How things really have changed
The bit that people tend not to remember about Karl Marx is that this communism thing was going to arrive when the economic problem of scarcity had been solved. And also that it was capitalism which would bring that end of scarcity.
And what even fewer people are noting is that this is actually happening. Take this ludicrous campaign about sugar:
Chocolate bars are likely to shrink by a fifth in the next three years after Public Health England told sweet manufacturers they could meet obesity targets by cutting product size.
Really? We needed all the powers of government, plus multitudes of government funded sock puppets, to grasp the idea that smaller choccie bars might mean less sugar in choccie bars?
But on the main point there's this from the actual report:
It will also help to reduce health inequalities, as sugar consumption, and the rates of obesity in children, tend to be highest in the most deprived.
It's the most deprived in our society that get the most food? That is a harbinger of true communism, isn't it? We have truly solved that economic problem of scarcity in this sector, haven't we?
And yes, as Marx predicted, it was capitalism that got us to this point.
Are 70% of France’s prison inmates Muslims?
There’s an incredible statistic out there that says that 70% of the population of France’s prisons are Muslims, despite only 8-10% of the population being Muslim. It’s everywhere – in this Telegraph article by Harriet Alexander, in this Washington Post article by Molly Moore, in this New York Review of Books article by Scott Atran and Nafees Hamid, in this report by a French politician (p. 6), and most recently in this Sunday Times article by Niall Ferguson (which he quickly corrected after I pointed out the mistake).
But it’s not true.
Its origin of this stat seems to be a book called Islam in Prisons by Farhad Khosrovkhavar, a French sociologist, though he says he doesn’t use it himself and the figure has been misattributed to him. Prof Khosrovkhavar carried out a survey of four prisons in ‘sensitive’ areas in Paris and the North of France (out of 188 across France).
I emailed Prof Khosrovkhavar, who rejects the 70% figure altogether and says that he reckons a true figure is ‘around half’ – 40%-50%. But (he stressed) these are just estimates, because the French government does not record these things.
The closest thing to an official figure is the number of French inmates who registered for Ramadan – 18,300 out of a total prison population of 67,700, or 27%, back in 2013 according to Agence France Presse. Prof Khosrovkhavar suggests that this could be an underestimate, because some Muslims will fear being ‘noted’ by the intelligence services. A Brookings Institution report says that “Muslims are greatly overrepresented in prisons and within the eighteen- to twenty-four–year-old age group in particular: they make up only 8.5 percent of that age cohort in France, yet 39.9 percent of all prisoners in the cohort.” Nobody seems to know for sure.
This, obviously, is not to suggest that France doesn’t have a serious problem with integrating Muslim men (in England and Wales, 15% of the prison population is Muslim from a total population of 5%). But the enormous 70% figure is false, and should not be used – no matter how many reputable-seeming outlets have been taken in by it.
This all reminded me of a passage in Quine and Ullian's The Web of Belief (my thanks to my mother for finding the passage for me):
An author of this book remarked after walking about the principality of Monaco, "Just think-only eight square miles!" "I don't see how you even get eight out of it," his brother replied. The map was conclusive: you couldn't. Yet the Encyclopedia Britannica, the World Almanac, Scott's stamp album, various American atlaseses, and the gazetteers in the dictionaries had agreed on eight square miles. Hachette and Larousse turned out to agree rather on 150 hectares, or less than three fifths of a square mile. A subsequent check of the Britannica (eleventh edition) revealed arresting detail: "Area about 8 sq. m., the length being 2 1/4 m. and the width varying from 165 to 1100 yds." Even this arithmetical absurdity had not prevented the producers of all those other reference books from copying the figure of eight square miles, if the Britannica was their source. We are happy to report that the myth broke at last and the "sources" subsequently consulted converged on 0.59 square miles. There is even a new alertness: 0.71 is now reported, because of 76 acres lately reclaimed from the sea. But there is very likely some unwarranted figure on another topic that we are all accepting still, or even newly.
The policy of seeking safety in numbers by checking multiple sources is an excellent precaution; but, as the above example illustrates, it can fail when the sources are not independent. No one would check a newspaper report by checking more copies of the same newspaper. There is a saying that 4 X 107 Frenchmen can't be wrong, but the contrary is the case if they all believe what one wrong Frenchman tells them. In the foregoing example, admittedly, the Frenchmen were right.
This is comforting, isn't it?
MPs overseeing the DfID have said that it must step up the propaganda efforts:
MPs have denied accusations that a lot of foreign aid cash is "wasted" and have said that the government should do more to publicise its good work.
