Venezuela Campaign: Living in darkness under Maduro

This week Venezuela experienced one of the most severe and widespread blackouts in recent memory. The city of Caracas and nineteen of Venezuela’s twenty-three states were plunged into darkness for nineteen hours initially, with the blackout continuing for another day in most of the country. Every aspect of Venezuelan life was affected - Caracas’s metro and international airport shut, hospitals couldn’t function, and schools closed.

Like the rest of Venezuela’s creaking infrastructure, its power grid has fallen victim to decades of political mismanagement. In 2007, ten state-owned and six private-owned electricity companies were nationalised to form the giant Corpoelec. Competent leadership of this massive and vital company was essential. However, the installation of Chavista managers chosen on political grounds rather than merit led to mismanagement on an epic scale. The power grid cannot match demand, nor can it guarantee any amount of reliable electricity.

Mismanagement in the energy sector was compounded by dwindling revenues. Price controls steadily detached revenues from costs over the years. The economic collapse of recent years now means that there is little money available to fix problems. However, even when Venezuela rode high during the oil boom of the 2000s, the electricity sector was neither improved nor made more resilient. Instead, as with every other Venezuelan state enterprise, it was looted by unscrupulous and corrupt managers and politicians.

A long list of politicians and political favourites have been involved in looting the sector. They include: Nervis Villalobos, deputy minister for electricity under Chávez from 2004 to 2006; Javier Alvarado, former deputy minister of energy and petroleum and director of Corpoelec from 2007 to 2010; Diego Salazar, cousin of former energy minister (and former ambassador to the UN) Rafael Ramírez. Rocio Maneiro, current Venezuelan ambassador to the UK and associate of several leading British politicians, is alleged to have hidden $4m in Andorra between 2012 and 2015.

In one case, a group received at least $2 billion in bribes from Chinese companies in return for awarding infrastructure contracts, many of which were never completed. Court documents reveal the lavish way they spent their ill-gotten gains: €493,573 worth of Chateau Petrus 1990 and Dom Pérignon, €953,000 on bespoke suits, €1.7 million on 107 luxury watches, and €516,012 on helicopter hire. Following the Chavista model of wealth redistribution, establishment officials have been siphoning off funds from the many to their relatives and associates across the world.

Another case involves the company Derwick Associates, owned by youthful Chavistas close to the then head of the state electricity company Javier Alvorado. Following Chavez’s declaration of an ‘electricity emergency’ and despite Derwick Associates having no experience in the energy sector, it was awarded 11 contracts without competition to the value of $2.9 billion. Derwick Associates invoiced $5 billion, and much of the work remains incomplete.

The regime’s record on major energy projects is truly dreadful. After a two year investigation, National Assembly Deputy Julio Montoya reported in 2016 that of the $30 billion of works financed by the Chavista government to address the electricity emergency, 96% had either not started or were not operational. No progress has been made since then. Seventeen years have passed since Chávez announced the construction of the huge Tocoma hydroelectric dam in 2002. Thirteen years have passed since the construction contract was awarded to a consortium led by the corrupt Brazilian firm Odebrecht. Billions of dollars have vanished. And there is still no electricity being generated.

The failings of the Venezuelan energy sector are mostly the responsibility of Hugo Chávez. Chávez nationalised the private electricity companies, introduced price controls, politicised management, failed to maintain the power grid, and responded to the inevitable failures in supply by authorising massive corruption in the procurement of new capacity. Chávez’s legacy is one of shadows and darkness.

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

How to judge Phil Hammond's mooted period poverty plan

It is said that Phil Hammond, the Chancellor, is to address the problem of period poverty in schools. We do not think that there is any such thing as period poverty but then so what? Reality and politics rarely do match up with each other.

There is a way though for us to judge such a plan. To work out the additional costs, the greater inefficiencies of government action. We have a distribution system for menstrual products in this country. Vast warehouses filled with aisle upon aisle of all the varied forms, shapes and technologies that can and are used to deal with this evidence of fertility. They’re called shops and they exist in near everything down to the smallest hamlet.

We can also take a stab at guessing what would be the cost of using this extant distribution system. A box of tampons - just to use as an example one of the myriad technologies and products - can be had for £1 these days. A box containing perhaps 24 pieces. Agreed, not possibly enough to deal with each and every period but when averaged out we’d not be far wrong in saying that a box per menstruating woman per month is a reasonable guesstimate as an average.

