But Vandana Shiva's ideas don't work

One of the advantages of the market based economic system is that people try out all sorts of things. We can then look at the results of what they’ve done, copy those that work well and abandon those that don’t. Persisting in advocating those that don’t work is often referred to as religion - or perhaps Einstein’s definition of insanity, repeating the same mistakes and expecting a different result.

All of which is something to keep in mind when considering Vandana Shiva’s approach to farming. The Guardian provides something of a hagiography - to repeat the allusion to religion - in this interview.

The formidable Indian environmentalist discusses her 50-year struggle to protect seeds and farmers from the ‘poison cartel’ of corporate agriculture

Well, yes, we can see why fight The Man would appeal to those with comfy office jobs and who have never had to struggle with the soil for their daily bread.

For Shiva, the global crisis facing agriculture will not be solved by the “poison cartel” nor a continuation of fossil fuel-guzzling, industrialised farming, but instead a return to local, small-scale farming no longer reliant on agrochemicals.

Local, small-scale farming has another name - peasantry. To remove technology - and capitalism, globalisation and markets - from farming would be to condemn all of humanity to permanent peasantry. We think that’s a bad idea.

But more than that, the thing The Guardian doesn’t mention. Shiva’s ideas have been tried. Just recently, in Sri Lanka. She herself has said so. As many have noted the results were, umm, not good. Like the collapse of yields, imminent starvation and the ruination of the entire economy, the bankruptcy of the State.

We do think it would have been useful for The Guardian to point this out. The ideas have been tried and they don’t work. But then those with the comfy office jobs always do think that they’ll retain those in that New World Order, that it’ll not be them sent out to be that new peasantry. Kip Esquire’s Law is one of those ideas that has been tested and found to be true.

We're fine with this Greedflation idea, no, really

It’s all the capitalists trying to rip us off:

And there is more and more evidence that aggressive profit-seeking has contributed significantly to the inflation surge. Research released in March by the trade union Unite showed that for the 350 largest companies listed on the London Stock Exchange, “Profit margins for the first half of 2022 were 89% higher than in the same period in 2019.”

We would note more recent evidence too:

Britain’s second largest supermarket has reported a fall in annual pre-tax profits as it revealed that it had spent more than £560 million on keeping its prices low over the past two years.

To explain all of this we can - even should - look at the original report from Unite which makes that allegation of greedflation.

Economic analysis: Five channels of profiteering

“Free market” economic theory says that prices and profits should come down as firms compete and undercut each other. But across a whole range of markets, this has been failing to happen. The broken economy provides plenty of opportunities for firms to profiteer – that is, take advantage of a crisis.

Specifically, we identify five main economic channels of profiteering:

1. Supply crunch. After a supply chain shock, demand chases reduced supply – this allows companies to push up prices and profits. (Examples: food crops hit

by widespread droughts; semiconductors hit by pandemic production halt, raw material shortages and trade wars.)

2. Demand jump. An increase in demand for a good, while supply remains

constrained, allows companies to lift prices. (Examples: many consumer

products at the end of the pandemic.)

3. Market windfall. Centralised market pricing structures help companies score “windfall” profits – where a market-wide price jumps due to factors unrelated to many companies’ costs. (Examples: oil and gas, wholesale electricity

market.)

4. Market concentration (oligopoly). Where a few large companies dominate

an industry, they can have greater power to increase mark-ups. (E.g., oil and

gas, shipping, ports, supermarkets.)

5. State-licensed monopolies. In some key industries, companies are granted government concessions which give them major power to set prices, encouraged by failing regulation. (E.g., North Sea oil fields, electricity and gas distribution networks, other privatised utilities.)

We’d argue with 4) especially as it applies to supermarkets. Not just that fall in Sainsbury’s latest profits. But the simple fact that margins have collapsed over the past 25 years. Around the turn of the century British supermarkets made perhaps 6% of sales. Now it’s about 2 to 2.5%. What changed was the irruption of Aldi and Lidl - yes, it is that recent at scale. And yes this does prove that markets and competition work to restrict profit making. It might take time, but it works.

Actual oligopolies, with market power, or those state backed monopolies, of course we should kill them off. We’re not going to say different about that. Monopolies are Bad, M’Kay? What they’re calling “market windfall” is just marginal pricing. Of course the price across the market reflects the production price of the last unit to be produced. How does anyone think supply and demand works if not in that manner?

