Everyone's a fruit and nut-case

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If one wants to understand people’s attitudes to economics, one could do worse that look at reactions to the announcement that UK confectioner Cadburys is to be bought by US counterpart Kraft.

“Cadbury Defends Sell-Out thundered the FT, leading one to wonder whether “Sell out" was a city term or another example of the FT’s flight from market economics. The Daily Express launched a “Crusade " to save the “historic British company". The Guardian spoke of “defeat" and “throwing in the towel".

Meanwhile, Gordon Brown has warned Kraft not to cut jobs at Cadbury....

It is all painfully predictable. The British press are widely hostile to the sale of what is seen as an iconic British brand to a foreign competitor. Economic nationalism abounds: For the socialist press, it was proof that Nothing... has really changed... the deal-makers are back [and] the dominance of the City over the economy remains unchecked.... For the nationalist press, it was “the end of an era". And for the politicians, the economy remains something that can and must respond to the politically-influenced will of powerful men. Plus ca change! Now, it is certainly true that (Toblerone notwithstanding) the Americans make chocolate almost as well as they make beer, and it really would be a tragedy if Kraft destroyed Cadbury’s products and filled our shelves instead with Hershy Bars. However, this is very unlikely. As long as Cadbury chocolate sells, Kraft will keep making it. They will only “strip the assets" if they can make more profit by deploying them elsewhere. As many of these assets are fixed (you can’t move Bourneville!) that would mean selling them on to people who valued them even more – i.e. somebody who was able to use them more productively. Those new owners would surely need workers, and if they were putting the workers to more productive uses, that would mean they would also pay higher wages. It may take a bit of time, but any “rationalisation" will benefit all those concerned (unless, of course, unions and governments conspire to keep wage rates so high that the unemployed cannot find work).

The choice for the country as a whole is even more stark: do we want an open economy or a closed one? Will we respect private property or not? The UK benefits enormously from inward investment (we have among the highest Foreign Direct Investment in the world), which underpins a lot of jobs including much of our remaining manufacturing industry. Britain’s car industry, for example, survives only thanks to FDI. This FDI is dependent to a large extent on foreign investors trusting that they will be able to get their money back. If we close our borders to foreign money, or stop them repatriating their profits, or interfere when owners seek to sell their property as, when and to whom they choose, we will have fewer jobs and be less prosperous.

This is a time of great uncertainty for Cadbury workers and we should be sympathetic. But neither political posturing nor media tub-thumping will help create the new and better jobs that they may, and two and a half million others definitely do, need.

A market for tigers

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The Telegraph reports that there are now fewer than 50 wild tigers left in China. We have banned the selling of tiger parts for many decades, yet tiger numbers continue to fall. The policy fails yet many persist in defending it. Tigers will only survive in the wild if we change our policy and trust the market.

Wild tiger extinction is demand driven. There is a huge demand for tiger parts in traditional Chinese medicine. Campaigns to reduce this thousand-year-old practice have failed. As there are fewer and fewer tigers, the price has gone up. Tigers live in poor countries. It is lucrative to risk being caught, and to bribe game wardens, officials and politicians. Because the price has sky-rocketed demand has gone up even further, as we see in the recent popularity of high-end tiger bone wine and tiger meat.

For decades environmental policies have focused on banning the tiger trade. This is doomed to failure, as the sky-rocketing price makes it impossible to police it. When trade is outlawed only the outlaws trade.

There is a market solution: the commercial farming of tigers. It is not difficult to farm tigers, and it is being done in many countries, including China and the USA. China has 5,000 captive tigers; the US 10,000. In fact these privately owned tigers may very well guarantee the survival of the species.

Economically and environmentally it makes total sense. The high demand is met by an increased offer. Therefore the market price for tigers goes down. If the price of a farmed tiger sinks below the price to poach one, poaching will disappear. In other words: farm tigers in captivity and tigers in the wild will be left in peace. It has been done before: widespread farming and internationally sanctioned trade rescued crocodiles from extinction.

