Journalists not quite understanding this market stuff

This would be just terrible if it were true:

What 2,000 job cuts tell us: the free market kills digital journalism

We can’t quite see that ourselves. Following those job cuts we can still see a plethora of sources of news available to us on this ‘ere internet thing. For something dead it seems in remarkable health.

The future of journalism will generally be smaller and more challenging in the short term and remains uncertain in the long term. However, the problem now is so clear that even the most advanced digital thinkers can see it: a digital free market for journalism doesn’t work.

What the market is actually doing is its job. Which is to sort through the available and possible plans for doing something and telling us which do work. The value to us all of this service being greatest when technological change is happening - the technological change being what presents the new available and possible plans which need to be sorted through.

That we’re getting a lot of shouting about journalism in crisis is because it’s the professional shouters, the journalists, who are being sorted through, nothing more than that.

But then the author here, Emily Bell, has been involved in running the Observer and Guardian for some decades. Just the institutions we’d go to for advice on profit in journalism, aren’t they?

Venezuela Campaign — 10 fallacies about the situation in Venezuela

1 — The Americans have wanted to topple the Chavista Regime for Years

The 2002 coup against Chavez collapsed because of a lack of American support. Americans have been the main customer for the Venezuela’s only significant export, oil, paying the Chavista regime over US$1 billion a month in hard cash. It was only earlier last week that sanctions were applied to the oil industry as a whole.

2 — The problems of Venezuela are all down to western sanctions

It is ludicrous to suggest that these minor restrictions had anything to do with an economic crisis that was well underway a decade earlier. The first sanctions in 2015 only targeted corrupt regime officials. In 2017 some minor sanctions were introduced preventing Americans from buying oil company debt, which almost no-one wanted to buy anyway.  By then, the borrowing capacity of the country had long since been exhausted. Domestic policy, not foreign intervention, has led to this crisis.

3 — The collapse of the economy has caused by speculators and hoarders

When businesses can’t operate because price controls have made them uneconomic and investors fear nationalisation without compensation, an economy will collapse very quickly. Shortages have occurred since 2005. Imaginary nonsense about the hoarding of items is no more than regime propaganda designed to distract from policy failure.

4 — Chavez and Maduro are on the side of the poor

The poverty rate is now 93%. Top Chavistas, on the other hand, are now extraordinarily rich. Chavez’s Minister of Finance has admitted to stealing US$1 billion. Chavez’s family now owns 17 country estates covering more than 100,000 acres and have liquid assets of $550 million. That’s not counting his daughter Maria, whose net worth is said to be over $4.2 billion.

5 — Corruption happens in every country

In Venezuela corruption has been elevated to an art form, with a rigged currency exchange system enabling the regime to bestow millions on regime cronies at will.  State enterprises are run to create corruption opportunities for their Chavista managers through rigged contracts and sale of price controlled goods in the black market.

6 — The fall in oil prices in late 2014 caused Venezuela’s economic problems

Other major oil exporting countries were not forced into similar difficulties as a result of a price decline.  High oil prices before 2014 merely helped to disguise the disastrous path the country was taking. Venezuela had used the high prices to borrow huge amounts, which it then was stretched to repay.  It was also giving away over 200,000 barrels of oil per day – half of which to Cuba. The regime had destroyed the rest of the productive economy, so its dependence on oil was much enhanced. The main problem with its oil sector is not so much prices – which naturally go up and down – but the reduction in capacity through mismanagement. Venezuela now produces only a third as much oil as it did when Chavez came to power, the same level as in the 1940s.

7 — The Maduro government has survived because the people have been prepared to defend it — with their lives if necessary

The regime, its security forces and hired militias have been terrorising the people. This is particularly true in the poorest slums where ‘Operation to Liberate the People’ has claimed around 10,000 lives. The Organisation of American States has referred the Venezuelan Government to the International Criminal Court for crimes against humanity, citing 8,000 extrajudicial killings, 12,000 arbitrary arrests and the detention of 13,000 political prisoners. It is doubtful that many of the regime’s forces will be prepared to risk their lives defending it.  After all, the top military scattered when a malfunctioning drone appeared above a military parade. They’re in it for money, not their lives.

8 — Wasn’t Maduro democratically elected?