We're really not sure that will work all that well:
"The media has a responsibility to be accurate and contextual given its role in influencing public understanding and opinion," it added.
The committee urged the department to "continue improving its communications and to be more proactive in publicising when it is doing good work".
The newspapers should report tractor production statistics, not actually bother to question whether we need more tractors or not. And that worked so well when it was tried, didn't it?
Presumably this means we shouldn't go around questioning the £50 million or whatever spent on the Ethiopian version of the Spice Girls.
Still, this is comforting:
The report said "poor or wasteful spending" appeared to be no more of a problem for the department for international development than it was for other parts of Whitehall.
Or perhaps not so comforting. You mean every department is spending on the local equivalent of the Spice Girls? We're supposed to be comforted by the idea that HMRC has a version of Yegna?
The Unworldliness of the EU Court
The EU Court of Justice published two reports on 27th March. Both concerned the legitimacy of firms banning their employees wearing Islamic headscarves. This being the EU, the Court came to opposite conclusions. In one, the ban was upheld as it was the firm’s general policy. In the other, the ban was disallowed as it was merely to satisfy customers.
The key finding in the former case was that the ban, to be acceptable, had to be “objectively justified by a legitimate aim, such as the pursuit by the employer in its relations with its customers of a policy of political, philosophical and religious neutrality, and the means of achieving that aim were appropriate and necessary.” The key word, amongst several hundred words of verbiage, turned out to be “objectively”.
The latter case concluded that the ban “was not a genuine and determining occupational requirement justifying a difference in treatment of the worker”. This is curious: banning all headscarves for everyone cannot be discriminatory whereas banning Islamic headscarves clearly is. In this case, it would appear, all headscarves were banned. But the crunch comes at the end: Banning the headscarves was not “a requirement that was objectively [my emphasis] dictated by the nature of the occupational activities concerned or of the context in which they were carried out. It could not, however, cover subjective [my emphasis] considerations, such as the willingness of the employer to take account of the particular wishes of a customer.”
The Times headlined this as “Need to humour customers does not justify Islamic headscarf ban”. The Times appears to agree that humouring customers is a silly and subjective thing that no right-minded company should do.
This attitude harks back to the days when judges and other gentry would not allow their children to take up anything so vulgar as trade, except perhaps the wine trade. Never mind being below the salt, to be caught actually selling anything cost one a place at the dining table altogether.
Objective reality is that all companies depend on the cash provided by customers and their employees owe their livelihood to that too. Customers are entitled to spend their money how they wish. They have freedom of choice. They may not do so on the basis that judges would like them to, but that is for the customers to decide, not judges, and there is nothing subjective about it.
Farmers still aren't quite getting this free trade thing, are they?
The Guardian carries a long piece about Brexit, tariffs, beet and cane sugar and so on. Should we continue to protect beet growers? Should we just abolish the tariffs and let cane rule?
Our answer is obvious, abolish the protections and see what happens. Not all agree:
Even then, its farmers claim the burden of living in a high-wage economy means it is unfair to pit them against surplus cane that is dumped on the world market below the average cost of production by developing economies.
“If we are living in a higher-cost economy than Brazil, and as a society we value things that those higher costs support, then a degree of tariff protection to make that sustainable is legitimate,” argues Martin. “In an ideal world run by rational people, that is what tariff barriers used sensibly can help to balance out.”
Actually, that's the argument for cutting tariffs entirely and the heck with it. Because that very fact that we are a high wage economy is precisely why we should not be doing low value add things. We should only be doing things which add a lot of value - wages do after all reflect the value being added in the economy.
If there are people out there willing to grow sugar for $300 a month while we would need £3,000 a month to do it then we should be buying from them and not producing ourselves. We should be off doing something which adds more than £3,000 a month to justify those wages.
Again, the fact that we're a high wage economy isn't an argument to build protection around it, it's the very argument that we shouldn't be doing the low value things that poorer people in other places could be.
The Financial Confusion Authority and the Long Grass
On Sunday’s Radio 4, Lord Vince Cable asked why the FCA had still not published its report into the alleged mishandling, by the Royal Bank of Scotland (RBS), of Small and Medium-sized Enterprises during the financial crash of nine years ago. The complaint, in essence, was the classic one that large British banks lent umbrellas to small business customers when the sun was shining and then took them away when in rained. More specifically, it was alleged that RBS pushed customers towards insolvency through, e.g., selling them inappropriate products and/or revaluing the businesses, and then transferred them to the “care” of their Global Restructuring Group (GRG) whether they wanted that or not.
