly that nationalisation would bring:

Smith says that every year he called his supplier, Scottish Gas, to get a better deal, and each time was told that there was only one standard tariff in his area.

Their predicament highlights the obstacles faced by energy customers who want to switch, despite rules to open up competition.

The Smiths, and some other residents in the Scottish town of Stornoway, have been trapped on a single, pricey, standard tariff for years after wrongly being told they neither qualify for cheaper deals nor have the option of changing providers, because Centrica – which owns British and Scottish Gas, and supplies one third of British households – is the only gas supplier to the island.

As we continually point out it is that very competition between suppliers which lowers prices and thereby insists that suppliers are unable to exploit consumes over much. And as we see here in the absence of such competition there is the claim of over much exploitation.

At which point there’s not a great deal left to the case that we should insist upon the one monopoly supplying all the tens of millions of us in order for us to gain a better deal, is there?

Venezuela Campaign: tragedy of hyperinflation

Hyperinflation in Venezuela has reached astonishing levels, making life extraordinarily difficult for ordinary people and causing immense economic damage. Inflation is currently running at some 200,000 per cent and is projected by the IMF to reach 1 million percent by the end of the year.

The effects of hyperinflation at such levels are extreme, and radically different from the levels of 2% or 3% experienced in Europe in recent decades. Money becomes almost entirely worthless shortly after one receives it. There is no point in saving as the value of savings is wiped out, and thus little is invested. There is also no point in lending money as interest and capital repayments soon become valueless. Instead there is capital flight, as ordinary people are desperate to get their money out of a worthless currency. What people receive in pay does not keep up with the ever-increasing price of goods.

Using the salary of a full college professor as a benchmark, in the 1980s it took around 15 minutes of earnings to pay for one kilo of beef. In July 2017, this professor needed to work for 18 hours to pay for the same quantity. In mid-2018 he must work longer still, in the unlikely event beef can be found.

Prices are increasing at an ever faster rate. A large coffee with milk cost at least Bs.S.80 (Bs. 8,000,000) in Caracas on the 11th of September 2018, 78% more than the price of week before, and double what it cost 15 days ago and 220% more than five weeks ago.

It is evident that hyperinflation is caused by the government printing more and more money. Venezuela’s monetary base – the amount of money printed by the government – increased by an extraordinary 30% in one week alone at the end of August. The move by the regime to remove 5 zeros from the currency and place greater emphasis on its Petro cryptocurrency (since revealed by a Reuters investigation to be largely imaginary) seems to have been a smokescreen for even greater money-printing.

In fact, it seems that physically printing money is beyond the means of the regime. As Venezuela’s banknotes are printed abroad, they have to be imported at significant cost to the government, which has led to severe shortages of physical cash. Since 2014, the number of active ATMS has plummeted to around 9,000, while card readers have multiplied.

The regime is printing money because it has little other means of staying afloat. It has largely destroyed the private sector through nationalisation and price control. Oil output is at its lowest level in more than 50 years and foreign reserves are at the same level as 1974 and plummeting downwards.

Regime supporters and cronies get privileged access to foreign currency at preferential rates. A small group of Venezuela’s elite, also known as the ‘boligarchs’, have made billions ouf of unrealistic exchange rates which are deliberately rigged to make astronomical profits in currency transactions. But ordinary citizens, 90% of whom are suffering in extreme poverty, have no alternative to spending much of the day searching for food with a currency that by the hour is worth less and less.

Venezuela’s economic woes remain a cautionary tale about how foolish policies lead to economic ruin. Venezuela is a country with vast natural resources, but it has resorted to printing money to try and make ends meet. This is economic mismanagement of the highest order.

More information on the Venezuela Campaign can be found on their website. 

It's fun how the Venezuela explanation has changed, isn't it?

Those of us rich in maturity will recall when Venezuela was the next great hope of the progressive left. David Sirota, Mark Weisbrot, Owen Jones, Jeremy Corbyn, Syriza, the Podemos lot, all were united in insisting that this vastly greater government control of the economy and the distribution of its rewards was the way forward for us all.

That has, to be fair to all of them, rather run into that brick wall of reality. They’re no longer all saying that we all should be doing it that way.

But the explanation now is that obviously, that’s not socialism nor even progressivism. The story now is that it’s simply a kleptocracy.

Well, OK, that at least has the merit of being true.

But it then runs smack into that brick wall of reality again. So, we grant the government vastly greater power over the economy and the rewards available in it. How do we stop that becoming a kleptocracy? The answer that we are pure as they are not does not work. For the moment we do grant that power then the kleptocrats will infiltrate and then become the government, won’t they?