No he wasn’t.  The election itself was called by an illegitimate body, the “Constituent National Assembly” (created by Maduro to supplant the legitimate National Assembly) which barred many opposition political parties from taking part.  Many popular opposition candidates were jailed by the government, blocked from taking part in the election or forced into exile. The international community and the National Assembly rejected the results and have called for free and fair elections.

9 — National Assembly President Juan Guaido has just appointed himself President. Is this a coup?

The Venezuelan constitution provides for the National Assembly President to become interim President when there isn’t a President appointed according to the constitution.  It is the job of the interim President to organise free and fair elections to choose a new President. Juan Guaido is just following constitutional requirements.

10 — If the opposition takes power, it would mean the end of the social programmes that have provided free healthcare and education, not to mention eradicating malnutrition

What social programmes? The health system has now collapsed and few children go to school.  As for malnutrition, 7 million people suffer from malnutrition children are now dying of it, and the hunger rate has tripled since 2010. The opposition have pledged to introduce rational economic policies so that social spending can be restarted.

More information on the Venezuela Campaign can be found on their website. 

Paper money and taxation both have limits

On February 3rd, 1690, the Massachusetts colony issued the first paper money in the Americas. What was unusual about the Massachusetts issue was that this was the first paper currency not to be convertible. It was not backed by gold or silver, only by the assurances of the colony’s government. To thwart forgery, the bills were cut by hand with an indentation across the top, with the Treasury retaining the stub in case the bill subsequently needed to be authenticated. The lack of convertibility was attributed to a local shortage of specie down to the ongoing King William’s War in Canada. It set an unfortunate precedent that allowed future governments across the world to issue unbacked currency to pay their way, foreshadowing the hyper-inflation of the Weimar Republic, Zimbabwe and Venezuela.

On the same day in 1913 the US passed the 16th amendment to its constitution, allowing Congress to levy an income tax without apportioning it among the states on the basis of population. There had been earlier attempts at income tax, including one in 1861 that was repealed in 1872. When the Supreme Court struck down an 1894 Act that included one, the only option was an amendment to the constitution. The reasoning was that while most federal revenue was derived from tariffs, these were thought to bear too heavily on the poor, and that a tax on income would be fairer. All taxes change behaviour, however, and governments that have imposed excessive income taxes have found that they inhibit the creation of wealth and jobs, and rarely if ever raise the anticipated revenue.

On a more sombre note, February 3rd was in 1959, 60 years ago, “the day the music died,” with the deaths in a plane crash of Buddy Holly, the Big Bopper and Ritchie Valens.

What is it about people not grasping the real world?

An insistence here that we really must rebuild the IMF and the World Bank to, well, to do something. The something being that the current system is all just too free market. It leverages private money, doesn’t pay due care and attention to how it all ought to work, producing investment and cash flows for and from governments:

But like every crisis of the Trump era, this sordid affair is an excellent opportunity to mobilize around an entirely new vision for the Bretton Woods institutions – to push for radical reforms that would put the resources of the World Bank and the IMF in the service of the many, rather than lubricating the wheels of global finance in the interest of the very few.

Well, if it is the few benefiting from the current system then sure, we’d want to change that.

Rather than supporting governments and prosperity, the World Bank and the IMF led the so-called Washington consensus: an orchestrated campaign of mass privatization, austerity and financial deregulation. “There are virtually no limits on what can be privatized,” wrote Mary Shirley, the chief of the public sector management and private sector development division, in 1992.

There’s the assumption being made. That supporting governments and supporting prosperity are the same thing. They aren’t but they could be correlated, certainly. That’s an empirical question, not a result we can assume.

Here’s an idea: build a new Bretton Woods and fund the International Green New Deal by simply mobilizing idle savings via a linkup between the revamped World Bank and the new IMF.

The IMF can become the issuer of a digital currency unit in which all international payments are denominated, countries can retain their currencies (that will float freely against the IMF’s unit), and a wealth fund can be built by depositing in it currency units in proportion to every country’s trade deficits and surpluses.

Meanwhile, backed by the IMF’s capacity to issue the world currency unit, the World Bank can crowd idle savings from across the world into green investments, reclaiming its soul after decades of investing in environmental destruction and human displacement.