There are 3 million children in English secondary schools, some 1.5 million is a good guess at the number of girls and young women in them.

1.5 million by 13 months of the year - yes, this all works on lunar months, not solar - by our £1 per person per month gives us a total cost of £19.5 million. That’s the total cost of using the extant infrastructure to provide all the period needs of all schoolchildren. If we just added that amount to child benefit then we’d be done. Such an addition of £1 per month to child benefit for a female child of post-pubertal age would see the problem entirely dealt with.

So, how much will Phil’s plan cost?

Anything less than total provision will be an example of the greater cost of direct government action. If it turns out to be only emergency supplies that are provided, or if it’s only for some subsection of all. And of course any amount over £19.5 million even if that total need is met is also that evidence of the inefficiency of direct government action.

That the political head of steam is up for something stupid to be done about this invented problem is obvious. Given that foolishness is to happen we’ll just have to use it as an example in the future of what not to do. An example of how much more expensive it is to have that direct government action rather than a tad of financing leverage and leave markets to solve the rest of the problem.

The book that changed the world

Two documents issued in 1776 were to have a major and lasting impact upon the world. One was the American Declaration of Independence, and the other, published on March 9th of that year, was “An Enquiry into the Nature and Causes of the Wealth of Nations,” by Adam Smith. Normally shortened to “The Wealth of Nations,” it was the book that began the modern study of economics.

Before Smith’s book many people thought (and some still do) that nations became rich by exporting, and by selling more abroad than they bought from abroad. Mercantilism taught that this accumulation of balances was the cause of wealth, and that it was in a nation’s interest to practise protectionism, to give its own goods preference by subsidies and by tariff barriers against foreign goods.

One of Smith’s many insights was that nations become rich by specialization, trade and exchange. Yes, we could grow grapes on Ben Nevis, “by means of glasses, hotbeds, and hotwalls,” and we could make wine from them, at 30 times the cost of an equivalent French wine. But why should we? Let the French specialize, buy their wine at 1 unit, and keep the other 29 units in our pocket. It makes us richer. Tariffs make us poorer by causing us to pay more for our goods.

Smith also observed that people do not need to be good in order to benefit others. Their regard for themselves leads them to make and sell us goods that enrich our lives.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

We could all produce our own meat, beer and bread, but we do better if we buy from those who specialize, and make ourselves richer by accessing their specialist skills.

Smith’s pin factory employs 10 men who produce 48,000 pins per day, each specializing in one of the processes involved in pin making.  If ten workers did every step themselves, they could each produce perhaps 10 or 20 pins per day. Specialization makes each worker 240 times as productive, and makes pins cheaper for those who buy them. The same process in other industries increases productivity and powers prices.

“The Wealth of Nations” was timely, coming in the early stages of Britain’s Industrial Revolution. Its ideas influenced legislators, and persuaded them to lower tariffs and trade more freely. This has created unparalleled and unprecedented wealth, wealth that has funded medicine, sanitation, and more abundant food, giving us longer life-spans and an improved quality of life. Yes, it was indeed a book that changed the world.

Even the Institute of Directors is missing the point

It’s something of a pity when even those supposedly well informed and part of the system manage to miss the very point under discussion. Here the Institute of Directors, or at least their new head, manages to entirely whiff on the subject of CEO pay. For the important point at issue is not how much is paid but who decides how much is paid:

Pay for chief executives at Britain’s biggest listed companies rose more than six times faster than wages in the wider workforce in 2017, and the average boss’s pay packet hit £3.9m.

“If you start your own company and you run your own company, you can pay yourself as much as you want,” said Valeur. “If you run a company that other people’s money is funding, you have to be having a proper balance between what you get paid and what the company earns.”

That’s there should be a proper balance seems fair enough. Whether it’s at a founder led company or not actually. But that’s not the point at all. The actual thing to be discussing is who decides what is proper?

The correct answer here being the people doing the employing. Not the wider society, not the misanthropes with a grudge at the High Pay Unit, not the Chancellor and not the head of a business lobby groupuscule. Instead, it’s those employers. Which in the case of senior management and CEOs is the shareholders collectively. If they wish to pay whatever then it’s their money and whatever is the proper amount.

Sure, we can go on to discuss whether shareholders get to properly decide and all that but unless we get this more fundamental point straight first we’re never going to be able to discuss matters properly.

