Through the eyes of a Dane

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During the last five months I’ve been living in the UK. This has been an extraordinary experience as it is the first time I have lived outside my native country Denmark. Before I came to the UK I expected to be arriving in the liberal front-runner of Europe, the country where state intervention and regulation was the exception rather than the rule. I was expecting to go from socialism to a small state, but it was quite the opposite. If what we have in Denmark is social democracy and what you have here in the UK is liberal democracy, then I’ve become a social democrat!

One of the most striking experiences I have had is the discovery of health and safety? Before I came to Britain this was something that existed on construction yards and in laboratories, where it is probably sensible to have safety rules. In the UK health and safety has become the new ruler of everything, and it overrules any other decisions. I’ve manage to discover some very extraordinary rules and associated courses for using a chair and computer screen. Yet the most ridiculous health and safety regulation I have meet so far is the rule that children are not allowed to leave schools when it snows.In Denmark we don’t prohibit snow fights, we organise them.

Britain is no longer free

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It's official – the UK is no longer a free country. Well, semi-official, because the judgement comes from the independent Heritage Foundation, based in Washington DC, which has been compiling its influential Index of Economic Freedom for a decade and a half. It surveys 183 countries, assessing them on ten scores including business freedom, property rights, trade, government spending and corruption.

This year, though, after the financial crisis and the regulatory clampdown on banks, investment, and finance, both the United States and the United Kingdom have headed down the scale. By contrast, Switzerland – which is attracting financial firms and their high-flying employees away from the City of London – has been storming up the league table.

The most shocking news, though, is that the UK has dropped out of the top ten for the first time. In the view of the Heritage Foundation, in other words, it is no longer a free country. Well, we could have told them that. The Heritage experts say that it is not just a fall in the UK's financial freedom that explains its slippage. They blame high public spending and workplace regulations, which take decisions out of the hands of individuals and empower officials instead. That growing official power is one reason why the UK is slipping in terms of corruption and the respect for property when compared to other countries.

Sure, we are better than North Korea, Zimbabwe, Cuba, Eritrea and Burma, which make up the tail end of the Index. But in any index of free countries, it is a bit galling to fall behind Chile. Galling, but certainly fair.

Dr Butler's new Alternative Manifesto is available here.

Working better

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Like most organizations that commit themselves to a ‘fairer’ society, the UK’s equality watchdog – The Equality and Human Rights Commission – rarely comes up with socially or economically sensible ideas. Its new set of proposals focuses on over 50s in the workforce, and caries the usual suggestions for ‘anti-discriminatory’ government initiatives and legislation that would bog down the labour market and do more harm than good. However, they also suggest one very good idea: namely scrapping the default retirement age.

The state pension age reflects an era where many workers only lived a few years past the retirement age. Nowadays however, 64% of women and 24% of men wish to work beyond this, and provided they are still adding value to their workplace, they should be free to do so. Out-of-date legislation shouldn’t be used to push the workforce onto state dependency.

Once out of work, people must rely on their lifetime savings and any available pension to get by. And as people are living longer, their own saving must stretch further, while pension schemes become increasingly strained and unsustainable. When people retire at 65, they take with them valuable skills and knowledge that could still contribute to the economy and provide them with personal financial and personal gain. Abolishing the default retirement age makes individuals better off & the public purse a little less pushed: Research from the National Institute of Economic and Social Research suggests that extending the average Briton’s working life by 18months would net Britain an extra £15bn.

The Department of Work and Pensions has signalled that it is taking this suggestion seriously, which can only be a good thing. Now, onto reforming the giant Ponzi scheme of a state pension...

Is Britain really out of recession?

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All economic statistics are iffy, and growth figures are the iffyest. There is no doubt that we have been through the deepest and longest recession since the Second World War, but are we really out of it now? Yes, says the Office of National Statistics (ONS), delivering a message their political masters will love to hear – there's an election looming, after all. The UK economy actually expanded over the last quarter of 2009. Not by much – 0.1% – but as they used to say in black-and-white films, 'That's your story, boys!' And the story is 'Recession over – official.'