GRG had two objectives: “turnaround” and “commercial”, i.e. making as much money out of the situation as possible. It was alleged they did this, in part, by forcibly acquiring customers’ assets cheap and selling them dear. RBS has since recognized that these objectives were in conflict and, they claim, now supervises to ensure fair play. Quite how it does, or even could, do that is opaque.
In January 2014, the FCA appointed the Promontory Financial Group to investigate the extent of the abuse. Promontory, now owned by IBM, reported to the FCA in 2016. The FCA published its own summary of the Promontory report in November. How that differs, if it does, from the original is not clear but it is an odd document. On the one hand it reads like a whitewash, playing down the admitted abuses, but then remarkable admissions crop up. For example:
- “the failure to support SME businesses in a manner consistent with good turnaround practice;
- placing an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers;
- the failure to document or explain the rationale behind decisions relating to pricing following transfer to GRG;
- the failure to ensure that appropriate and robust valuations were made by staff, and carrying out internal valuations based upon insufficient or inadequate work – especially where significant decisions were based on such valuations;
- the failure of GRG to adopt adequate procedures concerning the relationship with customers and to ensure fair treatment of customers;
- the failure to identify customer complaints and handle those complaints fairly”.
Two thirds of customers transferred to GRG were in fact viable and “most of them experienced some form of inappropriate action by RBS. However, the Report also concluded that, in a significant majority of cases, it was likely that inappropriate actions did not result in material financial distress to these customers.” That does not sound like a ringing endorsement to me nor does it match up with the media reporting of RBS/GRG management actions during this period.
But why has the Promontory Report still not been published six months on, nor the FCA’s own report? The FCA seems to have plenty of time to hound the little guys, like individual Financial Advisers, but none to uncover a potential scandal concerning one of the country’s biggest national institutions.
Finally, there is another possibly innocent but still intriguing aspect of the FCA’s long grass strategy: the role of Margaret Cheever. Ms Cheever was a Managing Director of RBS during the period under review, responsible for Banking Credit Policies and Practices and Corporate and Institutional Banking. She left to become, guess what, a Director of Promontory. Obviously she may well have had nothing to do with any of this but it would be good for that issue to be clarified not least because conflicts of interest lie at the heart of this matter.
It's the canvas that has changed, not the economics
The Guardian carries another of those whining pieces. Where did it all go wrong? Back post-WWII the economy was just lovely, then Ronnie, Maggie, neoliberalism, privatisation, you know, the stuff we here at the ASI do, and it's been terrible since then:
The share of national income that went to the bottom 90% of the population held steady at around 66% from 1950 to 1980. It then began a steep decline, falling to just over 50% when the financial crisis broke in 2007.
Similarly, it is no longer the case that everybody benefits when the US economy is doing well. During the business cycle upswing between 1961 and 1969, the bottom 90% of Americans took 67% of the income gains. During the Reagan expansion two decades later they took 20%. During the Greenspan housing bubble of 2001 to 2007, they got just two cents in every extra dollar of national income generated while the richest 10% took the rest.
Those responsible for global financial crisis got away with it while those who were innocent bore the brunt of austerity
The US economist Thomas Palley* says that up until the late 1970s countries operated a virtuous circle growth model in which wages were the engine of demand growth.
“Productivity growth drove wage growth which fueled demand growth. That promoted full employment, which provided the incentive to invest, which drove further productivity growth,” he says.
At which point a simple but not simplistic explanation of what happened. The canvas upon which we were painting the economy changed, economics did not.
It really is neoliberalism and globalisation to blame, or thank according to preference. Consider Milanovic's Elephant Graph. Which shows whose incomes have been gaining these past decades. Yes, the 1% (note that the global 1% includes me and most likely you too, above about £25,000 a year is that global 1%) but the vast majority of the gainers have been the 10% to the 70% of people out there. China got rich, India's getting there and even Bangladesh, yes Bangladesh!, has been growing at 5 and 6% for two decades now.
All those old economic drivers, productivity, wages, demand, they're all still working away. It's just that they're operating on the global economy now, not just a small series of national ones. And as before the gainers are the poorer end of society.
30 years back the great demand was that we must aid that global South to develop. Excellent, it's happening, why is everyone complaining?