The market can do even more for wild tigers, apart from farming them commercially. One fundamental problem with wild tigers (and wild animals in general), is that they are not owned by anyone. They are literally a free for all, which results in shortages, as is always the case where there is collective ownership. People are more protective of what they own privately than what they own collectively. Wild animals are greatly helped when their reserves are privatised. It can for example allow tourists to pay the cost of protecting the reserve. State owned tiger reserves bear a heavy responsibility for the killing of wild tigers.

The banning fails yet the environmental lobby persists in it. They rejoiced when CITES, the international organisation which regulates endangered species, misguidedly called for a phasing out of tiger farms in 2007. They attack the commercialism of farming, yet cannot come up with a rational alternative. They attack the cruelty of tiger farms, and perhaps rightly so, yet forget that we successfully ensure the welfare of many other farmed animals.

It's time for the environmental lobby to wake up, to realise the disastrous effect of its failed policy, and to use market mechanisms to achieve its goals.

JP Floru is a councillor in the City of Westminster and Director of the Freedom Alliance.

George Orwell - 60th anniversary

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Tomorrow marks the 60th anniversary of the death of George Orwell, best known for his novels 1984 and Animal Farm.

Orwell was a pen name: he was born Eric Arthur Blair in 1903, the son of a British colonial civil servant. He went to Eton, joined the imperial police in Burma, and in 1927, decided to become a writer. In the 1920s he had anarchist leanings, but before long he became attracted to socialism. In 1936 fought with the Republicans against Franco in the Spanish Civil War. In that conflict, however, his worst enemy turned out to be the Communists, who were backed by Stalin and were quite willing to put down anyone, including socialists like him, who might dissent from their ideology.

During the Second World War, Orwell worked at the BBC, and in 1943 (now a prolific journalist and author), he became literary editor of the socialist journal Tribune. His belief that Stalin had betrayed the ideals of the Russian Revolution came out in his short 1945 fable, Animal Farm – which became a huge success. Four years later, his hatred of Stalin's totalitarian state led to his publication of 1984. Though notionally set in the future, it was in fact a grim portrayal of the horrors of Stalinism: his description of Big Brother, for example, is a close description of Stalin, while the 'traitor' Goldstein shares features with Trotsky.

The two books remain as powerful descriptions of how revolutionaries, having torn down the old laws, often create a worse, inhuman nightmare of their own. They provide a strong warning against the concentration of power in a few hands. Against socialism, in fact.

See Dr Butler's new Alternative Manifesto here.

The meaning of Massachusetts

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Regular readers will know that I have no love for the US Republican Party, especially in its big government, Bush-era guise. Given the incompetent, spendthrift way Bush and his colleagues in Congress governed, they deserved to lose in 2008. But still, I couldn’t be more delighted that Ted Kennedy’s former Senate seat has fallen to the Republicans: it is precisely the one-year anniversary present that Barack Obama deserves. He ran as a pragmatic centrist but since taking office his true colours have shone through: he wants to end American exceptionalism and turn the United States into a European-style social democracy. And that, quite emphatically, is not what most Americans want.

The main practical effect of this election result is to land Obama’s efforts to reform US healthcare in extreme difficulty. This too is a very welcome development. It’s not that the US healthcare system doesn’t need reform – it does – but rather that the Democrats’ plan takes entirely the wrong approach. The ambition of reform should not be to use government coercion to expand coverage, but to reduce costs by allowing greater competition and consumer choice – that is, by having stronger market forces, not weaker ones. Simply by permitting US citizens to purchase health insurance across state lines, for instance, it has been estimated that 12 million more people would be able to afford insurance.

But also I think this debate has an added significance: as Peter Wehner and Paul Ryan wrote in the Wall Street Journal a while back, socialized healthcare is a big government “tipping point". Once the government provides healthcare to a large enough number of people, any attempt to cut taxes, reduce spending, or roll back the state will be met with accusations from the Left that people will lose their healthcare – a tactic which, judging by British experience – is as effective as it is cynical.

