Just to remind everyone, the good old days are right now

To read the pages of the, say, Guardian, is to be confronted with a list of all that is wrong with the world - there are undoubtedly things wrong with it too. But the insistence is that things are getting worse. Something that Hans Rosling insisted wasn't true and as The Guardian has just printed from him:

It is absolutely true that there are many bad things in this world. The number of conflict fatalities has been falling since the second world war, but the Syrian war has reversed this trend. Terrorism too is rising. Overfishing and the deterioration of the seas are truly worrisome. The list of endangered species is getting longer. But while it is easy to be aware of all the bad things happening in the world, it’s harder to know about the good things. The silent miracle of human progress is too slow and too fragmented to ever qualify as news. Over the past 20 years, the proportion of people living in extreme poverty has almost halved. But in online polls, in most countries, fewer than 10% of people knew this.

Entirely so, there are undoubtedly things wrong out there. As there are things going right. And there's a useful shorthand for the bits that are going right - those to do with economics. People everywhere are leading richer, longer, more healthy, lives. With more choices, more calories and fewer dead children.

Given that the main economic idea of the last 40 years - well, The Guardian insists it is at least - is neoliberalism, that must mean that neoliberalism is the correct economic policy to be following.

We can take this further, as Ricardo Hausman points out:

Our research has uncovered that in the developing world, there are enormous differences in productivity within countries, across their different regions. For example, in the US, the richest state, which is probably Connecticut, is about twice as rich as the poorest state, which is either Mississippi or West Virginia. The difference is a factor of two. In Mexico, the difference between Chiapas and Nuevo León is a factor of nine. Similar differences exist between the Indian states of Bihar and Goa or between the cities of Patna and Bangalore. These differences in income are mainly differences in productivity. It’s not the result of what share of the pie goes to capital and what size of the pie goes to labor. It is differences in the sizes of the pie.

So there are these enormous differences in productivity that make the productive places rich and the unproductive places poor. The poor people are not being exploited. They’re being excluded from the higher productivity activities. It’s not that the capitalists are taking a very large share of what they produce. It’s just that they produce very little in the first place.

Many of those that worry about inequality blame capitalism for it. Even Pope Francis has been framing the issue in this way. Now, let’s define capitalism the way Karl Marx did. It is a mode of production where some people own the means of production and others work as wage laborers for them. But if this is the case, capitalism hires 8 out of each 9 workers in the USA, 2 out of 3 in Nuevo Leon, 1 out of 7 in Chiapas and 1 out of 19 in India. Places where more of the labor force works for capitalist firms are richer, because capitalist firms allow for much higher productivity.

A useful shorthand for neoliberalism would be the expansion of capitalism - tempered, as we should always hope, by free markets - to those parts of the world previously unexploited by it. This being something that actually works in improving the human condition.

By any historical or global standard the good old days are right now. Something caused by that neoliberal globalisation, the spread of capitalism and markets to the parts of the world previously unsullied by them. The only puzzle we've got is why so many people are unhappy with this?

Madsen Moment – the morality of private sector players in Education and the NHS

Dr Pirie tackles the moral objections to the private sector getting involved in education and the NHS, and those that object to people choosing these services. 

We're sorry but we're going to have to call a halt to all this social mobility malarkey

One standard demand in modern society and politics is that we shouldn't be running society in pursuit of this wealth, all this stuff and GDP. Instead, we should be concentrating upon the happiness of the people. Another insistence from the same sort of source is that we should be having lots of social mobility. Something which even Polly has managed to note means downward social mobility for just the same number as those who enjoy upward such.

Something has to give here:

Men spend their lives subconsciously striving to do better than their parents and are materially less happy if they fail, while women have no such hang-ups, research has found.

Men already have lower self-reported happiness than women - something that's been true all along in fact.

So, downward social mobility increases unhappiness in society, happiness is the goal, we'll have to stop the mobility, won't we? Good, that's settled then.

