The Guardian says it's all the Left's fault - we agree

The Guardian tells us that the current state of politics is all the Left's fault, something we agree with:

The Guardian view on France: Fillon v Le Pen is the wrong contest

The shift to the right in western democracies is undeniable. The left shares the blame, in France as elsewhere

Although we go further, it is not a share of the blame but all of it which is to be placed there. We say so not just because it's gloriously fun to bash lefties - but because we do think that the plot has rather been lost.

We here of course are classical liberals, neoliberals even. And we are so because we're really on and of the left if we are to define that in any sensible manner.

We regard the great goal of global economics to be the eradication of absolute poverty - we'll sweat the small stuff later. We regard the great victory of the past 40 years as getting that abhorrence down to under 10% of the population and hope to be here to celebrate its eradication in a couple of decades' time. We also insist that classical liberalism has always been on this properly defined left - Cobden's great free trade campaign was so that the working man had cheap bread to eat after all, rather than that restrictions upon imports continue to fatten the landlords' pockets.

We think it instructive to look at those surveys done of economists in the US. They trend Democratic, as of course do all US academics. It's not quite like sociology where a Republican cannot be found but a solid majority of professional economists define themselves as D not R over there. And yet when surveyed about policy they (92%) near unanimously slam rent controls, reject wealth taxation, agree that income taxation should not be at confiscatory levels, worry that minimum wages can be too high and so on all the way to free trade is a good idea. That is, avowed lefties who understand economics roundly reject most of the economic policies put forward by left wing parties.

And that's the problem, the disconnect and the fault. For what most want is really rather simple. Just the knowledge that life is getting better, that children will have more opportunity, live better lives, than their parents. This is not a working class, nor middle class or any other class goal, it's a human one. And the method by which it will be achieved is to get those economic policies right and sweat the small stuff later.

Meanwhile, the vanguard of the modern left is condemning those who might decide to use skin colour as a guide to whom they might wish to rub uglies with on a gay dating app. As Owen Jones just did in The Guardian.

Thus that problem with that modern left - they're just not concentrating on what is important. Bettering the condition of the average guy 'n' gal is, thus policy should be all about producing that improvement. And that the masses aren't voting for the modern left is simply evidence that the masses realise that's not what said modern left is offering. And that really is the left's fault.

If there were an economically rational left out there we'd support it. Rational here just meaning one whose policies were consistent with the declared aim, that of bettering the condition of the average person. Sadly this isn't there and that's both why it's not being voted for and why the left that is there should be blamed.  

Sure Fidel Castro was a dictator but what about that free health care, eh?

We've all seen the point being made over the past couple of days. Sure, Fidel wasn't perfect and he stuck to the damn Yankees and what about that free health care, eh? 

At which point something that not a lot of people seem to be aware of:

To his critics, the late Fidel Castro was a totalitarian despot, an opponent of free speech and a man determined to preserve his hard-won revolution whatever the cost.

But to his defenders and admirers, he was a leader whose enlightened and practical approach to social care provided Cuba with enviable health and education systems.

Figures from the UN children’s agency, Unicef, show that Cuba’s youth literacy rate stands at 100%, as does its adult literacy rate.

...

Life expectancy in Cuba is 81 years for women and 77 for men. In the UK, it is 83 years and 79 respectively. And while the former spends $2,475 per capita on healthcare, the latter spends $3,337. Cuba dedicates 11.1% of its GDP to health; the UK 9.1%.

Those numbers don't add up - If it's 11% of GDP and spending is $2,475 per capita then GDP per capita is near $23,000 a year in Cuba. No, Cuba really is not about as rich as Malta (nominal GDP per capita) nor Chile nor Panama (PPP per capita).

Which is the thing to draw attention to. The various statistics about the island are all drawn from the Cuban government. Those Unicef, the WHO ones, are all added up from the data passed over by the Cuban government. There is no independent verification of the basic figures. Which brings us to this:

Some, however, argue that the success of Cuba’s social care owes as much to politics and pragmatism as to equality and governmental magnanimity.

