Bureaucracies will grasp at anything, won't they?

It's undoubtedly true that the political and economic system in Russia has changed, and changed for the better, over the past 50 years. Whatever the downsides of Putinism they're as nothing to the problems with Stalinism. However, the change might not be quite as deep as perhaps we'd all like. Another way of making much the same point is that bureaucracies have their memories too, and they'd often like things to go back to when they had more power:

Russian officials are considering reintroducing Soviet-style exit visas, a senior MP said on Friday, in a move that would severely restrict Russian’s rights to travel abroad for the first time since the fall of the Soviet Union. Vadim Solovyov, the deputy chairman of the constitutional law and state building committee in the State Duma, Russia’s lower house, said the move was one of a number of options being considered in response to the apparent terrorist attack on a Russian airliner in Egypt. “There are a lot of suggestions to introduce exit visas at the moment,” Mr Solevyov said in an interview with a Moscow radio station. “Foreign ministry officials and members of the security services would explain to a citizen what he is risking. And when he has received this official information, confirming that 'yes, I know everything, I understand, and none the less I’m going', he would be granted the ability to leave,” he said.

It's not going to happen of course: the State not having the power to determine whether a Russian may leave Russia is one of the most cherished, as it probably should be, of the rights on offer under the new dispensation. But it's an interesting example of a mindset that still exists, isn't it?

And don't think that it applies only to Russia: there's plenty here at home who long for the past days of greater state power over us all.

Ten initiatives to help young people: 2. US/UK visa swap

Employment is a major concern for many young people, both for those who choose not to undertake university education and for those who have done so.  Because of concerns about immigration, especially illegal immigration, the governments of both countries have tightened the rules and made it very difficult for citizens of the one country to seek work in the other. The UK government should negotiate a 'visa swap' with the United States to produce a new kind of visa available to young people below the age of 25.  Under the new arrangements, young people in Britain would be able to travel to the US for up to two years, and obtain work there without the need for a work permit.  Similarly young US citizens would be able to live and work in Britain for up to two years without the need for a work permit.  Neither represent a type of immigration that would concern the other country.

If the two governments agreed to such a visa swap it would greatly extend opportunities to the young people of both countries.  There are large numbers of young people in Britain who would jump at the opportunity to live in America for two years and work to support themselves there.  In the process they would acquire new skills.  In particular they would be exposed to the US approach to consumer satisfaction, and learn the standards of service expected there.  They would almost certainly return to the UK with attitudes and skills sought by employers, with their career prospects enhanced.

Similarly, large numbers of young people in the US would welcome the chance to broaden their horizons by visiting Britain for a couple of years and working there.  They would have the chance to visit the nearby continent of Europe during holidays or time off, and gain experience of foreign countries other than the UK.  Most American youngsters are noted for a can-do attitude and a commitment to the work ethic.  Working alongside young people in Britain, they could well provide an example that could spread those attitudes.

In terms of international understanding, the Anglo-American relationship would be enhanced if significant numbers of each country's young people had lived and worked amongst their counterparts in the other country.  The cultural exchanges and friendships formed would facilitate each country's understanding and appreciation of the other.  An arrangement such as this would be immensely beneficial to the young people of each country, enriching their lives with new experiences and opportunities.

To introduce you to an extended whingefest

We wish that this was satire, or perhaps even the ravings of some poor deluded soul well outside the mainstream. Unfortunately it is neither: this whinge that Bill Gates really shouldn't be spending his own money how he wishes is meant to be a serious contribution to the debate:

Is the most effective philanthropist a dead one? It’s a morbid question, but also a pertinent one. Are large philanthropic organisations such as the Ford, Rockefeller or Gates Foundation able to achieve the most good with a living benefactor who is in the picture on a regular basis, providing expertise and political leverage? Or are they better off once a benefactor is long gone, permitting staff to operate free of the constraints of donors who, however well intentioned, may hinder effective decision-making?

To recast that question, which is the better organisational style? One of the most intelligent men of our generation (yes, Gates is, fearsomely intelligent) directing an organisation attempting to do good or the usual bureaucrats that fill up any organisation after a generation or two having meetings about whether there's sufficient diversity in the snacks offered at meetings to discuss which snacks should be served at meetings?

