We're not convinced by this from James Kirkup

James Kirkup at the Social Market Foundation tells us that businesses which gain support from government in these troubled times should have to sign up to a charter of niceness. Promise not to be nasty in the future given whatever today’s fashionable definition of being nice is.

We spot, just on casual reading, two errors. This:

And in 2006, Parliament legislated to embed in law a significant challenge to the Friedman

view that business has no social responsibility beyond profit. Section 172 of the

Companies Act 2006 remains, to my mind, one of the most important yet under-discussed

laws passed in recent years. It places the directors of limited companies under a new duty

to “promote the success of the company for the benefit of its members as a whole.” In a

sense, the narrow shareholder value doctrine has been disputed in UK law for more than

a decade, though this law has not been given sufficient force to date. (I will return to S172

later in this paper.)

A member of a company is not one of that wider group of stakeholders. A member is not an employees, customer, lender or anything other than a shareholder - members are, in company law, shareholders. Thus the Section 172 claim is that shareholders might have other interests than mere cash. We’re entirely sure they do, something that would not have surprised Friedman either.

There is a much deeper and more important error here though.

Few arrangements or practices can survive the public perception of unfairness, that some

people are undeservingly favoured while more worthy people miss out. Nor are bankers

the only business actors bedevilled by the perception of unfairness. Big tech firms and

(especially) famous coffee chains that are seen not to pay their fair share in tax to the

country where they operate are other examples of how no company is bigger or more

important than the idea of fairness.

The argument is that business will benefit from this new contract that must be signed. For those that don’t - or those that appear not to hew to the principles of it - will suffer as the customer base considers them to be unfair in their actions and thus avoids them.

Which is the very proof that a contract, the legal force, is not required. For if customers do avoid companies they regard as having acted unfairly this will damage those interests of shareholders - members being such recall - and so they will benefit from hewing to those notions of fairness. Greed - or, to borrow a phrase, enlightened self-interest - will ensure that companies act as the public wishes them to. The very diagnosis shows us that the law is not needed.

This all comes from the Social Market Foundation. Perhaps showing us that the qualifier “Social” when added to market is as with “social” when added to justice, or climate to science. The first word rather negating the meaning of the second.

The Lives of Others

Well into week three of home isolation and the temptation to stop work and switch on the TV has never been stronger. In a textbook case of self-justification, I flicked on The Lives of Others as, being in German, it made me feel pretentious enough to not to admit to watching TV during the daytime on a workday.  

The film, however, is brilliant and it is no surprise that it won best foreign language film at the 2007 Oscars, and has been credited as the best-ever German film.

The film is set in Communist East Germany (GDR). The main character is a Stasi officer, Gerd Wiesler (Ulrich Mühe). He is noticeably more committed to the ideology of socialism than many of his colleagues trying to play party politics to climb the greasy bureaucratic pole. Gerd is tasked by one such superior, to spy on playwright Georg Dreyman (Sebastian Koch), who is known for his loyalty to the party, and provide grounds for his arrest. The real aim of the mission is a favour for a government minister who believes his position makes him more deserving of the writer’s girlfriends’ affection. 

Over the course of the film the Stasi officer, observing the life of the writer through the cameras and bugs placed in his apartment, begins to see how his own life of blind obedience seems dull in comparison. He sees how the playwright’s small acts of rebellion against the GDR state serves not the exploitation of the capitalists over the workers. Instead, it demonstrates the oppressiveness of the state which refuses to accept a world of nuance rather than ideological dogma. The officer is torn between his loyalty to the corrupt state and his knowledge that the writer is a good man who does not deserve the punishment that has been planned for him from the beginning. 

Following a tragic storyline, the film shows how communism’s innate totalitarianism and need to quash even the smallest acts of rebellion against the state. It also shows the flawed humans who run a communist state, leading to unnecessary suffering. The state surveillance and intervention into the lives of its citizens results in tragic consequences. 

Of course, we have never known a Stasi in the UK. Yet as the government increases restrictions on our lives, most of them justified to help stop the pandemic, it is important we do not allow more sinister features to emerge.