As a senior western diplomat told the Guardian in 2007: “Health and education are the revolution’s pillars of legitimacy so the government has to make them work. If they don’t, it loses all its moral authority.”

We would slightly change that - so the government has to make them appear to work.

One of us spent most of the 1990s working in Russia. And one thing we learned there was that no number coming out of a communist dictatorship was to be trusted - and it was not just us, the statisticians had to start with the assumption that absolutely every economic number was entirely wrong.

Which is what drives our assumption about those social statistics. They're made up.

If only there were something like Benford's Law which could be applied to health and demographic statistics to check....

How deeply Castro got under the British left's skin

We're all aware that the likes of Jeremy Corbyn and Ken Livingstone are and were completely gaga for Castro and his revolution. To the point that any muttering about executions and gulags was met with "But free health care!" as if we'd not built our own NHS without shooting anyone.

But to show how deeply the rot went consider this from the normally considered to be much more moderate Willy Hutton:

But Castro, and perhaps more importantly, his right-hand man, Che Guevara,were ambassadors for what seemed a different kind of communism. They planted doubts in our young minds. While Russian tanks crushed the Hungarians and, later, Dubček’s Prague Spring and Mao’s Red Guards committed countless atrocities, Cuba seemed to represent something different. Maybe communism did not have to collapse into gulags, prison camps, thought control and atrocity after atrocity. Maybe there was a different vision of society than exploitative capitalism or tyrannous communism. Israel’s kibbutzs, representing a new form of communal shared living, and Cuba’s new socialist order might – just might – represent a future in which the idealistic could believe.

Given the drugs and the hedonism of the time, not to say that mindgargling ignorance of youth, perhaps it might just about have been possible to believe such then. But now? 

And yet. We did dance for liberty and freedom. But we also danced for a world in which, as Fidel proclaimed, we looked out for each other. Most Cubans want to retain the great egalitarian legacy he has left, even while they try to combine it with a more dynamic economy and genuine political freedoms. The dream remains to combine all three. I dreamed it then. I dream it now.

It's that mention of the kibbutz which is so important. They were and are entirely voluntary. As is John Lewis, the Co Op, the RNLI, Meals on Wheels and all the rest of what Burke called the little platoons and which are the manner in which we cooperate and look out for each other. All of them being organisations which work precisely because the people in them are there voluntarily.

That is, the underpinning of this great adventure has to be liberty, liberty first and always. Rather than some planner of society, like, say, Willy Hutton, telling us all what we should be doing. Which is to say that we must start by being liberals, as we are and most of the British left is not, and only then can any of the other problems be solved, desires met.

Be careful what you wish for on wages

Lidl is to pay that Living Wage to all its workers. This will undoubtedly lead to the insistence that if one supermarket can do it then all should. And that's the point at which people should be careful of what they wish for:

Lidl will be the first supermarket group to raise its minimum pay to the level set by the Living Wage Foundation in a boost for thousands of workers.

The German discounter said that from March it would pay all Lidl UK employees a minimum of £8.45 an hour in England, Scotland and Wales and £9.75 an hour in London. It claimed this would make them among the best-paid supermarket employees in Britain.

What Lidl wishes to do is of course entirely up to them. It's the coming insistence that if one then all which will be the problem. For there are different methods of retailing, ones that use more or less labour to perform the basic tasks. Lidl is at the low use of labour end of this spectrum - they are therefore able to, if they should so wish, to pay more for each hour of that labour. The same will not be true of other chains which use a more labour intensive retailing method.

The usual example here is in the US. Walmart famously pays quite low wages. Costco equally is famed for paying many dollars per hour more for the labour it uses. Campaigners regularly point to Costco and insist that Walmart must be able to pay those same wages, it's all retail after all, right?

The failure is in not noting that, per value of sales, Costco utilises about half the labour that Walmart does. One chain is following a labour intensive model the other a labour light one. And if the insistence is going to be that wages should equalise across the two models then the labour utilisation is going to equalise too. That is, insisting that Walmart follow the Costco model is going to lead to some half of Walmart's current labour being  offered the opportunity to contribute elsewhere in the economy. That is, to lose their current jobs.