There's nothing quite so conservative these days as a worried liberal
That's liberal in the American sense you understand, a wet left winger. As with Will Hutton here:
The internet celebrated its 28th birthday a fortnight ago. It’s an invention that ranks alongside the wheel, immunisation against disease and the internal combustion engine as a transformer of human existence. As an open information digital connector, it is an extraordinary force for individual liberation, embodying the very best of Enlightenment values: more information is available to more people through their mobile phones and personal computers than ever before.
The world can then follow the Enlightenment injunction to dare to know to a degree that the great philosophers, arguing for a free public realm where information and evidence could be openly marshalled and tested for human betterment, could never have foreseen.
Over the last 18 months, it has become obvious that the internet is the most serious threat to the Enlightenment values it purports to represent.
The Enlightenment was about more people gaining more access to more information in their own language. The King James Bible, as with Wycliff before and the equivalents in other languages of translations into the vernacular, were really the start of it all. And now that very same process, where more people gain more access to more information in their own language is a threat?
Well, yes, it is actually, but it's a threat to a certain set up, not to the idea itself:
Worse, the advertising draining from newspapers is reaching such a scale that the viability of a free press is under threat. Online newspapers can charge subscribers, but still need advertising to support journalism and the expensive edifice of complying with publishing law. At the very least, as upholders of true news, they should be competing with Google and Facebook on equal terms.
The world of cushy berths is threatened, berths where four digit weekly pay checks are distributed for an hour's work on a column. That's the actual complaint and that's the threat, not to the Enlightenment or its values but to the people who have done very well out of he current structure. Thus the most conservative insistence that nothing must change.
The most outrageous drivel
Terrible events have the capacity to bring out the most dreadful drivel in society. The murder of PC Palmer appears to be doing just that:
The website running a fundraising campaign to raise money for the family of murdered policeman Pc Keith Palmer is refusing to waive its five per cent fee, The Telegraph can disclose.
The fundraising page set up by JustGiving for the Metropolitan Police Federation has raised over £670,000 by Friday night.
This means that JustGiving - which pockets 5p of every pound donated - is likely to receive around £33,500 in administration fees.
It costs money to run a website. It costs quite a lot of money to run one which can work at scale.
The website takes a cut from most donations. While some of the money is used for maintenance, product development and charity training, accounts allegedly show that more than £10million was spent on staff costs last year.
People were paid for turning up to work? What horrors!
As it happens, JustGiving spends all the money it earns on developing the services of JustGiving. There's not even some rapacious capitalist behind the curtain. Although if there were we'd be defending them too:
He said: "The unfortunate thing is that they are a business and there is no other way of doing it other than asking people to go to bank and pay the money in over the counter."
We are enriched by the service they offer, as is true of all of the other things that we voluntarily spend our own money upon. Seriously, where did this drivel start, that people should not make a living giving us what we want?
The Tax Justice Network makes another unsubstantiated claim
The Tax Justice Network has just told us, once again, that countries lose gazillions in tax revenue to tax dodging. However, their claim is not in fact true. Specifically, this is not true:
We focus now on the long-term estimates of the revenue (in per cent of GDP) lost by each country i in period t as a consequence of profit shifting through tax havens in 2013, i.e. 𝐿𝐿𝑖𝑡.
They are not measuring long term revenue anything. For they are not measuring the effects of the corporation tax rates they look at.
Imagine, for example, that a country had a corporate profit tax of 100%. There would be little to no corporate activity leading to profit to be taxed. The country would be dirt poor in fact. Thus there would be little revenue.
Equally, a tax rate of zero would encourage activity like billy oh. And revenue would be gained from other taxes instead, like the consumption of the workers now gaining higher wages, even perhaps their income tax.
This is, of course, the Laffer Curve argument and just like that argument it is something which is true at some level of taxation. Lower rates will increase revenue, higher rates reduce them.
We're not insisting that current rates are either above or below that revenue maximising level, not right here and right now we're not. But we do insist that failing to even consider the point means that no estimation of long term revenue losses has in fact been made.
We'd also point out that going over that revenue raising rate is easier than many think. The combination of three things made it probable that the UK corporation tax system in the UK in the 1970s managed this. High inflation, a corporate tax system which did not rebase costs on that inflation and relatively high tax rates meant that corporate capital wasn't even earning enough to cover depreciation in some of those years.
It really is necessary to consider the wider effects, not just do sums as the TJN has done. But then, you know. This is the same researcher who insisted that Zambia was losing squillions in revenues by comparing the price of tens of thousands of tonnes of copper in that country with the price of 10 kg samples of copper in Switzerland. Experimental design might not be the strongest suit here.