A recent post by Derbyshire police involved one of their drones filming walkers out on the peak district. Looking more like a clip from the TV show hunted rather than an efficient use of police time, it showed a car park more than half empty along with walkers hundreds of metres apart – clearly at little risk of infection. Yet the baying for people’s blood by many in the comments section is an unnerving reminder how the handing over of oppressive powers can often be a popular one at the beginning.

As Tim Stanley wrote in the telegraph this morning, the attitude needs to remain, “I am happy to stay at home if it helps save lives,” rather than the emerging sentiment, “I will do as I’m told because I’m terrified and the state knows best.” 

While these restrictions on our liberties are necessary at such an extreme time, we must remain vigilant on any unnecessary losses of freedom or surveillance. The tragedy of communism in the past shows the damage these can cause.

Yet perhaps even more important, we as a society must be wary to not fall into the trap of calling for further controls and demanding the crucifixion of those who we believe to be in the wrong. 

Keeping perspective on scientific claims

Most people think that knowledge is solid and unchanging, just waiting to be accessed from the libraries of the world. It isn’t.

What we call ‘knowledge’ is actually no more than our best guess. Take Fred Hoyle’s steady state theory of the universe. Later evidence proved him wrong and gave us the Big Bang hypothesis. But then, that too could be sunk by new evidence arriving tomorrow.

When COVID-19 broke out, nobody knew whether it was a terrifying killer, or a mere nuisance. Governments pursued different strategies based on different guesses. Imperial College London, for example, figured that a third of Britain’s population were already infected and 250,000 people could die. Then Oxford University concluded that the virus was indeed common, but so mild that the healthcare system could cope. Then a Stanford University study—and a second one from Imperial—calculated that the virus was even less deadly than seasonal flu.

Science done at speed, on rapidly changing events, is always bad science. Emerging evidence will improve it.

BUT: that evidence itself will still be speculative, questionable, maybe biased, mistaken or downright wrong.

Still, if you think the medics have little to go on, spare a thought for the economists trying to determine the full effects of the lockdown. They know even less.

Perhaps the coronavirus really does change everything

While we were entirely happy with most aspects of society BC - Before Coronavirus - we are aware of the clamour insisting that everything must be different after it:

California Gov. Gavin Newsom says 170 ventilators shipped to Los Angeles by the federal government to deal with the coronavirus crisis were “not working.” The Los Angeles Times reports that the life-saving machines from the national stockpile are now being fixed by a Silicon Valley company Newsom visited on Saturday.

We are aware of the point that some things simply are not possible without government. But perhaps one of the things that will become clearer AC is that government just isn’t very good at any of the things it tries to do.

The logical conclusion from that being that where we’ve alternative methods we should use those rather than government. Saving the enforced collectivism for those moments and actions where There Is No Alternative.

When we add the already known point that there are many things that government - that enforced collectivism - cannot do at all then we’ll end up with very much less government than we have now. Which would be a useful silver lining, wouldn’t it?

We've moved the clocks forward, let's keep it that way

Now we have put the clocks forward, we will have longer, lighter evenings.

Lets’ leave it that way. Changing the clocks on everything is a hassle, and there is no scientific basis for it. In Britain, it started in 1916, based on the belief that lighter evenings would save energy during the First World War. In the Second World War we added yet another hour, with Double Summer Time.

But changing the clocks does not save energy. Several US states and cities straddle time zones, and there’s no difference in their energy use.

We’re told that farmers like it. They don’t: animals waiting to be fed don’t care what the clocks are saying. And farmers are only 1.5% of the workforce anyway.

My Scottish relatives complain that if the clocks didn’t go back in winter, children would be going to school in the dark and there would be more accidents. That’s wrong. Most road accidents happen in the evening—when people are tired after a day’s work and rushing to get home. Winter darkness just compounds the risk.

These arguments aren’t new. Boris Johnson rehearsed them in a newspaper article several years ago. Come October, he has the opportunity to do something about it—to improve our evenings and save us all a lot of hassle.

