Refresh

Today saw the launch of a new initiative by the Telegraph. 

Refresh is a policy discussion forum, run on social media, with the express aim of reinvigorating support for free markets in Britain. Opinion across much of the UK’s political spectrum is turning against free markets, and young people in this country are continually painted as only being interested in left-wing solutions. Refresh rejects this kind of thinking. It is apolitical, instead it focuses on how capitalism can be harnessed to improve living standards, create freedom and unleash the potential of individuals.

Refresh exists primarily to promote good policy and ideas that, if put in place by governments in Britain, would have a real and positive impact on this country. It challenges closed thinking with radical ideas that cut against the political grain.

Run by Helena Horton and Daniel Capurro at the Telegraph it is a truly refreshing idea to try and persuade the young of the benefits of the free market – not by bribes or gimmicks, not by appeal to identity, but by ideas and argument. Something set out excellently by Lee Rowley MP today. 

We're proud to say that we're part of this. Reaching out to the next generation by presenting them with ideas that will change this country. Specifically aimed at, and written by, those under 35 years of age our writers will be directly engaging and persuading Britain's youth. We're going to see more and more pieces written by ASI staff and friends over the next few months.

But to get you in the mood, here's a piece by Matt Kilcoyne on how it's not it is not capitalists that have led to our broken housing market, but the state – by imposing rationing.  

And here's Sophie Jarvis explaining why, if the Tories want to rebuild the entrepreneurial spirit in Britain, they might need the self-starting, meritocratic, liberty-loving and wealth creating attitudes that immigrants bring to the country. 

Varoufakis makes Marx's mistake- underestimating markets

Yanis Varoufakis has favoured us, in The Guardian, with another of those pieces which just insists that Marx was right. You know, sure, it's hasn't happened for 150 years and counting as yet but it's sure right around the corner today.

None of this should surprise a reader of the manifesto. “Society as a whole,” it argues, “is more and more splitting up into two great hostile camps, into two great classes directly facing each other.” As production is mechanised, and the profit margin of the machine-owners becomes our civilisation’s driving motive, society splits between non-working shareholders and non-owner wage-workers. As for the middle class, it is the dinosaur in the room, set for extinction.

At the same time, the ultra-rich become guilt-ridden and stressed as they watch everyone else’s lives sink into the precariousness of insecure wage-slavery. Marx and Engels foresaw that this supremely powerful minority would eventually prove “unfit to rule” over such polarised societies, because they would not be in a position to guarantee the wage-slaves a reliable existence.

It's a fair old prediction, certainly. But a little earlier Varoufakis tells us:

While celebrating how globalisation has shifted billions from abject poverty to relative poverty,

That is, the wage slaves have done damn well out of the arrangement. As absolutely any examination of historical and current day living standards will tell us.

The reason why is, of course, that Marx underestimated the power of markets. Especially that for labour. He was aware of how it was monopsony - not that the word existed back then but this is what he meant  by monopoly capitalism - in the purchase of labour which would immiserate the workers. We've not have such monopsony, they're not immiserated.

Further, as long as we maintain a market economic system we're not going to have monopsony and thus we're not going to have the immiseration.

Markets are more powerful than Marx thought they were, than Varoufakis thinks they are. Which is why the working classes today are richer than any bourgeois of Karl's time, richer in fact than any bourgeois or even capitalist of any earlier era. That power of markets to ensure that the new created wealth of capitalism flows to us as workers and consumers is also why there's no coming crisis nor revolution.

How excellent, we can entirely dump the concept of ethical investment

As we all know there's a certain social pressure on us all to invest only in those industries or companies that are morally sound. This is something we should indeed do of course, we should use our own interactions in a market economy to increase our utility. Knowing that we're not doing bad is an increase in such utility and thus we should invest, just as we buy or otherwise act, according to our tastes.

It's a little different when we forced to do so according to the morals of another but still.

However, there's always that feeling that we're giving up income by doing so. Thus this is good news:

Ethical investors make more money than those who look purely at financial measures, according to a major new study.

Environmental, social and governance (ESG) issues have typically been deemed to be fashionable but bad for business. This is because “ethical” ­investors have to limit the number of companies which they can back, losing some opportunities for profit.

But a Deutsche Bank study of more than a decade’s worth of data could turn that situation on its head, showing companies that can pass an ESG test are typically better bets than those which fail.