Think of this the other way around for a moment. All such progressives do indeed insist that if and when the capitalists gain control then they are akin to kleptocrats, the monopolists will simply rip off the people. We liberals agree actually, which is why we’re so insistent upon there being competition to limit if not expunge that ability.

OK, if people gain the power to rip everyone off then they will. Or, the power to do so will be colonised by those who wish to.

Thus that argument that the Bolivarian Revolution has been colonised by the kleptocracy isn’t a useful excuse, for it’s the original granting of that power to government which causes the kleptos to colonise said government.

Don’t want the government to be run by thieves? Then don’t grant government that power that thieves find so attractive that they’ll work to become the government. This works whichever brand of thieves you care to worry about, crony capitalists or socialists.

Mssrs. Sanders and Varoufakis want to tell us where it all went wrong

Bernie Sanders and Yanis Varoufakis are insistent that the entire global economy took a serious wrong turn some 40 odd years ago. Therefore progressives must gird their loins and fight to overturn the extant world order.

We disagree, obviously enough, for we’re liberals and that world out there took a more liberal - classically liberal - turn those decades back. We disagree on theory that is.

However, we also disagree on the basis of empirical reality. The great claim of the progressives was always that they cared about, concerned themselves with, poverty in a manner in which classical liberals did not. We were the ones accused of preferring theory about liberty and freedom over the pernicious effects they had as a result of an uncaring attitude towards reality.

Well, yes, except think of the effects of that last 40 odd years of this New World Order. Absolute poverty has fallen from some 40% of humanity to under 10%. The best predictions we’ve got are that it will entirely vanish by 2030. This has indeed been brought about by that neoliberal globalisation which is being so complained about.

We do think the grand problem is and has been that absolute poverty. We revel in the fact that is has fallen and is falling. The idea that we should change horses just as the finish line comes into sight strikes us as absurd.

Global economic policy of the past 40 years, that system so being whined about, has just produced the greatest fall in human poverty in the entire history of our species. We cannot see that this is a failure requiring a change in policy. Mssrs. Sanders and Varoufakis disagree - what say you?

The ASI at Tory Conference: Rebooting Consumer Capitalism, Cannabis and Saving 1 Million Years of Life

As usual, the ASI will be tackling vital but often neglected issues at this year’s Conservative Party Conference in Birmingham. We're hosting three events inside the secure zone (that means to attend you'll need a conference pass): one on Sunday and two on Tuesday.

Our Sunday panel (4pm-5pm in Exec Room 2 of the ICC) asks what lessons the UK can learn from abroad on reforming our approach to cannabis. With the coming legalisation of medical cannabis following public outcry over the plight of children being denied access to life-changing treatment, Canada legalising recreational cannabis, and increasing calls for the UK to follow suit, we’ll be examining the arguments for parting ways with prohibition that international experience provides.

The UK’s prohibition of cannabis jeopardises children’s safety, encourages gang violence and leaves millions in the dark about what they’re taking. This approach has failed and the public know it. More Britons support a legal, regulated cannabis market than oppose it. We will ensure evidence, not hyperbole, guides the debate around recreational and medical cannabis legalisation. Chaired by our resident vice expert Daniel Pryor, our speakers are George Freeman MP, Crispin Blunt MP, VolteFace’s Paul North and Hanway Associates’ George McBride. For more info, click here.

On Tuesday, we’re spoiling you for choice by having two panels occurring simultaneously from 4pm-5pm. First, we’re partnering with Octopus for a session on rebooting consumer capitalism in the ICC’s Executive Room 8. There is growing public sentiment that the retail energy market isn't working, water firms aren't delivering, rail franchising is failing, and broadband availability is too low. These industries affect nearly everyone in their daily lives. Competition should be at the heart of any solution. Streamlining the sector regulators could minimise producer capture, cut bureaucracy and simplify regulations. The innovation spurred on by Open Banking could spread to other sectors if consumers are given more power over their data. Various reforms to the rail franchise system can promote a greater role for on-track competition, delivering on the promises of choice and better service.

We will discuss the most effective reforms that could restore the public’s trust in these vital sectors, and consumer capitalism at large. Chaired by our Head of Research Sam Dumitriu, speakers include John Penrose MP, Chris Hulatt of Octopus Investments, Bim Afolami MP, Fingleton Associates’ Eleanor Mack, and Oliver Wiseman (Editor of CapX). For more info, click here.

The second Sunday panel focuses on Britain’s vaping revolution and how we can save over one million years of life with the right policy reforms. Vaping is at least 95% safer according to Public Health England, and current evidence suggests that it doesn’t act as a gateway to smoking. But reduced-risk nicotine products could be even better. Whatever your view of Brexit, it presents us with an opportunity to become a world-leader in liberalizing e-cigarette and reduced-risk tobacco products regulation.