This is not the dawn of a new progressive age

We around here insist that we’re progressives. We’re also liberals and radical. However, where we differ from those who more usually call themselves radical, progressive, liberals is that while we agree that the power of the state is hugely important in being both liberal and radical we do have this niggling insistence that often enough it is less state which creates the radical liberalism. For example, unilateral free trade would be both radical and liberal yet it’s not exactly an extension of the activities or powers of the government now, is it?

However, put that aside and use progressive in its more usual meaning, someone who is insistent that we need more government to solve whatever ails society. Because there isn’t any money left to extend that power of government:

Spectre of soaring debt will haunt governments for years to come

Nations are borrowing hand over fist to battle the economic fallout of coronavirus, putting severe strain on their balance sheets

In general we don’t agree that every problem can be solved by throwing more tax money at it. But, as is obvious, that’s what is being done right now. And that means that there simply isn’t the fiscal room to be doing any more of that for the next few years, decades - generations if that’s how long it takes to pay off the spree - and therefore there is no room left for politics to be that conventionally progressive.

In which, of course, there is more than a glimmer of hope. We entirely agree that we should have a more radically liberal society and we’ve that antipathy to government being the vehicle for it. Antipathy based upon both preference and the logical objection that more government doesn’t actually work. The inability to finance more state intrusion will mean that all radical liberals are going to have to use other methods - markets, liberty perhaps, possibly even a culling of current state power - to gain that better world.

We really are where Liam Byrne said we were. The money has run out. Which is, actually, excellent, for now we’re constrained to solutions that actually work.

To show the terrors of cost benefit analysis we must perform a cost benefit analysis

There could be a reason why this gentleman is a Media Studies professor, not one of economics or logic:

In the late 18th century, Malthus warned that the poor would breed at a rate that would outpace the resources necessary to sustain a growing population, resulting in famine and misery. His predictions failed but were still deployed for decades to limit public amelioration of poverty.

Well, no, Malthus showed that they had and up to the point he wrote he was right too. It was capitalism and the Industrial Revolution that changed that historic truth. But leave facts aside and consider the logic here:

In the late 18th and early 19th centuries, Bentham promoted the idea that public moral decisions should be made to foster the greatest good for the greatest number, forging the calculus that has pushed policymakers and economists to invoke simplified “cost-benefit analyses” to decide if a measure is worthy of consideration.

Overall, this approach is a stark example of a troubling ideology that grips too many of those with power and influence in the world. Economism is a belief system that leads people to believe that everything can be simplified to models and curves, and that it’s possible to count and maximize utility in every circumstance. What economism misses includes complexity, historical contingency and the profound, uncountable power of human emotion.

To set up a false choice between driving the economy into the ground while saving millions of lives or reviving the economy while sacrificing millions of lives ignores a core fact: the global economic depression unleashed by the deaths of millions in the United States, millions in Europe, millions in Asia, millions in India, millions in Mexico and millions in Brazil would be beyond our experience or imagination.

No one would trade with anyone for years. Trade would grind to a halt because of mourning, fear of infection, society-wide trauma and social unrest.

Those last three sentences detail the costs of allowing the pandemic to rip through the population. We don’t agree with that analysis of what would happen for Spanish ‘Flu did exactly that, killing those numbers and more, and the 1920s were a great flowering of trade and economic growth. No, we would not justify Spanish ‘Flu on those grounds.

But look again at the logic there. We must not use cost benefit analysis, economism, to inform our decision making. For here is a cost that is very large, which outweighs the benefits of the decision being taken.

That is, we’ve just performed a cost benefit analysis to claim that we must not perform cost benefit analyses.

To retreat to economism once again, Adam Smith’s division and specialisation of labour. We might be better served if journalism on particular subjects were done by those who understood particular subjects rather than by those who understand journalism.

Only a thought.

You get what you pay for - well, you should at least

It’s not exactly a surprise that we’ll disagree with something said by John McDonnell. Yet it does still need to be said:

First, the self-employed and dependent contractors (those who are self-employed but provide a service as part of someone else’s business, such as Uber drivers) are not covered by the scheme’s guarantee of up to 80% of their wages. The self-employed are a diverse group, including cabbies and child-minders, plumbers and actors. The Federation of Small Businesses has been calling for the self-employed to be valued and protected. We agree.