ESG is of course a set of the morals of others that we are urged to conform to. There's an entire industry trying to persuade us to do so as well. The great thing about this news being that we can toss the entire concept.

For the only reason we are urged by those social pressures to conform to this set of moral standards about investment is because of that worry, that fear, that income will be lost by doing so. If no income is lost, if this claim is true that in fact more income is made, then we don't need the moral insistence, do we? We don't even need the moral classification itself.

For if ESG investing makes more money then everyone will invest in an ESG manner without being urged to. We can just leave the lust for gelt and pilf to do the work without the branding, the advertising, the suasion or anything else.

That ethical investing makes more money means we don't have to have that concept of ethical investing, doesn't it? 

Someone's always got to pay, don't they?

If one group are to get more than another must get less. This is true even if the economy is growing - even if all are gaining more it's still true that what is being added to the incomes of one group isn't being added to that of another. When it's sharing out more for all of course it's much easier, more peaceable, than when we're fighting over a fixed pie. As, when and for example, there's a legal insistence upon higher wages for one specific group:

The care of more than 13,000 elderly and vulnerable Britons could be thrown into turmoil after one of the biggest providers of home care visits in the UK warned it would go bust unless creditors backed a rescue plan.

Allied Healthcare, which has contracts with 150 local authorities and also provides out-of-hours services for the NHS, is asking for breathing space on its finances after cashflow problems that have been triggered in part by an £11m bill for back pay owed to sleep-in care workers.

Whether or not those workers should be paid while they sleep isn't the point. Just as, today, our point isn't whether the minimum wage should justly rise or not. It's just an insistence that someone, somewhere, has to pay that higher cost. Or, of course, the jobs won't exist and those supposedly getting that higher pay will get none.

Which is an important point. Legislatively raise wages by £11 million and some, one or another, employers will go bust. Or, customers - here the taxpayers - must pay more. Noting who loses does rather change the joy doesn't it? As opposed to the usual political stance of only considering who wins.

World Bank states the obvious - unions outraged

An interesting little tale here. The World Bank states the blindingly obvious and unions, as a result, are outraged. The point being made is that minimum wages, protections for labour, can be "too high." Too here meaning high enough to damage both employment prospects and the economy in general. Therefore such wages and protections should be lower to the benefit of all. It's really not an outrageous thing to say at all:

A working draft of the bank’s flagship World Development Report – which will urge policy action from governments when it comes out in the autumn – says less “burdensome” regulations are needed so that firms can hire workers at lower cost. The controversial recommendations, which are aimed mainly at developing countries, have alarmed groups representing labour, which say they have so far been frozen out of the Bank’s consultation process.

...

The WDR draft says: “High minimum wages, undue restrictions on hiring and firing, strict contract forms, all make workers more expensive vis-à-vis technology.”

That second is obviously true, there's a "too high" level. But the important part of all of this is the bit "developing countries." Take the examples of India or Bangladesh (as one of us did just recently) where as much as 85% of the labour force is outside that formal economy. Where, this meaning the same thing, that 85% of the labour force have no protections at all from such legislation. Indeed, they're locked out of that formal economy by the costs of hiring labour into it.

It would be better if the protections, the costs, were lower so that more of the population could enjoy them, no?

The unions are outraged, of course they are, because they work for their members. Which, in those developing countries, means only those in that formal sector. So what about the nation as a whole, so what about the workers, it's our workers and ours only that we care about. Which is fine, of course it is, but we do need to remember that they do work only for their own members.

It is possible for the protections on offer to formal labour to be too high. A useful method of working out when that is being that the vast majority of the working population can't get hired into formal labour because of the costs of doing so. Thus, and ineluctably, things would be better if the protections were reduced. As the World Bank is saying and as the unions, those representatives of formal, and only formal, labour are complaining about.

Quite the most stunning piece of research we think

We're told that Waitrose is to install health food police. In fact, they're going to train their shop assistants to be helpful:

Once trained up by qualified nutritionists, shop assistants will advise and direct customers who ask towards healthier choices on the shop floor free of charge.

For example a shopper deciding on a meal to cook for supper might be advised to buy quinoa instead of rice, Waitrose said.

They will also be trained to suggest recipes to shoppers, and advise them on how to read food labels and where they can find reliable sources of nutrition information.