That Lidl, running a labour light model, can pay this Living Wage does not mean that those running more labour intensive models can also do so - not while continuing to run labour intensive models that is.

To read George Monbiot's best essay of the year

George Monbiot tells us that societies get too complex - more and more effort has to be put into supporting the complexity, marginal returns fall and eventually, collapse. This is explained in his nomination for best essay of the year, which is here:

At some point, however, investment in socio-political complexity typically reaches a point of diminishing returns, meaning that the marginal beneficial returns (i.e. problems solved) of additional complexity begin to decline, leading to a lowered capacity to solve the new problems that arise and to deal with their consequences. These returns may even turn negative, at which point societies are not anymore capable of upholding the level of complexity they have reached. Typically, they then tend to break down to a lower complexity level.

Thus, inevitably, civilisation will come tumbling down as a result of our economic system becoming ever more complex.

This is all based upon the ideas of Joseph Tainter. And there's ever such a slight problem with those ideas. For he thought this was already happening just as he was explaining his ideas. In 1988.

Yes, in that 1988, just before the dual economic explosion of digital technology and globalisation. Both of which are not showing any signs whatsoever of diminishing returns, quite the opposite.

That is, we've got another of those lovely ideas - ones that might be possible, sure. We know very well that there can be diseconomies of scale for example. They could apply to political systems too - we certainly think so at times. But it's entirely non-obvious that this applies to economies. And it has most certainly been non-true since the explanation was proffered. That is, another of those lovely ideas which could possibly be true but seem not to be.

At which point to float an idea that might also fall into that class of possible but not true ones. We;re certainly willing to agree that complexity can have its problems. That the management of complexity can cause inefficiency. Perfectly happy to agree with all of that. We're pretty sure that Hayek was making the same point actually, we can't plan because we can't know enough about the complexity to do so. But then Hayek also gives us the solution here. Use the market - the market can handle complexity precisely because no one is trying to manage the complex system.

Which means that the answer to this complexity question was given several decades before it was actually asked.

Cannabis in Colorado: More than you ever wanted to know

Cannabis in Colorado: More than you ever wanted to know

Yesterday The Times published an op-ed response to The Tide Effect report released by VolteFace and the Adam Smith Institute on Monday by columnist Alice Thomson. The report argues that the only way to bring cannabis under control is to legally regulate it. Thomson presents the counterexample of Colorado, the US state where cannabis has been legal longer than any other, and paints a bleak picture of the place since the change.Her article plays on the understandable fears of many regarding the impact of a regulated market by sporadically drawing what seems to very credible and alarming statistics.

How to solve South Wales - don't let government anywhere near it

It's not often that we agree with anything that Aditya Chakrabortty writes over in The Guardian. It's also not often that he writes anything conservative or free market. However:

Finally, learn one of the hardest lessons of Brexit: the reason the political geography of Britain is so divided is because its economic geography is so unequal. Treasury levers and Bank of England billions are barely any use here. Instead, what’s needed is an attentiveness to place.

In his Deep Place studies of local Welsh economies, the academic Mark Lang starts from what places like Pontypool already have, and what can be built on. He pulls together members of the community and asks them what they need. His new report on Pontypool shares a lot with the work on the foundational economy done by the Centre for Research on Economic and Social Change, which i’ve written about here before. It starts from a recognition that chasing multinationals and chain retailers pays only limited dividends in a place that’s had its purpose stripped out. It argues for focusing on what locals need: social care, good schools, broadband. This isn’t Westminster politics with its big announcements, or even Cardiff politics and its ribbon-cutters’ charter. It’s more modest, perhaps even pessimistic. To me, it rings more true.

This is conservative because it is just Burke's little platoons all over again. Central government, even regional government, doesn't have the answers. And it's free market because it's voluntary cooperation down among those little platoons that the solutions, whatever they are, will be found.