Rebuild that system as it was and should have been before that dreadful irruption of neoliberalism in the 80s and 90s. Back to government to government and state led development through the official channels.

But the question is, would this work? The answer being no, for it is to fail to ask why we stopped doing this in the first place. The answer to that being that this private sector neoliberalism has led to the greatest reduction in absolute poverty in the history of our species. The Washington Consensus, that list of stupid things you shouldn’t do to an economy, it worked.

Why would we want to reject what works in order to go back to what didn’t?

The Export-Import Bank and gold ownership

The US Export-Import Bank was established by executive order on February 2nd 1934, 85 years ago today. It provides financing to enable the export of goods and services in circumstances where the political and commercial risks of a deal deter commercial lenders. In the past it has provided funding for the Pan-American Highway that links Alaska to Chile, and for the Burma Road that enabled supplies to be sent from Burma to China while bypassing Japanese forces.

It has been criticized for excessive support to some corporations, notably Boeing. In 2007 and 2008, 65% of Exim’s loan guarantees were to enable foreigners to buy Boeing aircraft, and in 2012 it was 85%. Critics have alleged that this acts to raise the price of new planes, and it has been seen as a form of subsidy to the US domestic air industry. Certainly, supporters of competition and free markets have long been strident opponents of the Bank.

My own involvement with it was modest. In 1974, when I worked for the 12-strong Republican Study Committee that did research for fairly conservative members of Congress and senators, the supporters of Exim Bank did not have the votes to push through Congress a renewal of its funding. The Democrats had the clever idea of tacking an addendum onto the appropriations bill to legalize the private ownership of gold for the first time since 1933, something the centre-right in the US had long campaigned for. They hoped this would tempt enough conservatives to support the joint bill.

The group leader called us together and asked if we should go for it. We all agreed, and swung just enough support to see it through. It passed, and President Ford signed it into law. Exim Bank had its funding renewed for another year, and Americans celebrated now being able to own gold legally, and have a hedge against future federal inflation. Exim today still has its troubles and its critics, and Americans can still own gold.

What is the definition of work of equal value?

Asda has a set back in one particular employment law case:

They say they should be paid the same as those working in the supermarket's depots, who are mostly men.

The supermarket chain was challenging an Employment Appeal Tribunal decision that the jobs in Asda stores are comparable to those in its depots.

At the Court of Appeal in London, Lord Justice Underhill ruled that "Asda applied common terms and conditions wherever they [both types of workers] work".

That is, it is feasible to compare the jobs because they’re at the same employer under largely the same terms etc.

It’s this next bit:

The workers must still prove their roles are of equal value and, if they are, that there is no reason aside from sex discrimination that they should be paid equally.

To argue about the value of work is to commit a category error. It’s, effectively, to be making Marx’s mistake with the labour theory of value. Since the 1870s and the marginalist revolution we’ve known that’s wrong. We need to consider the supply of workers able to do the job and the demand for them to do so - that’s what determines those wages.

Only after that error do we get to the next, which is any decision to insist that two different jobs are of equal such value. The only measure we’ve got - only useful one - of what a job’s worth is what someone is willing to pay to get it done. How can it be otherwise in a market economy?

The entire concept being used here is thus wrong. A sad thing to have to say about what we’ve, in error, encapsulated into law.

Edward Coke's contribution to English Common Law

Sir Edward Coke (pronounced 'cook') was born on February 1st 1552. He is widely regarded as one of England's most prominent jurists, and one who firmly established the primacy of English Common Law, putting himself personally at risk from Stuart monarchs who tried to put themselves above it.

As Chief Justice of the Common Pleas, he declared the King to be subject to the law, and said that the laws of Parliament were void if they violated "common right and reason". James I & VI and Charles I had granted monopolies and patents in exchange for cash as a way to obtain funds outside Parliamentary control, but Coke wrote and advocated the Statute of Monopolies that substantially limited their powers to do so.

As an influential judge, he often ventured into constitutional law with his voluminous writings, declaring that no tax or loan could be implemented without the permission of Parliament.