It's entirely true that the British police are famed for what they'll do if asked - like tell the time. However, a fairly important point about police - as opposed to these assistants - is when they'll intervene if not asked. We're not, for example, being told that there will be barks of "Oi, you! Fattie! Step away from the ice cream, drop the frozen pizzas" which is what a police approach would entail.

However, what sparks our interest is this most stunning piece of research:

Research shows that shoppers tend to reach for unhealthy options in supermarkets if they do their shopping while hungry.

For example participants in a Cornell University who were hungry purchased more high-calorie products, the researchers found. 

Well, yes, we rather think that's how hunger works isn't it? It's a signal to the body that it needs more calories. Time to go off and hunt or gather some more, the hungrier we are the more and denser the calories should be.

That is, this isn't an error, this is the point. We're more than a little worried at people not getting this. Not just about food and hunger, but more generally, people missing the point. For example, we're often told QE failed because it raised asset prices. But then the point of QE was to raise asset prices to make investing in making more assets more attractive. That is,  raising asset prices was the point of QE.

We really do think we'd all be better off is rather more people got the basic point of what it is that we do. You know, like hunger prompts us to eat? It's a pretty useful little signal in fact....

Tianah

When I ask 20-somethings just out of university what they want to do, they often tell me that they would rather not work for a company driven by profit. “Profit-making isn’t a good cause.” Seeking profit is a sign of “greed”.

I realised that something needed to be done to address this trendy aversion to capitalism. The economic case for the profit motive has been around for a long time, but many young people are not taking notice, if they have ever even encountered it. So I created Tianah, a short documentary about my friend, to show the human side of profit.

Tianah tells the story of how ambitious entrepreneur, 23-year- old designer Christianah Jones, went from a teenage Psychology student selling clothes from her bedroom on the Depop app, to the businesswoman who created the famous Slim Shady sunglasses brandished by Bella Hadid and Kaia Gerber today.

This is a snapshot in the life of one of the many entrepreneurs active in London in 2018 – a celebration of individualism, technological advancement, and the beauty and necessity of the profit motive.

When Tianah was a teenager she was a fan of style. Since there are so many styles to try, she hated wearing the same thing twice. This made her stand out, but led to clothes stacking up in her bedroom. To get rid of them and make quick money, she sold them along with other cheaply sourced fashion finds that she would patch up herself. It became a hobby, and demand grew. It was when she made a profit and sales kept improving that she realised this is how she might not only make a living, but achieve the success in life she desired.

Tianah took the risk of quitting her graduate job and abandoning her plan to continue her studies to master’s and PhD level. Then she could focus full-time on her business and creating her own fashion lines. With no other income, this step forced her to find increasingly imaginative ways of sourcing labour and materials and keep ahead of what the young masses craved.

It is an inspiring story; it says that backing down from your ambitions in the face of popular beliefs can compromise not only your own success, but your ability to lift the cynics up with you. Tianah explains why profit is vitally important to her survival and why she aims far higher than merely getting by.

If Tianah invests her time, money, special knowledge, and materials into making her latest fashion idea a reality, and these efforts make money, it is a signal. It means that her product – the combination of the resources she brought together in her own way – is more valuable than the sum of its parts, more valuable than those parts were before her vision connected them. If she loses money, she is destroying value, and those resources would have been better expended elsewhere.

As Tianah puts it, nothing is free in this world; she gives people the feel-good factor and she receives something in return for that.

By choosing to buy Slim Shadys, someone has decided that the money it would cost to buy the Slim Shadys is worth less to them than the Slim Shadys being on their face. It is personal; the customer knows best. Others are free to come along and create a better product. But when Tianah does it better, she wins the customers’ money and creates more of the same product that is making people better off than they otherwise would have been. Crucially, the product will become more ubiquitous and affordable as creators realise there is money to be made and compete for business.

Slim Shady sales are an example of this process which transcends fashion and can improve everything from supermarkets to schooling. It is a process that leads to more wealth being created, not taken from anywhere. It is why, throughout history, entrepreneurs such as Tianah contribute to human progress. Profit-seeking means everyone gets richer and life gets better.

Profit makes the world go ‘round.

The world is getting richer or freer - probably both

An interesting little snippet in the FT:

The findings show that demand for cash continues to rise globally, despite t increase in electronic payment options, including mobile in recent years. Cash in circulation relative to GDP has increased to 9.6 per cent across all continents, up from 8.1 per cent in 2011.