Which means that this is also the third, something we agree with Aditya about.

Who knows, we might be surprised, it could be that laddie Chakrabortty has the beginnings of a reasonable economic commentator in him.

What the ban on letting agency fees means for the marginalised

Much in need of some good publicity, Philip Hammond, the Chancellor, is set to announce a ban on letting agency fees.

These charges - often for administrative duties, such as inventory and background checks - are clearly unpopular. But in their efforts to find a political free lunch, the Conservatives should consider the threat the changes pose to the country’s most marginalised renters.

A landlord has little way of knowing whether a prospective tenant will be a delight, or a nuisance. It is this risk of the latter that means that landlords will keep rents low for long-term residents, knowing that they would prefer to keep the business of well-behaved occupants.

Letting fees, most of which are paid at the beginning of an occupancy, have served as one way to mitigate against the risk of a rotten tenant. If a new occupant is destructive, and must be evicted, the landlord is then more able to cover a loss of earnings while a new tenant is found.

Eliminating these charges could be to the detriment of tenants who landlords perceive to be more risky. Without letting fees, there is a concern that landlords could rely on crude race or class-based stereotyping in order to judge the riskiness of prospective tenants.

There is already evidence of discrimination in the British rental market, as well as in the US - a problem that a ban on letting fees could exacerbate. Yet despite this concern for at risk renters, the policy is likely to be a vote winner. 

Surveys confirm that the charges are not liked. Last year, Citizens Advice estimated that new private sector tenants were facing an average of £337 in letting fees. However, we cannot be sure that banning the fees will reduce the cost of renting. As the housing minister acknowledged just two months ago, landlords are likely to raise rents in order to recoup the lost revenues from a ban on fees.

Rather, the economic rationale for a ban on fees is likely to be that by eliminating upfront moving costs, would be tenants can more easily relocate, and rents can adjust more quickly.

This effect could plausibly be a boon to the UK’s labour market as well. Rising homeownership rates are associated with a subsequent increase in unemployment, perhaps because workers become less willing to move for work when the costs of moving home increase.

This could also ameliorate some of the concerns over tenant riskiness previously discussed.

If abolishing letting fees does increase rental sector liquidity, then kicking out an occupant is less likely to result in a property being left unoccupied - producing no rents - for a prolonged period. It is difficult to determine which effect - the lack of upfront revenues or an increase in tenant turnover - would be more significant.

However, reducing the transaction costs of moving could also play into the hands of landlords keen to evict tenants. As, again, the prospect of a property being left vacant becomes less of a concern.

US evidence suggests that such evictions tend to fall disproportionately on women and non-whites. Abandoning the letting fee model could make the position of these vulnerable tenants yet more precarious.

Liberalism must not surrender to the populist tide

It is now something of cliché, and not exactly wrong, to say liberalism and globalism are in retreat as populist nationalism is in the ascendancy. Fortunately, it is probably hyperbolic to think we’re seeing the end of liberalism or the death of Western civilisation. Still, protectionism, industrial strategy, and nativism have tragically blundered back into respectable discourse and seem set to shape policy and political culture in the immediate future.

This raises the question of how liberals should respond. Simply defending the status quo is unsatisfactory for a few reasons. Although globalisation, open markets, trade, and migration have made the world an infinitely better place over the last thirty years (and, indeed, the last three centuries), widespread dissatisfaction cannot be ignored. That is, unless you take Hillary Clinton’s Presidential campaign or the end of David Cameron’s career as models of success.

Secondly, liberals should not view the status quo as wholly acceptable on our own terms either. The idea of ‘neoliberal hegemony’ has always been something of a myth (or an outright lie). Regional trade agreements are, at best, a poor substitute for non-preferential multi-lateral free trade. Pernicious and nonsensical regulations have continued to restrict and distort markets, with occupational licensure and planning restrictions being obvious examples. And almost all developed countries continue to have convoluted, inefficient, arbitrary, and perverse tax regimes.