How much I pay my cleaner is a negotiation between me and the cleaner, a mutual discussion of hours, effort, labour supply and demand. How much a company pays frontline staff is the same conversation over the same points. How much a CEO is paid is again exactly that same conversation over exactly those same points with the shareholders as the employers being the people deciding what is right and proper as the conclusion to the deal.

Only once we’ve all grasped that can we progress. Progress to the correct conclusion that for the rest of us, non-shareholders and non-CEOs, it’s none of our damn business what CEOs get paid by shareholders.

Constitutional monarchy confirmed

On March 8th, 1702, died William III, the English king who did more than any other to preserve the role of the crown in constitutional government. After William it was always rule by “the King or Queen in Parliament,” rather than rule by any claim to divine right.

William was Dutch, born one week posthumously and inheriting the Principality of Orange. He had some claim to the English throne, being the grandson of Charles I and married to the daughter of James II, his uncle. James, the legitimate king, was Catholic, but Britain wanted a Protestant monarch. When William landed unopposed at Brixham in 1688, James fled to France and was deemed to have thereby abdicated, so William and Mary were declared joint monarchs.

In 1689 he assented to the Bill of Rights, a landmark document in British rights and liberties. It asserted that the monarch could not overrule laws passed by Parliament, or impose taxes without their consent, raise a standing peacetime army unless Parliament approved, or deny Protestant subjects the right to bear arms. The monarch was required not to interfere in Parliamentary elections, or to punish Parliamentarians for what they said in debates. He was also not to demand excessive bail or to inflict “cruel and unusual punishments,” limits that found their way a century later into the US Bill of Rights.

William was by no means enthusiastic about the Bill, but he accepted it to restore harmony to his kingdom. It largely succeeded, limiting the faction fights that had divided the nation. William promoted moderation and tolerance, both in politics and religion. In 1689, he gave the judiciary its independence, later enshrined in law by the Act of Settlement of 1700–01. He granted the Royal Charter in 1694 to the Bank of England, a private institution owned by bankers.

William had a lasting influence on constitutional history, and not just in Britain. Around the world today, it is arguable that it is the constitutional monarchies, rather than the full democracies, that are the best guardian of the rights and liberties of their citizens. The United Kingdom, the Netherlands, Norway, Sweden and Denmark, plus Australia, Canada, New Zealand, Japan and others, all follow the precepts established under William of limited government, an independent judiciary, free speech, and some degree of separation of powers. He set a precedent that reverberates around the world today.

To watch George Monbiot fail Chesterton's Fence

George Monbiot tells us all that we should abandon the car except for those really essential journeys. For there are costs associated with car use and that means we should.

He’s entirely right on one point. There are indeed costs associated with car use. Personal costs, societal costs, health costs, he’s absolutely correct. He indulges in the usual switch and bait of course:

One of these emergencies is familiar to every hospital. Pollution now kills three times as many people worldwide as Aids, tuberculosis and malaria combined. Remember the claims at the start of this century, projected so noisily by the billionaire press: that public money would be better spent on preventing communicable disease than on preventing climate breakdown? It turns out that the health dividend from phasing out fossil fuels is likely to have been much bigger. (Of course, there was nothing stopping us from spending money on both: it was a false dilemma.) Burning fossil fuels, according to a recent paper, is now “the world’s most significant threat to children’s health”.

A goodly chunk of that global pollution death toll is the use of wood and coal as indoor heating and cooking fuels. The toll is higher than that of smoking by some estimates. Further, that pollution now kills those more than communicable disease is because we did spend money on curbing communicable disease as a cause of mortality. Obviously enough we’re all to die of something - Mary, Elijah and those few others who didn’t being somewhat controversial historical characters. If we don’t of smallpox, cholera or some other bloody flux or ague then we’re going to survive long enough for a lifestyle complaint to catch up with us. One of us here once received an email telling of a diagnosis of terminal cancer in another which read, in part, “I have now lived long enough to get prostate cancer” which might be both droll and dry but there’s also a great truth contained within it.

But the real mistake here is that Monbiot has entirely failed Chesterton’s Fence, completely refused the jump. The point being that if we see a fence in the country we cannot insist upon its removal until we have worked out why it was placed there in the first place. Only once we know the original reason can we understand whether that still applies or not. Obviously enough, only if it doesn’t can we proceed to modernise.