The more general rise in the demand for money is evidence of the world getting richer. As with a restaurant which moves from serving 50 covers to 150, a restaurant which is going to need more plates. A larger economy needs more money to lubricate it - thus Milton Friedman's strictures on why the money supply must grow but moderately and in pace with GDP.

But cash relative to GDP is something different. That's an expansion in freedom. 

As we've pointed out before cash is untraceable and anonymous - that means that we can do things the prodnoses would prefer we didn't with it. Escaping the prods of the nosey is indeed a rise in freedom. Yes, there's also the possible loss of tax revenue in a grey economy to consider but then which do we think more important? Liberty or paying for diversity advisers?

Your answer might differ from the logically correct one there if you are a diversity adviser but it's pretty clear to the rest of us.  

Happy Birthday David Ricardo!

Today marks a significant birthday, that of the English economist, stockbroker and politician, David Ricardo (1722-1823).

His career began as a successful broker and speculator. It was said that he made £1m by misleading market players into thinking that the French had won the Battle of Waterloo, and then buying stocks and bonds cheaply.

But Ricardo is much better remembered today as an economist. His career in this field started when he read Adam Smith’s Wealth Of Nations (1776). Applying rigorous logic to Smith’s ideas, he made important developments in the theory of rents, wages, profits, taxation and value. In 1809 he argued that the high inflation in England was the result of the over-issuance of banknotes—making him an early monetarist. Like Smith, he opposed protectionism, arguing that the Corn Laws (which restricted wheat imports) made domestic production inefficient and drove up rents.

Ricardo’s greatest contribution to liberal thinking was perhaps his theory of comparative costs (now known as comparative advantage). Countries, he said, could make themselves better off by specializing in what they can produce relatively cheaper (in terms of what else they might have produced) than other countries. Even if a country can produce everything more cheaply (in absolute terms) than another, they are still better to specialize and trade in the goods where they have a comparative advantage. 

This principle became and remains one of the key foundations of the argument for free trade. So let’s raise a cheer for David Ricardo, 296 but still going strong—or at least, his ideas are.

Communal Forgetting

Throughout my school years we didn’t spend much time talking about the Russian Revolution and its atrocities and I’d bet that most of my peers wouldn’t know of any genocides except for perhaps the Holocaust. Though I grew up in Denmark, this is not strictly a Danish problem. According to a report by The New Culture Forum similar tendencies are seen in the UK. In a survey they found that less than ⅓ of 16-24 year-olds have studied the Russian Revolution at any point in school. Furthermore, they found that of secondary school children aged 11-18 81% weren’t able to mention a genocide other than the Holocaust.

What’s more, in their report they presented a list of 22 historical figures to respondents and asked them to indicate whether they associated that name with crimes against humanity or not. It turns out that a significant proportion associated George W. Bush (39%) and Tony Blair (34%) with crimes against humanity, far more than did Communist mass murders like Pol Pot (19%).

In a different survey the respondents were presented with a different list of another 15 historical figures and were asked to indicate whether they would consider them to be a dictator or not. Surprisingly, more people thought of Ronald Reagan (9%) as a dictator than Nicolae Ceaușescu (8%).

The list of surprising findings goes on. In a third survey designed to test respondents attitudes to various ideologies, socialism is viewed as the most positive ideology while only receiving the second worst negative score. Unfortunately, it seems the brand socialism has not been contaminated by the crimes and atrocities of Communism - rather the opposite.

By now, we’ve established that lack of education is the problem. Therefore, getting out on the platforms where young people spend their time to educate them on Communism and its consequences might help turn the tide. Good friends of the Adam Smith Institute have created a project, Museum of Communist Terror, with the aim of keeping the knowledge and understanding of the deaths, terror and economic failure of Communist regimes alive. They plan on doing this through social media and talks for schools and universities among other things that ultimately will lead up to a museum in London.

Part of their strategy is also to educate people through small videos with experts and victims of Communism. I highly recommend that you spend 2 minutes watching their most recent video on the Holodomor and perhaps share it with your friends.

Holodomor: recognised as a genocide by over 15 countries but something most people have never heard of. pic.twitter.com/tNvG4cMvhB

— Communist Terror (@CommunistTerror) April 17, 2018