Equally liberals should not simply compromise with and capitulate to populism. If ‘protecting liberalism from itself’ means closed borders, ‘strategic’ protectionism and interventionism, disdain for the judiciary and the rule of law, the annihilation of privacy, and normalising ethno-nationalism, it’s not clear that there’s anything left that’s worth protecting.

Nevertheless, if only for pragmatic reasons, neoliberalism cannot be, and more importantly cannot be seen to be, inflexible market fundamentalism. It is arguable (though far from clear, let alone certain) that free trade does not benefit everyone, even if it clearly provides net benefits for each economy as a whole. But, rather than meekly accepting that this means that ‘reasonable’ protectionism can be acceptable, we must argue for distinctly liberal responses. For instance, providing a basic income could ease any transitional periods of structural unemployment for workers formerly employed in uncompetitive industries.

Similarly, we can recognise issues like in-work poverty without capitulating to socialist illiteracy or nationalist xenophobia. There are reasonable neoliberal responses, such as introducing a Negative Income Tax and abolishing, cutting or raising the threshold of National Insurance. Populist concerns can be recognised, without populist values or solutions being validated or respected.

At the same time, a radical and unapologetic defence of globalism, free markets, consumerism, and liberty is needed now more than ever. Just because alternatives are being advanced, it does not mean they have even a sliver of merit. And just because economic self-harm and cultural degeneration are fashionable it does not mean it is wise to accept this and follow suit. 

Social housing hurts the badly off

Imagine we paid benefits entirely in food stamps. If we gave recipients cash—we worry—they'd spend it on stuff we don't like, such as booze and fags. To head this off, we give them £15,000 a year each in non-transferable food vouchers. Really, they only need about £5,000 in supermarket shops a year, but since they can't do anything else with them, they eat excellent food and shop only in Waitrose, while they scrimp and save when it comes to clothes, heating, transport, and housing. You'd much rather they gave you less, but they allowed you to spend it yourself.

This is crazy policy, right? But this is exactly what we do with social housing (and, indeed, housing benefit). When you secure a council flat, you are effectively being given the difference between its market rent and what you pay as an in-kind handout. Apart from the poorer council architecture, upkeep, and administration, it's almost identical to if they were paying your rent for you. The "economic cost" of the activity includes the difference between its most valuable use and its current use. If a tenant has an income of £10,000 but gets an additional £10,000 worth of housing each year from the council, it is a bit like forcing them to spend half of their total income on housing.*

Imagine council tenants were given the money in cash, instead of this implicit in-kind benefit, and councils sold their properties off to fund the payment, to be rented at market rates. One possible outcome is that they would re-rent the properties they are currently in, at the market rate. Indeed, I suspect that if this policy were really implemented, many would do just this to begin with. But over time, it's extremely unlikely that tenants would want to spend so much of their money on renting premium land in the centre of town—they would decide to move.

It might be countered: these people probably have jobs, families, friends or other connections in the area. This is true, and the appropriate way to weigh up these claims is letting them decide for themselves. 99.9% of Londoners make the same decision themselves, with cash instead of vouchers, if you include the benefit: we trade off cost of commute, range of amenities, and distance from friends. If we were forced to spend more, in order to live in a more desirable area than we'd pick on our own, we'd be worse off than if we could just choose how to spend that money ourselves. Council tenants are no different.

In fact, my initial analogy was far from the most general I could have made. The situation is much simpler: it's the basic parable of exchange under restrictions. The council tenant has something others want—a right to live somewhere—and that others would be willing to pay the tenant for. Indeed, most tenants would almost certainly accept this payment in exchange for moving out; they'd prefer the money. Both the prospective buyer and the prospective seller could be made better off if this capitalist act between consenting adults weren't banned. But it is.

*Actually, it may be interpreted a lower fraction: applying this method to housing implies we should apply it to healthcare, education, and pretty much everything else the state pays in kind. Housing is somewhat different because it's mostly a market, with few getting most of their housing from state bodies—replacing healthcare with a cash payment would require massive change in the market, replacing council housing would not.