To pose the question that way is to answer it of course:

We need to challenge this silence. We need loudly to ask an uncomfortable question: do foundations narrow wealth inequalities or simply preserve them? Are foundations at their most radical when they exist to serve a benefactor’s hopes and whims – or when they’re emancipated from such an obligation?

After their founders had died, the “big three” foundations in the US – Ford, Rockefeller and Carnegie – started to sympathise with labour and civil rights movements. Detractors frequently criticised them for being too anti-capitalist; Ford’s grandson Henry resigned from the foundation in protest in 1977, stating in a revealing letter that “a system that makes the foundation possible very probably is worth preserving”. At least Henry Ford had the honesty to state which side he was on. We should challenge his modern successors to be as upfront.

The answer being that such organisations should serve the interests of the bureaucrats that run them not the wishes of the founder. The argument against Gates is that he doesn't allow that long march through the institutions its head, he insists that the organisation do what it was set up to do: alleviate disease and poverty in the most effective manner possible. That this doesn't suit the bureaucrats is why they hate him and it.

Just to illustrate how far the decline reaches the thoroughly sensible, originally, Joseph Rowntree bequests now fund Richard Murphy to think big thoughts in his shed.

It is for this reason that Warren Buffett has insisted that his, very generous, donations to the Gates Foundation must be spent immediately, before such institutional degradation into a home for the socially just happens. And why the Gates Foundation itself talks about specific tasks now that it wishes to achieve, rather than gabfests that will produce a "legacy". That is, let's get rid of all the money before the funds become "emancipated from such an obligation" to actually achieve anything, or even any oversight. As with the Oxford Committee for Famine Relief campaigning in the UK, where there is no famine, Barnardo's, a system of childrens' homes campaigning in a country without such private childrens' homes, Stonewall campaigning for equal rights long after equal rights have actually happened.

C. Northcote Parkinson really did have a point, the prime purpose of any bureaucracy is to make sure that the bureaucracy itself survives. All else is subservient to that. At which point we might suggest Worstall's Corollary to the Peter Principle: all useful philanthropic work is done before the socially just or the bureaucrats take over the charity.

On those new UN development goals

We're having a slightly hard time getting our collective head around the Millennium Development Goals and their successors, the SDGs. For we're seeing people like David Rieff making what to us are the strangest arguments. To go back a bit, the MDGs were the idea that we could make the world a nicer place by getting a bit more development going on. More children vaccinated, shrink the number of people in poverty, spend a bit more in development aid to make that happen, things like that. And off everyone went and things have been pretty good really. Sure, not all of the targets were met, some of them (notably the poverty one) were met early and surpassed. The world is indeed a better place.

And the SPGs are an attempt to take this further.

And yet here's Rieff's argument, and we've seen it elsewhere. The MDGs were not achieved because one of them, the idea that every country should spend 0.7% of GDP on overseas official development aid, was nowhere near met. He's quite happy to agree that the poverty target was met, the vaccination one pretty close and so on. But there's that great gaping flaw in that the spending target wasn't reached.

And yet the true meaning of this story is that if we've reached all of the other goals, or near enough, without the spending, then it's not the spending that is an important goal, is it? And thus it doesn't matter whether that target is met nor whether we have a similar target for the future.

What we've actually proven is the counterparty to Angus Deaton's observations about development aid. He thinks that such aid can delay development but allowing government not to do the few things that government must do. And here we've found that development can happen without that development aid. Thus, perhaps, we can forget about eh development aid and just carry on with what we know works?

You know, Madsen Pirie's insistence that the way that you beat poverty is by buying things made by poor people in poor countries?

Why Theresa May be wrong

Theresa May’s Conference speech on Tuesday made some… strong claims about the harms of immigration, and attracted an array of excellent critiques in the media. I want to highlight one flaw that these reactions didn’t discuss in detail. Her argument relied on a constant blurring of the difference between the volume of immigration and the size of net migration flows. The problems she highlighted with immigration fall into two categories – problems with net migration, which generalise to population growth of any kind, and problems with the level of immigration - an influx of foreigners into our society.

