A possible Labour future

Many left-wingers despair of ever being able to influence events.  With an unelectable leader, a divided party, and the Parliamentary Party in conflict with the constituency members, they fear annihilation at the next election.

I am happy to provide them with a scenario that offers hope.  A Labour MP resigns his safe seat, possibly with the covert promise of a future peerage.  Ed Balls stands as candidate and is chosen, riding the wave of his popularity gained on Strictly Come Dancing.  He is returned with a massive majority in the by-election and promptly challenges for the leadership.  He runs on a left-wing, but electable platform.

He wins the votes of ordinary Labour supporters, and some on the left who want a leader who can lead and can win.  He wins, and as leader he unites the party and runs an effective opposition against the Tories.  Come the next election the choice is between an electable Labour Party with a coherent programme and a charismatic leader and a Tory Party seen as competent and a safe pair of hands, with the kudos of a successful withdrawal from the EU.

It could be a close-run thing.

Because it's our money to spend as we wish

There's a simple answer to this latest little campaign about executive pay:

The government is to outline moves later to make companies justify high levels of executive pay.

Among the measures under consideration are pay ratios, which would show the gap in earnings between the chief executive and an average employee.

Shareholders would also be handed more powers to vote against bosses' pay, while workers would have a "voice" on boards, under the consultation plans.

Theresa May has made tackling corporate excess one of her priorities in office.

There's a complicated answer as well of course:

Though Japanese firms benefit from a high-quality workforce and invest in R&D as much as their US counterparts, they fall behind US firms in terms of their earning power. This column suggests that corporate structures in the two countries could be an explanation for this phenomenon. The findings indicate that CEOs of US firms aim to maximise profits, whereas CEOs of Japanese firms prioritise long-term corporate survival.

American CEOs get paid very much more than Japanese. American CEOs also appear to do a very much better job than Japanese. Our complicated answer would therefore be that higly paid CEOs are worth being highly paid.

However, our simple answer is that up there in the headline. It is not up to the government to tell us what we may do with the money in our pockets. Whether my £5 is to be transferred into a pint, a bumper car ride, a pork pie or a nice healthy salad is up to me. For it is my money.

The money inside a company belongs, after the payments to those with other legal rights to it, to the shareholders. How they wish to deploy that residual, that profit, is up to them because it is their money. If they wish to send it to starving babies in Africa, so be it. Or pay it out as dividends, or build a yogurt knitting factory, or offer it as however much pay they desire to offer to the person running their company for them.

The only justification a company needs to offer to the government or anyone else is: It's our money to spend as we wish.

Why the Danes are the happiest

Over the past few years, Denmark has done incredibly well in The World Happiness Report, ranking number one in 2016, 2014 and 2013 and only missing out on the top spot by two places in 2015. Recently we’ve become more aware of Danish culture and values, as television shows like “The Killing”, “Borgen” and “The Bridge” have flooded our screens, and the craze for self-help books based on “hygge” (which roughly translates as wellbeing but also implies cosiness and homeliness) are set to be the big sellers this Christmas. But before upping sticks and moving to Copenhagen straight away, we should first work out what it exactly is that makes Danes so happy to see if we can recreate it at home.

The most obvious reason for the Danes’ strong sense of life satisfaction and general positive mood is their work-life balance, which is heavily weighted towards the ‘life’ part. The average full-time working week is the lowest of any OECD country at 37.3 hours, equating to less than 8 hours a day, five days a week. Compare this with the US’s average full-time working week (41.6 hours) or the UK’s (42.2) or even Turkey’s (50.5), and it becomes apparent that Danes spend significantly fewer hours at work than most people do.

Over the course of a year and a lifetime, the gap between hours worked in Denmark and hours worked elsewhere widens when holiday is taken into account. Over the course of a year, Danes work 61% of the hours that Indians do and 80% of the hours Americans do, with only Norwegians, the Dutch and the Germans spending less time at work. This is perhaps because Danes have a legal right to five weeks of paid holiday a year so they are encouraged to take time off, whereas in the US there is no legal requirement for employers to offer paid holiday. Furthermore, Denmark tops the list of time spent on leisure and personal care, with an average of 16.06 hours devoted per day to personal activities outside work such as walking, socialising and eating.

Working less does come at a cost though, as despite Denmark’s reputation as an incredibly rich country, the average household net-adjusted disposable income per capita is USD 26,945 a year - considerably less than the OECD average of 29,016. Their levels of higher education, education quality and life expectancy are only just above or in line with OECD averages, and Danes have to commit even more of their income to housing than most OECD citizens.

With Denmark performing essentially mediocrely in health, education and wealth out of the OECD countries, it seems surprising that they made it to the top of the happiness index. The reason why Danes rank as the happiest people lies in their perception and their attitudes. Their voter turnout is incredibly high across all incomes, 96% say they have people they can rely on, their water and air quality is high, and – most importantly – when asked to rate their life in general, their average (7.5/10) was a full point higher than the OECD’s. Perhaps this shows that the Danes’ value slightly different things: they would rather have more free time and less money.

There could be one final reason behind this Danish happiness phenomenon. Researchers at the University of Warwick found that “the greater a nation’s genetic distance from Denmark, the lower the reported wellbeing of that nation”, even adjusting from GDP, culture, religion, the welfare state and geography. In other words, the Danes are simply genetically programmed to be happier.

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.

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.