Here that fence is, well, why do we all use cars? Why does every society in which people become rich enough to do so do so? Simply because, on balance, people find that the autonomy of a form of personal transport outweighs the problems with it. We prefer to die at 85 of lung disease if we can tootle Toadlike for those decades.

It could even be that we shouldn’t but that’s not the point at all - the fact is that we do. The existence and use of the car adds value to our lives in that general calculation we make of our own utility maximisation. Entirely ignoring that, as Monbiot does, means one is never going to be able to deal with reality. Which isn’t a good start to trying to change it really.

Speedy communication speeds the economy

The telephone dates from March 7th, 1876, the date on which Alexander Graham Bell took out a patent for a new device he called by that name. Three days later, on March 10th, Bell made his device to work. He spoke on it to his assistant, Thomas Watson, "Mr. Watson—Come here—I want to see you" into the transmitter.  Watson, listening at the receiving end in an adjoining room, heard the words clearly. The device turned vocal sounds into electrical currents, which could do the reverse at the other end of the line.

It changed the economy rapidly, Businesses that had depended upon hand-couriered messages or mailed communications, or at best the anonymous telegraph, could now communicate by voice more rapidly. Not only did it grow a whole new telecommunications industry, it facilitated most other businesses by speeding up their transactions.

Bell and his partners offered the patent to Western Union for $100,000, but were rebuffed. Two years later the WU President said that if he could acquire it for $25m, he would think it a bargain. The Bell Telephone Company developed into American Telephone and Telegraph (AT&T). For most of the 20th Century it held a monopoly in the US and Canada, and was nicknamed “Ma Bell.”

In the UK the telephone monopoly was held by the Post Office, a monopoly so tight that it was held that the ringing of hand-bells to communicate could be in breach of it. When its telecommunications arm was formed into an independent entity and privatized in 1984, it was initially thought that a telephone service was a natural monopoly, since it would be cumbersome to have several lines connected to each home. At privatization, however, the new company, BT, was required to send the signals of its long-distance competitor down “the last mile” into each home. More competitors were allowed later, making the UK one of the world’s most competitive telephone markets.

More recently the development of mobile telephony has leapfrogged over fixed landlines to enable developing countries to move from no telephone service at all into widespread mobile telecommunication. This had made a big economic impact, enabling isolated farmers to discover where the best prices are to be had before moving their produce to market. Mobile phones are increasingly used in developing countries to transfer money across distances rapidly and safely.

Such were the consequences of that March day in 1876, but Bell himself thought that telephones were a distraction from his scientific work, and refused to have one in his study. He continued to work helping to develop other inventions, including the phonograph and the hydrofoil.

It's a start on tariffs but it's not enough

We should, of course, take our good news where we can get it. So, this is good news but it’s not enough either:

The Government may cut up to 90pc of UK trade tariffs if Britain leaves the EU without a deal, according to reports from Sky News.

The Department for International Trade (DIT) is reportedly intending to slash between 80pc to 90ps of all tariffs on imported goods, with some being eliminated entirely.

Key items that will retain their protection include cars, beef, lamb, dairy and some textiles. But the component parts used to make cars, some finished food products and some farm produce including cereals would be scrapped.

The cuts, which have been agreed by the Cabinet according to reports, are intended to stop price increases and protect companies from overseas competition.

We should not be protecting producers from competition. As The Guardian, of all places, has just pointed out about the irruption of Aldi and Lidl into the British marketplace:

The British supermarket giants, whose 7% profit margins were the world’s highest,

...

By sucking in shoppers and, as former Aldi UK CEO Paul Foley puts it, “sucking the profitability out of the industry” – profit margins of 2-3% are now the norm – the two German-owned companies have forced the “big four” supermarkets to take drastic measures.

That’s a simple transfer - and a large one - from the capitalists and producers to consumers. That’s just what competition does and is the value of it too.

So, why would we want to protect British producers to the cost of consumers? Why would we protect car and textile producers from foreign competition and not retail stores even?

Unilateral free trade, as in 1846, being the correct and only correct stance to take.

Sure, it’s going to be tough convincing people of this. There will always be those misguided enough to insist that this or that needs protection. Not all of them will be producers themselves to be protected either. The answer to which is to make that protection obvious and open. It must be a direct transfer from taxpayer funds to those producers instead of some indirect method like tariffs or other price rigging. For that’s the only way that the costs of the protection become visible. And as we humans work it’s only the visible things that we’ll really calculate the pros and cons of.