Leaving us with the correct structure, the one we should be having anyway. Have a society as free and liberal - liberal in that correct sense of relating to liberty - as it's possible to have without us all bursting from the joy of it. Including that economic freedom which is what leads to there being more GDP, more stuff. And the happiness of the resulting society will be something emergent from our interactions - just like everything in that economy is.

Polly Toynbee just is such a card, isn't she?

It's never quite been possible to work out what it is with Polly Toynbee. She'll argue, vociferously, at cross purposes with herself and the difficulty is whether she does this deliberately, in pursuit of some political point or other, or is it simply the not knowing much about that reality out there? 

For example, she's spent decades insisting that the idea of different schools for those of varied abilities - a split, say, into academic and vocational schools as with grammars and secondary moderns - is an anathema, a stain on our very society in fact. All must be educated in the same place in much the same manner, in comprehensives.

But today the conversation is about technical education, apprenticeships and so on for the, as she herself says,. non-university going classes. Thus she says:

Brexit turbo-charges the need for German-style technical education when the door slams shut on importing the skills we lack.

That German system divides into those academic and technical streams at the age of 10. And there's pretty much no way out of the technical into the academic stream after that age either. Certainly graduation from the technical stream does not enable a more academic tertiary education.

That is, the German system divides earlier and is even more rigid in its divisions than that older British system which is so anathematised. Which leaves us with our question about Polly. Is it just that anything is fair game in making a political point? Or is it that she just doesn't know?

Britain's slow wage growth could be to do with the taxes upon wages paid

It's a standard and completely unsurprising economic point that taxes levied upon the employment of labour come out of the wages paid for that labour. The employer is interested in the total price to be paid to gain the work desired, how that is divided between, say, national insurance and wages, is of no consequence to said employer. They're both part of the total costs, raise the NI portion and you'll lower the wages part.

Thus we might have a useful explanation for slow wage growth recently:

The Apprenticeship Levy, which came into effect last April, forces companies with a wage bill of more than £3 billion to pay 0.5 per cent of it to the Education and Skills Funding Agency (ESFA), which is part of the Department for Education.  

The companies have until April 2019 to draw down the funding, which they must use to take on new apprentices, or train existing staff.

As is the nature of these things a flat rate tax will largely produce revenue from those on higher wages. As is also the nature of these things apprentices are generally paid rather low wages. To tax the higher paid to produce lower wage jobs - and, as above, the total charge coming out of wages, it ain't the employers carrying the economic burden - will tend to reduce wages, won't it? 

What is one of the major complaints about the British economy currently? That there's not much wage growth.

Gosh, we wonder why?

Once again the new economics foundation fails economics

Nef, the new economics foundation, has a new little campaign running. That there should be affordable rents of businesses working in the railway arches which permeate London. This is to entirely misunderstand the purpose of prices:

In many cases, traders are being replaced by cafes and workspaces designed for people working on laptops.

Of those that remain, many are struggling for survival, as business rates also went up substantially last year for the first time in seven years.

Frances Northrop of the New Economics Foundation says: “Imagine Londonwithout the small businesses of Portobello Road, Brick Lane, Columbia Road and Chinatown. They are being driven out by the cold logic of ever-increasing rents.”

Many small independent businesses are based in railway arches across London, often owned by Network Rail or Transport for London.

As their press pack notes:

This campaign is really important and closely linked to the London Living Wage. If it can be established what a person needs to earn to live in London, it must be possible to establish what a small business can afford to pay in rents and rate.

As we say, this is entirely to misunderstand prices. For that's exactly what they do for us. Tell us how much a business can afford to pay in rent and rates. More than that, railway arches are a scarce resource. There's a limit to the number of them and a larger number of people who would like to occupy them. We thus desire them to be occupied by those who are adding the most value - that will be those who are able to pay the higher amounts in rent and rates.  

The market in property, the associated rent and rates costs, therefore do the job for us - sort through those who will add the most value by occupying a railway arch and also make sure that those who do add the most value do the occupying. Huzzah, job done and all that.

If that turns out to be cafes and workspaces instead of artists then so be it. We might not like what prices are telling us but they don't lie all the same.