Right now, the EU’s Tobacco Products Directive limits choice, drives up costs, and severely restricts the ability of vaping companies to advertise their products. Current advertising restrictions are especially harmful: many smokers simply haven’t been exposed to what vaping actually is, or readily accept the myths that surround it. Plain packaging rules prevent firms from inserting information on switching to less harmful products into cigarette packets. All of this is up for debate and has the potential to be changed. At Party Conference, we would therefore aim to discuss the arguments for taking a liberal regulatory approach to e-cigarettes and reduced-risk products for the sake of public health, as well as consumer choice. Confirmed speakers include Martin Cullip of the New Nicotine Alliance, UKVIA’s John Dunne and the ASI’s Daniel Pryor (author of our recent “One Million Lives” report). For more info, click here.

Be sure to join us for what promises to be a fantastic conference!

Adult Care: Please don’t complicate things further

The Commons’ Health and Local Government Select Committees got together to help Whitehall address one of its favourite areas for prevarication: namely what to do about adult social care.  Their joint Report, “Long-term funding of adult social care”, was published at the end of June but widely ignored by the media. The Minister, Caroline Dinenage, responded with an undated letter indicating they had nothing to say until their Green Paper appears this autumn.

The Report has six pages covering 33 conclusions and recommendations.  Nine key issues emerge:

1. Surprisingly, the shortfall is modest relative, say, to the NHS: “£2.2–£2.5bn.” in 2019–20. (para. 20). But far more funding will be needed in future. (paras.73 and 88).

2. Care should be available for all adults, not just the elderly. (para 38). Also surprisingly, about half the adult care budget goes on those of working age.

3. We should aspire “over time towards universal access to personal care free at the point of delivery.” (para. 42) But “accommodation costs should continue to be paid on a means-tested basis.” Needless to say, the Citizens’ Assembly (big focus groups) favoured “free at the point of delivery”. Furthermore, the need for personal care now should be extended to include “preventative” social care. (para 77).

4. “Risk pooling—protecting people from catastrophic costs, and protecting a greater portion of their savings and assets.” (para. 44). This is widely agreed in principle but no one has yet found a viable solution. This Report trails a few ideas but comes to no conclusion.

5. “People are generally willing to contribute more [in taxes] to pay for social care if they can be assured that the money will be spent on this purpose.” (para. 46 and 93-95). This assertion is fallacious as the TaxPayers Alliance has demonstrated. “Earmarking”, as hypothecation is called here, is not acceptable to HM Treasury but it does seem to work, in the form of insurance, in Germany.   

6. The cared-for should be able, as in Germany, to elect to receive cash to distribute to carers rather than the funding going to the caring organisations. State-funded caring should be extended to voluntary, usually family, carers.  The cost of this is not quantified. (para. 78).

7. Paras 89-91 make suggestions as to how local authorities can develop new income streams to provide plenty of money for social care and everything else.

8. At the national level too, the Report’s proposals would make things more complicated: “Much of our evidence suggested the need for national revenue raising options to be considered alongside, or instead of, existing or reformed local government funding arrangements. Given the scale of the funding challenge facing social care, many submissions also argued that a combination of different revenue-raising options will need to be employed.” (para. 84)  Some may regard these local and national money trees as optimistic.

9. “Given the interdependencies between the provision of health care, social care, and also public health, we recommend that in its discussions of future funding settlements the Government should consider all these in the round.” (paras. 100 - 107). “The concept of a cross-party parliamentary commission currently has the support of more than 100 MPs from all English political parties.” (paras 119-132).

This last conclusion is really the most important. Whatever the Green Paper will say, the debate will degenerate into party politics and it will not include the NHS. Above all, we need a non-partisan, intelligent analysis of health and care provision, taken together, balanced against what we can afford.

Good as this Report is in a number of respects there are three major concerns:

1. Armies of carers will be needed to cope with the much wider, but undefined, provision of care recommended by this Report, e.g. all age groups, preventative, free at the point of delivery. Given today’s staff shortages, low pay and unemployment, and reducing immigration, the Report should have addressed how many are needed. That said, there are ten times more people employed in the NHS than in adult social care, so switching resources from the former to the latter is worthy of consideration. And the Department of Health and Social Care has not published any strategy on the topic since 2009.

2. Add to those new carers at higher pay rates, the proposal to pay voluntary (family) carers. How many elderly couples now get along only because one cares for the other?  The Report does consider financial sources but, somewhat naively, accepts the Citizens’ Assembly view that people will happily pay more provided it is earmarked. The UK, with 23 different kinds of tax already, is at a 50 year high level of taxation. As the TaxPayers Alliance has demonstrated, when citizens say they’d be happy to pay, they mean for others to pay. The TPA demonstration took the form of asking passers by to put a ball in the “yes” box if they agreed that they should pay more tax or put the ball in the “no” box otherwise. Those putting their balls in the “yes” box were then offered mobile phones connected to HMRC so that they could increase their contribution immediately. None did.