It’s true that there is some variation in what self-employed people are paid. But the same job retention-scheme cap of £2,500 can apply to the self-employed. Recent average earnings can be used to estimate their income. Any inaccurate reporting can be picked up in tax returns filed for 2019-20. The self-employed deserve the same support as everyone else.

No, the self-employed do not deserve the same support as everyone else. For the self-employed have not been paying in to the system of social insurance in the same manner, or to the same amount, as everyone else.

National insurance really is what it says on the tin, a national system of insurance against the vicissitudes of life. Against happenstance, economic cycles and all that may ail employment prospects. The self-employed pay into this system at different and markedly lower rates than the employed. As a result they have fewer rights to payments from that national insurance scheme.

This is as it should be, you get what you pay for. The statement that people should - as McDonnell suggests - gain what they have not paid for strikes us as being wrong, simply and purely incorrect.

That something might be done is true, that it should be could be and that it will strikes us as likely. But this insistence that people should gain the insurance cover they’ve not paid for we still regard as wrong.

Just for the avoidance of doubt this particular piece comes from someone who is:

a) self-employed

b) unlikely to be offered anything under any scheme

c) not going to apply for or accept if they are.

For we around here think that conjunction between the walk and the talk to be important.

COVID-19 and Game Theory

As the UK faces increasingly severe lockdown measures, it is ironic that we are stuck in a very real prisoner’s dilemma.

For those uninitiated with game theory, the prisoner’s dilemma is a situation in which we have an incentive to make a choice that does not produce the optimal result for the group. 

In the classic case of the prisoner’s dilemma, two members of a criminal gang are arrested and imprisoned. They cannot communicate. The authorities cannot convict them on the main charge, but they can on a minor charge. If they both stay silent they get they both get the lesser charge, the optimal result between the two of them. 

But, if one speaks out then they are released, and the other person is put away for years. The incentive is for both to betray the other, in the hope of getting a reduced sentence, but which results in them both getting a medium sentence. The implication of the game is that two individuals acting in their own interest reach a suboptimal outcome.

Stuck in isolation, we have no idea as to how our fellow city-dwellers will act, and many choose to act in self-interested manner since they can assume others will as well. Let’s take the case of supermarket stockpiling. The media might have us believe that the virus has led to a plague of ‘covidiots’; revellers and hoarders hell bent on and single-handedly clearing out supermarket shelves. 

But are people acting irrationally? At a collective level, it is leading to shortages of goods. But in a direct sense, people are acting rationally. It becomes optimal rather than suboptimal to start stockpiling if everyone else does because their stockpiling creates the very supply problem they are trying to avoid in the first place.

No one particularly wants to hoard hand sanitiser, but will do so if they think others are doing so. The stockpiling of toilet roll doesn’t even have the same disease-preventing benefits of grabbing extra soap, but no one wants to be caught out without any loo roll if all their neighbours raid the local store shelves.

This perspective does not seem to be one entirely shared by supermarkets or the government, with the suggestion today that supermarkets will be advised to allow only 10 people in at a time, alongside the already implemented two or three items per person rules to stave off induced shortages. These policies are based on a cynical intuition that the majority of shoppers are irrational hoarders, that they will purchase these items whatever the price, and consequently that price rises are an equally cynical attempt at profiteering during an emergency. 

The item limit policies function as a blunt tool to prevent overbuying, but it comes with costs. It disproportionately endangers those who might need more like families and vulnerable members of society who will be forced to go into the shops more regularly to adequately supply themselves. This is likely to become increasingly difficult as further measures are taken to discourage time spent in public spaces. 

By increasing prices on certain goods like toilet paper, those who don’t want to be caught without it could opt to buy in smaller volumes, leaving more stock on the shelf and increasing buyer confidence that stock isn’t dwindling. In the case of meat and dairy, this has the added benefit of displacing demand onto cheaper vegetables of which there is a greater supply. As buyer confidence in the supply chain is restored, prices could be returned to standard levels. Government is rightly increasing welfare payments to compensate the least-well off for these short-term hikes. 