His greatest contribution to the liberties of Englishmen was the Petition of Right, which reaffirmed the principles of Magna Carta, and is regarded as one of the three seminal constitutional documents of English law, along with Magna Carta itself and the 1689 Bill of Rights. He wrote affirming the right of habeas corpus, and declared that that no private citizen could be forced to accept soldiers into his home, or be subject to martial law imposed upon civilians.

In a 1604 decision that has reverberated through history to affirm the rights of the subject against authority, Coke declared that “the house of every one is to him as his Castle and Fortress as well for defence against injury and violence, as for his repose.”

Against the overweening power of the state, personified in the monarchy, Coke set the justice of English Common Law, and through his judgements and writings ensured that its principles were enshrined in the constitution, and that no person, however powerful, was above them.

How horribly the language changes

We’re all intensely interested in sustainability issues. We’d not want the species to disappear in a howling wasteland of nothingness after all - so we’re pretty interested in making sure that current arrangements are sustainable. Where they aren’t we should do something about it too.

The problem is that as soon as we’ve got this societal agreement that this something is a good idea then the promoters of it go of and change the meanings of the words in use.

For example, perhaps there is something in this idea that clothes should be made for more than a couple of wear. We don’t think so - in fact we’re sure that there isn’t something in it - but it’s a useful concept to consider all the same.

The six companies, which include Amazon UK, JD Sports, Sports Direct and TK Maxx, have not taken any action to reduce their carbon, water and waste footprint. None of them use organic or sustainable cotton and only two – Sports Direct and Boohoo – use recycled material in their products.

The interim report by the environmental audit committee singles out Amazon UK for its notable lack of engagement in sustainability.

As we say we’re fine with considering whether waste etc is sustainable and we’re sure we know the answer too. But looking at the actual report we find something more:

...We also asked four leading online retailers to answer similar questions following evidence at our first hearing about illegally low wages for garment workers .....We believe that there is scope for retailers to do much more to tackle labour market....This is an interim report on the sustainability of the fashion industry

The labour market has nothing to do with sustainability. What wages the workers are paid can be a source of concern, of course it can, but it’s nothing at all to do with whether the system itself can carry on, is sustainable.

And yet in the language of a parliamentary committee wages are a part of that environmental sustainability. For no reason other than the campaigners have done that bait and switch. We out here are convinced that whether the world can carry on for a few more hundred years is important. Under that banner the campaigners have smuggled in their own concerns about wage levels.

It’s in this manner that inequality gets renamed as poverty, legal privilege in favour of previously disadvantaged groups is social justice and so on. We need to be careful abut what concepts are being smuggled into the national discourse in such a manner.

Dr Madsen's Memories

Many conversant with the Adam Smith Institute will be familiar with our President, Dr Madsen Pirie. Madsen, along with Dr Eamonn Butler founded the Institute in 1977.

Madsen has compiled a series of small windows into the idiosyncrasies of his career and personal life. The memories are in no particular order; some are from early childhood, middle life, and some from the recent past. They are a compelling collection of incidents, events and observations which we would recommend for an insight into the making of Madsen Pirie.

Below is a small excerpt into the kind of writing you may come across on the website.

To most reading this who have somehow found themselves perpetually hooked the weird and wonderful alcove that is the Adam Smith Institute blog,  lighthouses may bring to mind the genius of Ronald Coase. And, usually, this may be the case for the more wonky areas of the publications of an economic think tank. Nonetheless, we invite you to explore another side of the lighthouse.

The Madsen's memories post entitled Spurn Head lighthouse and faraway lands provides, a deeper, perhaps even lighter take on lighthouses.

“As a child I had looked out to Spurn, sometimes wondering if anyone out there was looking back at me.  There was, of course. A middle-aged man was looking back to the beaches of his childhood with fond memories.”

Written with sabre-toothed clarity, witty judgement and a cautious discernment of the reader’s state of mind, these posts may well be the quick read that gives you something to ponder on for the train journey to work or even the inspiration for a blog post of your own.

New posts are available at 7am every weekday, click here for more.

Venezuela's failure has a name: Socialism

Dr Madsen Pirie reflects on the failures of Venzuela’s leaders, their love of socialism, and the tragedy its enforcement has brought to what was once South America’s richest state. As events come to a head, and Maduro’s grip on power looks uncertain, we in the West must be ready to help the country’s citizens in any way we can.