3. Whilst the Report makes interesting suggestions for increasing the funds available from local authorities, it would be much simpler to abolish the involvement of the Ministry of Housing, Communities and Local Government, which plays no part in social care, and put funding with policy in the Department for Health and Social Care.  The Department for Education pays for schools so why shouldn’t the Department for Social Care pay for social care? Sharing those costs with local authorities is complex, would it be better to pick up the whole bill unimpeded by the ‘Office for Health and Care Sustainability’ recommended by the House of Lords? That would make the necessary interchanges with NHS England far simpler. Furthermore, the individuals’ contributions to their own care costs would need to be consistent across England and therefore set by the DHSC.

In conclusion, this Report further complicates what is already a very complicated matter.  It hits the nail on the head when it says: “Given the interdependencies between the provision of health care, social care, and also public health, we recommend that in its discussions of future funding settlements the Government should consider all these in the round” (para. 107), i.e. the DHSC should do what its title suggests.

Yes Mr Jones, this is how democracy works

Owen Jones is complaining about how democracy works. This perhaps isn’t all that great an attribute in someone operating as a political activist.

Since the Tory government’s imposition of austerity a decade ago, councils have lost about half of their central government funding. As supposed compensation, they have been allowed to keep more of their own revenue. Planned changes may give prosperous areas a huge advantage over poorer communities by allowing them to raise more money through council tax and business rates, while having fewer social needs.

Assume that this is correct - not usually a pass we’ll give Owen. OK, what would we expect under a Tory government?

Yes, quite, we’d expect such an election result to favour those who voted for it. That’s really rather what democracy is about isn’t it? That those who gain power as a result of votes hand out sweeties to those who voted for them?

Thus a Tory government leads to those Tory areas coughing up a little less in taxation to pay for those traditionally Labour areas. Shrug.

Further, it’s not obvious that this is unfair even if it is democratic. Because one of the grander moves of New Labour, under Blair and Brown, was that those traditionally Tory areas should be handing more substantial amounts of their tax revenue over to those traditionally Labour voting areas. Those who gain power hand out sweeties to those who vote for them.

Under Labour local government finances were indeed reorganised in favour of those poorer areas. An election happens, the people have changed their minds, the policy changes. And what else should be one when the people have changed their minds in this manner?

Certainly, there are entirely useful arguments against such policy changes. But they all contain that underlying distaste for the people changing their minds - you know, hope to negate the democratic bit of democracy?

Why we might not want the State to be running things

The British state has been in charge of basic schooling for well over a century now. The grip upon the university sector has been tightening over this time period. This may not have been a good idea:

Andreas Schleicher, OECD's director of education and skills, said that while young people in England are increasingly entering the jobs market armed with a degree, many graduates remain unable to cope with even “basic” maths.

"Some people with degrees don't have the right skills - numeracy and literacy,” he said.

"You would label them as overqualified, but they may not be overskilled." Mr Schleicher went on: "I am not talking about somebody doing advanced mathematical analysis or reasoning, these are pretty basic numeracy skills.

"And you ask yourself a: how people could leave the school system with those skills, and b: then how can they make their way not only into, but even out of, higher education with a degree."

No, this isn’t about private schools and all that, the split in the British education system. Rather, we’ve a system in which the State has people in its educational clutches for 16 years and they leave unable to do sums. Yes, 16, because we start at 5, you’ll be 18 leaving school if you’re going on to university and then 3 years there.

From which we can draw one of two conclusions. The first being that, well, if after 16 years these people cannot do sums then they’re really not cut out for any form of academic education in the first place, are they? Meaning that the expansion of the universities wasn’t that good an idea, nor perhaps the raising of the school leaving age from 13 if we’re to be reactionary about it. Or, the only other alternative, if the raw talent is there but after 16 years the State can’t manage to foster or fertilise it then we’d better get some other education system pretty sharpish, hadn’t we?

Yes, sure, there are arguments in favour of the State provision of education. But all of them do rather rest upon the assumption that said State will possess at least a basic competence at the task to hand. Given the absence of any evidence to this effect all of those arguments do rather fail, don’t they?

A government insistence that education must be gained seems reasonable enough, possibly tax financing of it. But given that government seems to fail that very test of education being gained perhaps not direct provision of it. After all, vouchers for everyone might gain us university graduates who can do sums, an advance upon the current situation.