All of which is just another instance of that great truth first revealed by Giles Wilkes. Nef stands for not economics frankly.

Today's economics lesson comes from Myles na Gopaleen

One of the great comic writers or journalists of the past century might not be thought of as quite the place to find an economics lesson, nevertheless it is so:

"This is the first time a newspaper article was started in brackets. Innovation, you see. The homeric task of creation. Bringing into being a thing hitherto not here, much more exhausting than building pyramids in Egypt."

And there we have the explanation of why the poorer countries should be growing faster than the richer. For we lucky enough to be in those rich countries are up and around the limits of the technological envelope. For economic growth to occur we have to do that homeric creation thing, work out how to add more value through some process or another.

The poorer countries - a useful definition of being poorer being not at that limit of the technological envelope - can copy what is already being done elsewhere to add value and thus growth is easier. Or at least should be easier.

In one sense this is what has been happening these past few decades as our beloved neoliberal globalisation has been spreading. It should be true that poor countries grow faster than rich. It should be that global inequality falls as this happens. Back when we were trying to plan that global economy, to plan those local and poor economies as so many did, it wasn't happening. It's since we've stopped that planning and direction, allowing markets to take much more of the strain, that what should have been happening has been.

Or as we might put it, that neoliberal globalisation has been more about not doing things to stop it than anything else.

Paternity leave doesn't solve the gender pay gap

Given the reporting that's going on about the gender pay gap currently there are, naturally enough, a number of ideas floating around about how to close it. We don't think it needs closing, coming as it does from people exercising their freedom to live their lives as they wish but still, worth examining the ideas proffered.

One of which is more and better paid paternity leave. This idea has the advantage of at least understanding a modicum of the underlying problem. It is the change - on average of course, not particularly of any one individual - in working patterns after the arrival of children which causes that gap. Women tend to be the primary child carer more often than men do and that's the cause and nub of the basic problem, if anyone even wants to call it a problem.

OK, makes logical sense, if more men took more paternity leave then more fathers would interrupt careers as mothers so often do and the pay gap would shrink. But, well, we do have to test logic against reality:

Forget "ladies who lunch." In Sweden there are "latte dads."

...

Latte dads aren't so commonplace because of their taste for caffeine. They're a direct result of Sweden's parental-leave policy, one of the most progressive in the world. The Swedish governmentsays that parents of both sexes are entitled to 480 days (16 months) of paid parental leave at about 80% of their salary (with a cap), plus bonus days for twins, and they must share — Swedish dads must take at least some of those 16 months. The days don't expire until the child is 8 years old.

...

"Men with prams have become such a familiar sight since shared parental leave was first introduced in 1974 (a full 41 years before parents are scheduled to get it in the UK under the government's proposals) that there's even a name - 'latte pappas' - for the tribe.

Excellent, Sweden has those policies which are advocated for here. Our reality test being do they close that gender pay gap? Well, no, not really. By the method the EU uses to measure it it's 15% in Sweden as opposed to 16% across the EU. As opposed to 6% in Italy which most certainly doesn't have any cultural tendency to latte dads.

Oh well, another of those plans which look good on paper but fail on exposure to actual human beings.

We're entirely happy to agree with the most vociferous of feminists that the gender pay gap is the result of deep seated cultural discrimination. It's just that we're entirely certain that it is discrimination by parents themselves over how they'd like to organise life to raise their own children. As such that gap - better to call it an earnings gap as well - is an outcome of people exercising their freedom and liberty. Something we thoroughly approve of ourselves even as it drives certain people entirely up the wall.

Wanted: A Gerald Nabarro to kill import tariffs

Sir Gerald Nabarro was a splendid figure. An immaculate dresser with a huge handlebar moustache, his three Rolls Royces were numbered NAB 1, NAB2 and NAB3. He appeared at every budget day, when such things mattered, in morning suit with top hat.

He killed the Purchase Tax by a series of relentless questions over the years: “Why was a budgie mirror with a bell taxed at a lower rate than one without a bell? Why was a 10-foot ladder taxed at a lower rate than a 12-foot one?"