She talked about immigrants putting pressure on government finances and education systems. Conspicuously absent was any mention of the fact that (unlike those of us who are scroungers born-and-bred), the majority of immigrants are actually net contributors to the state. Nor did she extend her logic to the hordes of babies and children in the UK who are net burdens on government services – perhaps because, like the children of immigrants, those children will grow up and pay taxes in the future.

The main thrust of the speech, though, focused on the social impact of immigration – the difficulty of creating a ‘cohesive society’ in the face of the 641000-strong huddled masses that came to the UK in 2014. May’s treatment of empirical research on the social consequences of immigration also leaves something to be desired. (For a more nuanced review of the literature, you might be interested in James Dobson’s ASI paper The Ties That Bind).

Approximately 330000 people moved to London in 2013 (including newcomers from elsewhere in Britain, as well as abroad). This is much higher as a percentage of the population than the 485000 outsiders that came to the country as a whole, and a much larger rate of social churn than in, say, the average town in the North-East of England. And yet the collapse of the social fabric has spectacularly failed to materialise. Indeed, London’s schools are better than elsewhere in the country and improving more rapidly, and there is substantial reason to believe that immigrants have a positive influence on this trend.

No one ever seems to worry about a tide of Scots flooding in and diluting our culture, destroying our values. But are they really like us in some fundamental way that French, Spanish and Polish graduates aren’t? Is there something in the water that hardworking Nigerian cleaners have failed to absorb?

The other assumption that went unexamined in May’s speech was that immigration is ‘high.’ There is some level of immigration at which the costs begin to outweigh the benefits. But with every wave of immigration, such claims have been made. In the 1930s: “Thousands of Huguenots were assimilated, but that was over the course of decades – there’s no way the country can cope with tens of thousands of Jewish refugees!” Each time, British society has proved its resilience and tolerance. Why would there be a sudden tipping point when immigration reaches about 1% of total population? There aren’t any compelling reasons to suspect that this time will be different – which might go some way to explaining May’s failure to provide any.

The EU closes the shop again

The bureaucrats in Brussels do not care for the constructive way Britain has fostered vital, young entrepreneurial businesses and their financing.  Their latest move is to specify how small companies can use the financial support they receive.  In a free and fair market, you might imagine that SMEs should be able to use their funding in any way the funders agree.  UK Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) legislation broadly does this. Nanny Brussels knows better and has decided that these funds may not be used for “replacement capital”, e.g. one generation of SME owners selling out to the next, and company acquisitions. Continental countries, notably Germany, do not use the financial market so much as state handouts which you might think more reprehensible, but oh no.  If you did not know for whose benefit the EU operates, wake up now.  If there was any doubt, the Association of Investment Companies reports that the Commission has warned HM Treasury that they will be watching the UK implementation quite specifically.

Fresh financing often involves an element of replacement capital, whether the entrepreneur wishes to sell the business, or reduce his personal financial risk, or simply grow the business. Using the financial services market to grow the wider economy is precisely what the EU should want. Releasing some equity may be the only way that an entrepreneur can develop the business.

As a company grows and develops, its financial profile changes and so does that of the management team. Replacement capital is crucial for facilitating such development.

Business growth must not be limited to the organic. Sales and acquisitions are vital for a healthy market.  The weak are reinvigorated by the strong.  This is where value comes from, notably for consumers who will be short-changed by the Brussels meddling.

To differentiate between growth capital and acquisition finance is, in many instances, completely artificial. VCT and EIS finance are major sources of capital in an investee company.  Outlawing such activity, often their main source of funds, will certainly reduce growth at a time when most commentators think that growth is what the EU most needs. A company, like any organism, is constantly evolving; many grow, some shrink, but as they change, so do their finance needs develop and alter.

In the UK version of the legislation in the Draft Finance Bill 2015-2016, HM Treasury has sought to water down the prohibition through negotiation with Brussels.  Needless to say, that compromise was ineffective and does not solve the problem. We should not have to play this off the back foot anyway:  the EU’s position is simply anti-competitive.