While perhaps counter-intuitive, raising prices in our current context is not a cynical cash grab, but an effective means of restoring consumer confidence and ensuring we can all access the goods we need during these strange and difficult times. While purely anecdotal, the supermarkets near me haven’t had eggs for days, but the corner-shop has plenty after raising prices to 40p an egg, and for that, I am glad. 

The broader experience of this pandemic might also point to other economic insights, like that of the tragedy of the commons, in which people overuse a shared resource. The classic case being overgrazing by farmers of a shared field of grass.

When the PM announced that pubs, clubs, bars and gyms should close down, he inadvertently created an incentive to flock towards public parks and holiday homes as the last vestiges of unrestricted leisure. What better time for a breath of fresh air than when your compatriots are cooped up inside?

Somewhat predictably, the media has us staring at images of parks heaving with joggers and tube stations chock-full of commuters (only worsened by the Mayor’s decision to reduce services at a time when people need to socially distance).

If everyone believes it is optimal for themselves to go to the park, it quickly becomes sub-optimal because the park becomes unpleasantly full, increasingly hazardous and precipitates further government lockdown. Social distancing is enforced either through individual inference or law enforcement. As per the tragedy of the commons, our own self interest has created a suboptimal state of affairs for everyone in jeopardizing public health, and incurring increasingly necessary restrictions on personal freedom. 

However, if YouGov is to be believed, 93% of us back protocols recommended by the Government, with those who do not forming a hyper-visible minority. Corroborated by recent observations that footfall in public spaces is dropping, we can conclude that as society adapts to this new normal, most of us will make mutually beneficial decisions.

Learning the lessons of the end of World War II

The Allies won a remarkable victory in World War II. Although among the victors, the UK was bankrupt and exhausted, its economy was in poor shape, and its infrastructure - roads, rail and telecommunications - was out-of-date and worn out. Its economy needed a reboot to refresh and renew itself to deal with the postwar world.

Instead, the UK government, a major recipient of Marshall Aid (far more than West Germany), and having negotiated a huge loan from the United States, squandered the money on building up an expensive welfare state, nationalizing industry, and trying to maintain the costly illusion that it was still a superpower. The sad story is documented in detail by Corelli Barnett in “The Lost Victory” (Macmillan 1995). 

The result was that while Germany and Japan saw reinvestment and renewal, the UK went into an economic decline that lasted for decades. Instead of abandoning the wartime restrictions and regulations, as other countries did, they lingered in the UK, hindering the country’s economic development and the process of renewal. The UK became the sick man of Europe.

There is an obvious lesson to be learned. Although extreme measures were needed to defeat the threat from Nazi Germany and Imperial Japan, they should have been temporary, as they were in other countries. Instead the UK retained many of the restrictions, to its long-term cost. 

To cope with the threat of the coronavirus, extraordinary measures have been adopted. An unprecedented economic stimulus has thrown away the rule-book, and restrictions on civil liberties have been introduced that are unprecedented in peacetime. The lesson to be learned from postwar Britain is that if these are needed to defeat the threat, they must be temporary. We must not continue to suffer under the burdens they impose to our economic well-being and our way of life once the threat is over.

Of course, there will be those who want to keep these measures in place in case they might be needed again in the future. The reply to this argument is that if they are needed in future, they can be re-imposed in future. But it is important to get rid of their burden until such a time, so that we might meanwhile prosper in freedom.

What we should now do is prepare a programme for the systematic removal of the emergency measures, both the economic ones and those that pertain to civil liberties, once the threat has receded. Even more than that, we should go further, going beyond the status quo that prevailed before the emergency, and removing some of the restrictions that held back our adaptation to the new economy. And we should undo the nanny state restrictions that thwarted our right to make our own lifestyle decisions concerning what we eat and drink and choose to live. After winning the war, this time we must win the peace.