My grandmother’s mantelpiece had two identical flower vases. The one marked “celery” on the base was 25% cheaper (essential) than the one that did not (luxury). Sir Gerald made the lives of successive chancellors such a misery that they eventually gave up and abolished it. We need someone to do the same for the Trump tariffs.

If we are to be silly enough to compile lists of those goods we choose to make more expensive for our customers, we need someone with Sir Gerald’s style and stamina to ridicule them. Step forward a backbencher looking to make a name for herself (or himself) with relentless questioning to expose the absurd and arbitrary nature of tariffs. Why are jeans with famous squiggles on the back pockets subjected to a higher tariff than those that do not? Why are bourbon whiskeys in the top ten of popular brands taxes at 35% more than the others?

I am sure that an army of unpaid volunteers would supply our backbencher with reams of examples with which to bombard hapless trade ministers. Eventually, as with the purchase tax, they might just throw in the towel (assuming it is not made prohibitively expensive as an import luxury).

There would be no money in this, and maybe no ministerial promotion, but there might be a knighthood, innumerable appearances on media shows, and the thanks of a grateful nation. Would a latter-day Sir Gerald kindly step up to the plate…

Book review: Profiting from Integrity by Alan Barlow

If you believed the Left, you might think that people in business are all cutthroat crooks. This book aims to demonstrate—through hard evidence—that when a corporation is run with integrity, it delivers better financial performance too. As the most successful and robust capitalists, like Charles Koch, already know. "Conducting all affairs with integrity,” he says,  "is the first principle because it is the basis for trust and the foundation for mutually beneficial relations with our constituencies - employees, customers, suppliers, partners, communities and governments."

The book’s author, Alan Barlow, illustrates the integrity-based management approach from his own experience in running a multi-national corporation. To him, integrity in business means: transparency in what management and staff say and in what they do and how they behave; management and staff taking a proactive stance as to what is acceptable and unacceptable behaviour; integrity as a prerequisite of how CEOs go about leading and managing their corporation, not an afterthought; and making integrity a core business process.

His recommended approach has several elements. Feedback, for example: making sure management and staff share things honestly. Stakeholders: identifying the people who matter. Vision: setting out a vision that motivates staff and meets the wider community’s needs. Integrity: embodying integrity and honesty into the business. Leadership: ensuring the moral direction is set from the staff. Staff: delivering real engagement and communication. Barlow devotes a chapter to each of these headings, showing how—and why—they lead to greater business success as well as moral satisfaction. And using the Culture Audit survey developed by the Great Place to Work Institute, he shows how each of these approaches also makes integrity-led businesses great places to work.

Barlow highlights some of the superior financial performance that his own company experienced through the integrity approach. Record growth in excess of targets; a doubling of size; profits growing 18% compound for seven years; revenue growth at double the market sector average; a 20% premium when the company was sold. 

But was that all due to integrity? Could it have been more about the quality of the management and staff, or grasping opportunities, or taking market share from others, or more and better R&D, or good networks? Maybe, says Barlow: but if so, that was precisely because the commitment to integrity encourages all all of these things—such as making the business a place that attracts first-class employees.

And again, is integrity perhaps something that works in some businesses—those like service industries that have very direct relationships with customers, for example—but not others? Barlow insists it benefits all, as the survey evidence suggests: America’s top companies to work for come from all sectors, and their financial performance is better than others too. Barlow concludes that companies can achieve greater profitability, be great places to work, and benefit the community through acting with integrity in everything they do. That’s possible if CEOs have the right character, mindset and intrinsic belief in themselves and the quality of what they create. And it is a million miles away from the dog-eat-dog fast-buck parody of capitalism imagined by the left.

It’s not just Paul Drucker’s idea that ‘culture eats strategy for breakfast’. Rather, ‘integrity eats strategy for breakfast’. People, it seems, want to work for and do business with people they trust, and avoid those they don't. Who apart from Charles Koch would have guessed?

You can buy Alan Barlow's book, Profiting from Integrity, here.