A guest worker programme for Syria's women

I have previously written that we should let Syrians come to work in Britain through a guest worker scheme, arguing that the effects for natives are unlikely to be very bad, and I suspect may well be positive. But how might such a scheme work? Typically guest worker programmes are seasonal, allowing workers to migrate during harvests to work in agriculture. The UK ended its Seasonal Agricultural Workers schemes in 2013 when it was scrapped alongside work restrictions on Romanians and Bulgarians being lifted. New Zealand’s programme has supplied workers for its growing wine industry, which quadrupled in size between 2004 and 2012 (from NZ$300 million to NZ$1.2 billion).

Britain’s agriculture sector is growing less quickly, and shows less of an obvious need for new workers. But we do have a problem with high childcare costs and, perhaps relatedly, low native fertility rates leading to an older population.

So I suggest we set up a guest worker programme for Syrians to come and work in the childcare sector here. This would reduce costs – labour costs account for around 78% of total childcare costs, in part because we have such tight regulations about things like staff:child ratios compared to most other Western European countries.

But interestingly, this could have a significant knock-on effect on fertility. A paper released last year found that, by reducing childcare costs, immigrant inflows can boost the fertility rate of high-skilled native women. By reducing the cost of having children, highly-educated women are able to have more of them (and may be less inclined to leave the workforce when they do have kids.)

Virtually all childcarers – 98% of them – are women, so the visa programme could be opened to women only without distorting the existing shape of the UK labour force.

This would have the added benefit of avoiding most of the crime that people (possibly exaggeratedly) worry about immigrants causing – the UK’s male prison population is about nineteen times the size of the female one (i.e., women account for 4.6% of the prison population). Of course we could require that applicants have English language skills as well.

This would also significantly boost the incomes of Syrians back home or in refugee camps – the New Zealand guest worker programme led to per-capita income gains of 30-40% in countries like Tonga and Vanautu with per capita GDPs significantly higher than Syria’s.

I have heard objections to this that Syrian women would simply not be allowed to come by their families, which seems to me to be a misreading of the strictness of Syria’s religious culture. But even if I’m wrong and there’s not much take-up, the few people who do come would still be made better off. The main downside might be what would happen to the men in Syria if the gender ratio became significantly lopsided – an argument against doing this on a massive scale, perhaps, but not against taking an extra twenty or thirty thousand people.

A programme like this is obviously going to be limited in scope. It won’t solve the Syrian crisis, but it could be very good for the people who take part. And it would have the nice bonus of reducing costs for British families and boosting the birth rate among high-achieving British women. So what are we waiting for?

EU Inners and Outers

The City Corporation hosted a gathering at the Guildhall last Thursday to discuss, from a financial services perspective, what the Prime Minister should be seeking in his EU negotiations and the consequences of Brexit, should that come about.  The eight invited speakers were supposed to be balanced between those leaning towards staying, the Inners, and those leaning towards leaving, the Outers.  Given the funding, it was no surprise that the majority were Inners.  Indeed, according to Mark Boleat, Chairman of the Corporation’s Policy and Resources Committee, who introduced the conference, the status quo is well-nigh perfect so far as the City is concerned.  Apparently, the Brussels regulators now follow the City’s advice like lambs following their shepherd. Perhaps the single market for financial services could be hastened a little but the important thing, we were told, was to remain within it.  Dr. Pangloss would have been proud. Interestingly, the few words of dissent from the Outers produced more applause than anything from the Inners.  But this was shadow boxing. There was little attempt to answer the questions: just the ritual “leaving is too risky” and “Europe will drag the UK down in global terms” arguments from the two sides.  The only speaker to land a punch was David Campbell Bannerman, ex-UKIP and now Tory MEP, speaking from the floor and dismissing one speaker’s contribution as undiluted self interest.

In essence, the big companies and organisations, City Corporation, CBI, unions, Whitehall, are mostly Inners whereas SMEs, including those in the City, and their representatives, IoD, Chambers of Commerce, are mostly Outers.  Some portray that as the old guard versus the future.

There is a vague wish that the UK government can protect the City in the way the French protect the Common Agricultural Policy but no one suggested how that could be done.

The most substantial issue proved to be the Euro.  The double majority rule that protects the non-Eurozone countries from being out-voted by the Eurozone ceases to apply once the current seven of the former shrink to three.  Furthermore, the other EU members have made it clear that they dislike the principle and even Lord Hill, the UK Commissioner, would not support it being extended to non-financial matters.  Since, when the current troubles subside, it is a racing certainty most of the current outsiders will join the Eurozone, the UK can look forward to being out-voted on almost everything and losing out, as we now do, in the EU Court of Justice.