The founding fathers viewed America’s role in world affairs very simply: it was to act as a beacon of liberty, to inspire the rest of the world with its freedoms and constitutional government. Perhaps Scott Brown’s election and the defeat of Obama’s healthcare plan is one small step towards America resuming this role. 

Boiled frogs

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British Airways - Failing to grasp reality

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I'm probably going to New York at Easter for the American-Scottish Foundation's Adam Smith Business Forum and reception on April 6. Who knows, I might even stay for the National Tartan Day Parade on April 10. I like to book in advance so I can get good value – I don't always fly the cheapest, but I can't see the point of paying more than I need to.

One thing's for sure. I won't be checking out British Airways. Here's why:

According to the Unite union, BA cabin crew are balloting for strike action over the Easter holidays. The previous strike action over the Christmas and New Year period was declared illegal by the courts. Steve Turner from the union Unite comments that BA have 'failed to grasp' the proposals put forward by cabin crew. Andy Cook, an industrial relations expert, states that cabin crew do not have a regular dialogue with their line managers.

Plainly, there is no use me checking out an airline that might not be flying over the busiest period of the year. I think more than one set of people has 'failed to grasp' the reality here. The reality is that aviation is a highly competitive business, particularly now when so many people have cut back on their travel plans. One clear way for people working in the business to make sure they don't have a job in a year's time is to give people like me good reason to book with the opposition. Yes, British Airways made huge strides after privatization. Sending all the cabin staff to charm school was a brainwave. But part of the deal was a generous settlement with cabin staff, who are now paid far more than most (all?) other airlines. And some of the nationalised-industry way of managing industrial relations (ie distantly and badly, with 'no regular dialogue') still pervades BA's culture. Sad to see it nosediving into a certain decline.

Happiness

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According to Geoff Mulgan, writing in yesterday’s Independent:

This year's election could be the first when party policies are interrogated not just for their effects on economic growth or the NHS but also for their effects on happiness.

Well, I can think of one thing that would make me happier: having less of my earnings forcibly confiscated and then wasted by self-serving bureaucrats. Oddly enough, the Lib Dems are the only party that would do anything for me in that regard – their plan being to raise the tax free personal allowance to £10,000 – although people with higher incomes (or mansions) would be penalized to make up for it. Otherwise, I don’t hold out much hope of paying less tax. Nor do I imagine that any political party will simply ‘leave me alone’. The Tories, once thought of as the party of limited government and personal responsibility, are now every bit as enthusiastically nannying as the rest of them. Apparently it’s called ‘compassionate conservatism’.

Of course, I don’t think my suggestions are quite what Geoff Mulgan had in mind when he wrote his article. On the contrary, the school of ‘happiness economics’ to which he appears to subscribe never seems to have much time for individual freedom, presuming instead that state enforced ‘equality’ is the best way to improve our general sense of well-being.

But I’ve got to say I side with US conservative Charles Murray on this one. Far from making us happier, I’d say big government drains satisfaction from our lives. I’m not talking about money or taxes here, but rather the fact that when government ‘provides’ it takes away our independence and undermines our self-reliance. It erodes families, and communities, and civic institutions. Far from encouraging solidarity and brotherly love, big government tends to atomise and dehumanize society, replacing a web of meaningful voluntary associations with distant, top-down authority.

Ultimately, America’s founding fathers had it right. Government’s job is not to implement policies that will maximize some aggregate measure of happiness, but to protect our rights to “life, liberty, and the pursuit of happiness". If we are to judge political parties as Geoff Mulgan suggests, then that is the criterion we should be using.