Maybe it is, but a 0.1% statistic hardly proves it. Economists measure growth by comparing output at the start of the period with output at the end of it. Both figures can be wrong, so the difference between them can be doubly wrong. It is hard enough trying to measure growth over quarter of a decade, never mind quarter of a year. And 0.1% is well within the possible error. Quite possibly, the economy actually shrank again.

Additionally, the calculations are done on sampling, rather than measuring the whole economy. You would need to be a statistical superhero to measure everything, particularly most businesses probably will not know exactly how they did last quarter until all the bills are settled and the spreadsheets are made up at the end of January, or beyond. So again, big mistakes are possible.

Even if the ONS guess is correct, we are not necessarily out of the recession woods. The £175bn of new money that the Bank of England created must have done something to stimulate business – though no more, it seems than to keep its nose above water. Now that this stimulus has come to an end, business might just slip under again. Don't trust any economist – nor statistician – who says they know for sure.

From Russia with thoughts

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Just back from Moscow, where the locals were managing perfectly well with temperatures of -18C. There must be a point about climate change there. No, I'm not saying that the freeze invalidates the idea of global warming (though you have to ask how many more years of falling world temperatures would be needed to do so). Rather, it shows just how adaptable we are. Maybe adapt (if necessary) is the best and cheapest policy after all.

The reason I was there, though, was to tell the deputy head of Russia's central bank, Alexei Ulyukayev, that he might as well take a holiday. China, not him, is going to determine monetary policy hereabouts. China is overheated, and know that they have to rein in. That means their demand for commodities will grow less fast, and the all-important oil price is likely to hover around $40pb for the next half-decade. That too suggests that Alexei could take a break, because the resulting downward pressure on the rouble makes a strong rouble policy unsustainable (you can't buck the market, after all), which will have the beneficial result of lowering inflation.

Russia has been addicted to oil, and to inflation, for too long. High inflation makes rational investment impossible, because the signal of real price changes get hidden in the noise of all prices soaring upward. And 10% annual price rises make quite a bit of noise. Dependency on oil is fine when prices are booming as they have been, but it looks pretty sick now. Output is already falling, and Russia needs to diversity – not by trying to 'pick winners' but by making it easier for people to invest in Russia and get a fair reward for their investment. But when you are around 120 out of 181 countries on the World Bank's list of good places to do business in, something radical is needed. Like asserting the rule of law, cutting back bureaucracy, standing up against protectionism, and changing the culture whereby politicians and officials think position is about lining their own pockets, rather than the country's. When things are booming, you can indulge conservatism, put off reform, and endure inefficiency and waste. In tough times, you need to be a lot keener. It is a lesson that not just Russia needs to learn.

The proposed privatization of BBC Worldwide

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News that BBC Worldwide - the corporation's commercial arm - has been put on a list of public assets that could be for sale as part of a government "operational efficiency programme", and that this is now backed by the House of Lords Select Committee on Communications is welcome, but not for reasons of operational efficiency.

The committee has it right when it says that a privatised company "would be capable of becoming a major global brand for distributing UK content". This begs the real question - why isn't the BBC that now? Why is it a localised brand that does not distribute well across the globe?

One of the reasons I have always favoured privatising the BBC is that I believe its total reliance on public funding damages British media. It creates a quaint organisation, with its peculiar "Auntie Beeb" culture; arrogant, statist, often inward-looking, prone to artisitic cliques, and always struggling with rationed resources. Letting the Beeb go free would make it go fully global, levering its huge competitive advantage - the English language - and able to take on the world through its creative genius and anarchic energy.

Yes, get BBC Worldwide out there in the global media marketplace, not just to make money today, but so that it's executives can come back to the broadcasting priesthood in White City and explain to them where tomorrow's money can be made from new audiences - by a commercialised BBC.

More from the New Economics Foundation

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Thorough statistical and scientific evidence leads me to believe that unless we severely restrict social and economic freedoms, Mother Earth could look like this as early as 2030:

UPDATE: It turns out our parody of the nef was unnecessary. They've been kind enough to do it themselves already...

Economic growth no longer possible?