So the bottom line, whatever the outcome of the referendum, seems to be that the UK must, in the longer term, accept the Euro or leave the EU.  A stark choice.

Seriously, don't worry about Iran's new uranium discoveries

Apparently Iran has discovered new sources or uranium within its own borders:

The Iranian government has found a surprise uranium reserve which could allow the country to fuel its nuclear programme without having to look abroad. It was previously thought that Iran would have to import uranium from other countries in order to power its nuclear plants, which would have made it easier for the West to monitor the develop of the controversial project.

This is not, not at all, what it appears to be:

Some Western analysts have previously said that Iran was close to exhausting its supply of yellowcake - or raw uranium - and that mining it domestically was not cost-efficient. A report published in 2013 by U.S. think-tanks Carnegie Endowment and the Federation of American Scientists said the scarcity and low quality of Iran's uranium resources compelled it 'to rely on external sources of natural and processed uranium'. It added: 'Despite the Iranian leadership's assertions to the contrary, Iran's estimated uranium endowments are nowhere near sufficient to supply its planned nuclear programme.'

The point about reserves, about mineral reserves, is that they are entirely dependent upon cost of extraction. Something that we pointed out here in this handy .pdf. That Iran has uranium within its borders simply is not a surprise to anyone at all. It would be entirely possible, just as an example, to run a nuclear weapons and or power program simply by grinding up pieces of Cornwall. Or, in fact, the back gardens of suburban England. The question is, at what cost?

What Iran has announced is that it's found uranium. What it hasn't announced is that it has uranium which it is economic to extract. Therefore nothing at all has changed: for we all always knew that Iran had uranium, just as every country, city and hedgerow does.

What have the Syrians ever done for us?

Anton Howes, an economic historian who studies the causes of the Industrial Revolution, writes on refugee inventors:

Another was Johann Jacob Schweppe (1740-1821), whose company lives on of course as a manufacturer of tonic water. Schweppe’s major contribution was to apply Joseph Priestley’s experiments on carbonating water to develop a machine that could mass-produce it, and then to develop it into a marketable product. Schweppe was the son of a peasant from Hesse. Lacking the strength for agricultural labour, he was apprenticed to a travelling tinker, who recommended him to a silversmith. He eventually ended up settling in Geneva.

Soon after taking his business to London in 1792, where he set up an aerated water factory on Drury Lane, the turmoil in France intervened. Fortunately, his daughter managed to join him before France declared war on Britain in 1793. Fearing the government’s reaction, Schweppe successfully appealed for the right to stay. He eventually returned to Geneva in 1802. France having annexed it in 1798, he returned to find himself a French citizen. (By the way, contrary to what it says on Wikipedia, his business did not fail - it was actually extremely successful and he simply sold his majority stake).

But Anton's list is of Europeans. What about Syrians? I was quite surprised to find out that Steve Jobs is half-Syrian, but the list goes on:

First up, there’s Ayman Abdel Nour, a one-time university friend of Assad’s at the University of Damascus, where he studied engineering. He became increasingly disillusioned with the regime, fleeing to the UAE in 2007, and then the US, where he is editor-in-chief of an online paper focusing on Syria. However, he has since developed and patented a sub-surface irrigation system, dubbed the Hydramiser. I don’t know much about irrigation, but it seems like a pretty helpful innovation for arid countries attempting to overcome their inherent agricultural disadvantages.

Read Anton's whole piece for more. I don't know of any inventors who are both Syrian and refugees, but perhaps one day that'll change.

And yes, I am aware that there are cultural differences between Syrians and Britons. Lots of people said this to me after my own piece that argued that accepting refugees might not be so bad in the long-run, economically speaking. Indeed Sweden, which in Europe takes by far the greatest number of immigrants from the Muslim world per capita, seems to have quite a serious crime problem.

But on the other hand London has done rather well out of immigration. The Asians who fled Uganda have been a success story in Britain, and the Arab migrants to the United States have integrated very well too. We should bear the potential problems with immigration in mind, but the fact that there are costs does not mean we should ignore the benefits too.