Charles Murray on happiness

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Earlier, I said that the sources of deep satisfactions are the same for janitors as for CEOs, and I also said that people need to do important things with their lives. When the government takes the trouble out of being a spouse and parent, it doesn’t affect the sources of deep satisfaction for the CEO. Rather, it makes life difficult for the janitor. A man who is holding down a menial job and thereby supporting a wife and children is doing something authentically important with his life. He should take deep satisfaction from that, and be praised by his community for doing so. Think of all the phrases we used to have for it: “He is a man who pulls his own weight." “He’s a good provider." If that same man lives under a system that says that the children of the woman he sleeps with will be taken care of whether or not he contributes, then that status goes away. I am not describing some theoretical outcome. I am describing American neighborhoods where, once, working at a menial job to provide for his family made a man proud and gave him status in his community, and where now it doesn’t. I could give a half dozen other examples. Taking the trouble out of the stuff of life strips people—already has stripped people—of major ways in which human beings look back on their lives and say, “I made a difference."

Charles Murray 'The Europe Syndrome and the Challenge to American Exceptionalism'.

Will we get for-profit schools?

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Cameron and Gove have fleshed out their education policy a little, and I have to say, I’m not quite as excited about it as James Forsyth over at the Spectator. There are a couple of useful announcements, but if this is what the manifesto will look like, then one thing stands out that should worry any parent lacking the spare change to send little Johnny to Eton: We will not be getting new for-profit schools.

In the Draft Education Manifesto it is explicitly stated on page seven that the new academies will be run by “charities, parent and teacher groups, trusts, voluntary groups and co-operatives." The 'radical' Conservative education policy wouldn’t be so radical without education companies. This draft manifesto claims to be “[d]rawing on the experience of the Swedish school reforms and the charter school movement in the USA", but in both instances for-profit schools are both an option, and I would argue, vital for their proven success.

If Cameron and Gove really are to give every parent access to a good school (as they claim), then unleashing competition into this shackled marketplace is vital. Without the profit motive and all the attendant drivers for excellence, a great part of the radical reform will be left in the paddock. But surely Cameron and Gove don’t need to be told that, why else were they busy championing the Conservative cause when Margaret Thatcher was busy liberalising huge swathes of the economy from the dead hand of the state in the 1980s?

I hope to be proved wrong on this point. Last year Frazer Nelson – who has incidentally done an excellent job with the Spectator – suggested that Gove’s schools would be run for a profit. At the time it appeared that he was privy to information that likely future Prime Minister had accepted the logic of Anders Hultin – an architect of the Swedish government’s voucher system – that profit was the key to success in Swedish schools. We will see...

Stop 0xC0000218: Policy Error

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One of Labour’s early campaign pledges is to provide £300 million worth of laptops to provide computers to 270,000 families.

Given the state of the public finances, it hardly seems appropriate to make new unfunded expenses. There are around 30 million income tax payers, so this scheme averages £10 per head. As for the educational merit of this scheme, a lack of laptops is not at the root of our falling standards. Rather than just chucking more of our money at the declining system, when education is already well funded, the government should instead attempt to reform the education sector to empower the users (parents and children), and deliver value for money.

Doing basic computation shows that this scheme costs over £1100 per laptop. This is a ludicrous expense for laptops. Private philanthropy through the one laptop per child project since 2007 has been delivering £62 ($100) laptops for children in developing countries and a new and perfectly capable windows laptop, as I myself use, can easily be acquired in the UK for under 300£. In the profit making private sector the Alienware M15X, the “universe's most powerful 15" gaming laptop", starts at £1158. Perhaps the government wishes to equip children for state of the art gaming? No doubt the government provided computers will be much less potent than those that can be purchased at the same cost in the private sector and like most government IT projects, this one will not only start with ludicrously high figures, but end horrendously over budget.

However, even if one supported the principle of the government spending more rather than tackling the deficit, and even if one believe that laptops were the best way to improve education (rather than transforming the sector, allowing money to be directed by the choices of parents and pupils), this scheme is terribly flawed. Why must government administer it? Instead, if the government gave families a £300 laptop voucher, this would not only vastly reduce costs but also allow parents to decide where to spend the voucher, which brand to buy, and what type of laptop they desire.

The government’s education policy is in desperate need of a reformat and reboot, but before doing so, this shallow vote seeking pledge should be sent to the recycling bin.