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According to a new report from the hair-shirt brigade at the New Economics Foundation, it just isn't possible for the economy to grow any more with destroying the planet. The press release contains this partcularly inspired piece of analysis:

We tend to think of growth as natural for economies, forgetting that in nature things grow only until maturity and then develop in other ways. A world in which everything grew indefinitely would be strange indeed. A young hamster, for example, doubles its weight each week between birth and puberty. But if it grew at the same rate until its first birthday, we’d be looking at a nine billion tonne hamster, which ate more than a year’s worth of world maize production every day. There are good reasons why things don’t grow indefinitely. As things are in nature, so sooner or later, they must be in the economy.

My response is quoted on the BBC website, but here it is in full:

The nef’s latest report exhibits a complete lack of understanding of economics and, indeed, human development. To compare to the growth of an economy to the growth of a hamster, as the report’s authors do, is juvenile and misleading. Growth is emphatically not a zero-sum game. Trade brings mutual gains, and drives a process of innovation and technological advance that no-one can predict in advance.

It is because of this endless human ingenuity that we can and will continue to create wealth and raise living standards, so long as we are not prevented from doing so by foolish government policies. And it is precisely this economic growth which will lift the poor out of poverty and improve the environmental standards that really matter to people - like clean air and water – in the process, as it has done throughout human history.

There’s only one good thing I can say for the nef’s report, and that’s that it is honest. Its authors admit that they want us to be poorer and to lead more restricted lives for the sake of their faddish beliefs. I suppose they deserve some credit for making that admission.

Death and taxes

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According to the World Health Organization, an estimated 30 percent of the world’s population lacks regular access to medicines, with this figure rising to over 50 percent in the poorest parts of Asia and Africa. Governments have often blamed this on the price of medicines, and have responded with a number of market interventions such as price controls and compulsory licenses.

However, our new research released this week shows that governments themselves are major contributors to the final retail price of medicines, through import tariffs and a range of domestic taxes. While such tariffs are gradually declining around the world, they are still as high as 15% – thereby acting as a tax on sick people.

Other low-income countries such as Ghana and Bangladesh increase the cost of medicines with import duties of between 6% and 8% - self-defeating in countries with such high disease burdens. Some countries levy especially punitive tariffs on antibiotics, hampering the fight against infectious disease. The worst offenders are Nigeria (20%), Burundi (15%), Nepal (15%) and Congo (15%).

In contrast, countries like Rwanda, Kenya, Gabon and Saudi Arabia have recently abolished import duties on medicines, joining the likes of wealthy European Union countries, Canada and the USA, as well as poorer countries like Benin, Malawi, and South Africa. Indian tariffs have fallen from 35% to 10% since 2001.

In 2005, a coalition of Switzerland, Singapore and the USA proposed at the World Trade Organization that all countries should abolish tariffs on medicines, as they are a regressive tax on the sick. It’s encouraging that many countries are moving in that direction, but there are still too many governments who needlessly price their own citizens out of treatment.

A global interactive map of medicine tariffs is available here.

Philip Stevens is Senior Fellow at International Policy Network, a London-based think tank

On the Citizens United case

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The US Supreme Court has just ruled that corporations have more of the rights as "legal persons" that "natural persons" enjoy than was previously thought. In particular, that they've many of the rights of political free speech. They're allowed to spend money on advertising for and against political ideas and even politicians. This of course has created all sorts of screamin' ana wailin' from those who regard companies as the earthly spawn of Beelzebub himself.

Well, no, because as my liberal friends all seem to be indignantly announcing in the aftermath of the Citizens United ruling, corporations aren’t really people! They’re creatures of statute, and “corporate personhood" is just a convenient legal fiction.

And that argument I'm afraid rather leaves me in giggles. For of course it's exactly the argument that we around here have been using about companies over taxation. You can't tax companies because they're just a convenient legal fiction. The tax will end up being paid by people, for only people, not legal fictions, can pay tax. Which rather means that, taking both together, those who are arguing that as "legal" not "natural" persons, corporations don't have the right to political speech should agree that we should abolish the corporate income tax.

For who can tax a legal fiction?