Sure, OK, hill top farmers will all go bust without subsidy. Make that subsidy a clear payment so that we can all see it and decide. Do we want to pay that subsidy or would we be happy to see the uplands rewild? The same is true of all and any other subsidies.

Tariffs and import quotas should be set, entirely and wholly, at nothing and infinite respectively. Any allocation of subsidy - something we oppose but realise not all do - must be made out in the open so we can all consider the value of it.

Ayn Rand's legacy

Ayn Rand died on March 6th, 1982, leaving behind a controversial legacy that still engages millions of people worldwide. Her book, "Atlas Shrugged," was voted the most influential in their lives by members of the Book-of-the-Month Club in response to a 1991 Library of Congress survey.

Although she wrote books such as "For the New Intellectual," and "Capitalism - the Unknown Ideal," her philosophy was accessed by many readers through her fiction writing.  She left post-revolutionary Russia and settled in the US, where she began script writing in Hollywood. Her best-selling, "The Fountainhead," features a brilliant architect who refuses to compromise his principles, espousing a radical individualism central to Rand’s philosophy.  The book’s success, and that of its movie adaptation starring Gary Cooper, projected Rand to a wider audience.  Her later work, Atlas Shrugged (1957), depicting a mysterious strike by leading innovators and industrialists, still sells hundreds of thousands of copies a year.

She called her philosophy "Objectivism," supposing that reality exists as an objective absolute, independently of any conscious mind. She thought knowledge to be based not on faith, but on sense perception, the validity of which she considered axiomatic, and which was interpreted through reason.

In ethics, she argued for rational self-interest as the guiding moral principle, and said the individual should "exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself."

Her political philosophy emphasized individual rights, including life, liberty and property, and she supported laissez-faire capitalism because in her view it was the only system based on the protection of those rights. This led her to oppose any government action beyond those needed to protect individual rights.

Controversially, she opposed altruism as a denial of rational self-interest, saying that no person should live his or her life for the sake of another. Although some deride this as "selfish," in her view there is no conflict of interests between rational individuals; they recognize the value of respecting each other’s rights consistently, sacrificing neither themselves nor others.

A biographer, Jennifer Burns, referred to her as "the ultimate gateway drug to life on the right," and it is true that she leads many, by justifying their belief in themselves, to support capitalism and to oppose all forms of collectivism. Rand has a huge following today, especially among young people, attracted by her philosophy of rational individualism, and by the way the Objectivist view of knowledge meshes in with its ethical and political stance.

She remains massively popular, even a cult figure in some circles, and has been featured in several documentaries. Her likeness even appeared on a 1999 US postage stamp. Each year the Adam Smith Institute hosts an Ayn Rand Lecture to commemorate her ideas.

The technological revolution will make the NHS cheaper, not more expensive

One of the tropes we see around often enough is that we must spend vast sums more, invest ever more heavily, in the National Health Service because new technologies are going to raise the cost of health care. This is not actually so for a fairly obvious reason. Why would we adopt more expensive methods of doing something?

Quite, we’ll only - as is true in all other areas of life - start to use a new technology if it is better or cheaper than the one we’ve previously used. Some of these new technologies being considerably cheaper too:

Smartphone apps are five times more effective at diagnosing serious heart conditions compared to standard tests, a University of Edinburgh study has found.

Better and also cheaper:

After 90 days, the smartphone device helped doctors diagnose 56 per cent of patients, in an average time of 9.5 days.

However, only 10 per cent of patients given standard care were diagnosed, in an average time of 43 days.

The technology also cut the cost of diagnosis from £1,395 to £474, researchers said.

That’s not an argument in favour of increasing spending upon the NHS now, is it? It’s quite the opposite, an opportunity to sniff around and see whether it needs quite so much of our hard earned.

This has also been true of all previous medical technologies too. Vaccines are cheaper than wards full of smallpox victims. Aspirin cheaper than leeches at curing headaches. What makes health care more expensive at times is the technology which allows us to cure something we couldn’t before.

The total cost of health care in the future is going to be the balance of those two plus whatever the demographics of the population being treated are. But it’s simply not true to go about insisting that advancing technology is necessarily going to make the NHS more expensive so open those chequebooks now.