But it’s the 1) and 2) there which needs to be emphasised. Sure, supply and or demand change, prices and profits do. Sure. It’s what happens next that matters. The greedy capitalists see those luvverly profits being made and change their own production patterns. To go steal some of those luvverly profits off the other capitalists. This is how supply increases - or shrinks of course - in order to meet that change in demand. Which is what brings prices back down again as supply and demand move to meet each other.

This is how we gain the resource reallocation to meet those changes in supply and or demand. This is actually the point of the price system itself plus a market with free entry and exit. This is what it’s all about.

It doesn’t work overnight, to be sure, but it does so faster than any other method anyone’s ever discovered let alone tried.

Unite are actually complaining that prices - therefore profits - change when supply and or demand do. When changes in the profits from changing prices as a result of supply and demand changes are the very point of the system in the first place. For they’re the incentives to go change supply and or demand in order to moderate price changes.

That is, they’ve either entirely misunderstood the world they inhabit or are just looking for something to whine about. With Unite we’re not sure but of course that first quote comes from The Guardian - that’s definitely the second reason there. What is a comment page without a whine on it?

The problem is government just never does stop spending, does it?

If there are fewer children then we require fewer schools, right?

Failing schools with tumbling pupil numbers will be “propped up” by the taxpayer under plans to hand them extra cash to stay open.

Har, har har, no, don’t be silly. That’s not the way it works in the slightest. If we require less schooling to take place then what government is going to do is subsidise schooling more. This would of course be one of the advantages of moving to a pure voucher system, as in Sweden. Government expenditure upon schools will be defined and limited by the number of children who need schooling.

But there’s also that larger issue to consider. Which is that the really grand difference between capitalism ‘n’ markets and government is that the capitalism ‘n’ markets system has within it its own culling system. It operates naturally, without requiring any positive action. If something is no longer worth doing - that is, the resources to do it cost more than the benefit that can be captured from doing it - then the people doing that thing go bust and are removed from the system. They also stop wasting resources on those things no longer worth doing.

This is not true of railway systems when run by government - vide HS2. It’s not true of blast furnaces when there’s even a sniff of subsidy available. Simply because we do recycle much more steel these days we require fewer blast furnaces. Is that actually happening? Nope, not here it isn’t, everyone’s standing around with their hands out instead.

If we require fewer schools because there are fewer children who need educating then we should close schools. Is that what government’s doing? No - which is the argument against government running schools, isn’t it.

This all sounds a bit colonialist to us - thought we'd stopped doing that?

There was indeed a considerable period of history in which we pinkish European types told most of the rest of the world - poorer and possibly slightly differently tinted - what to do. We then started calling that colonialism a bad idea and so stopped doing it. Or, at least, we thought we’d all stopped doing that:

Pesticides banned in the EU because of their links to human health risks are being exported and used on farms in Brazil supplying Nestlé, an investigation has revealed.

Europe is home to some of the world’s biggest and most profitable chemical companies, including the Swiss-based Syngenta and the German multinationals BASF and Bayer.

But a number of the pesticides and fungicides they produce have been banned by European health officials after they were linked to cancer, reproductive problems and neurodegenerative diseases.

Despite the ban, millions of pounds worth of the products are still being exported to Brazil, where they are used on farms that supply the international sugar market, according to a new investigation by Lighthouse Reports and Repórter Brasil.

Brazil has been independent for over two centuries now. Brazil gets to make up its own mind as to how it wishes to regulate pesticides - and herbicides, fungicides and the rest.

It’s certainly possible to imagine seasons why different decisions might be reached. As a poorer country perhaps the risk/reward trade off is different? Possibly the climate leads to greater problems that must be solved? Or maybe, and we know this might come as a shock, Brazilians have a different view of the good life from the more puritanical Europeans?

About the only thing that doesn’t seem to have changed here is that pinkish Europeans are telling Johnny Foreigner what must be done. Even using the same justification - it’s for your own good you know.

We really did think we’d all agreed to stop doing that. So, why haven’t we?

Adam Smith wrote another book?

Adam Smith (1723-1790) is best known today for his pioneering work of economics, The Wealth of Nations (1776). But in fact, he soared to international fame earlier, with The Theory of Moral Sentiments, published on this day in 1759.

It was a sensation. Moralists had struggled for centuries to work out what it was that made some actions morally good and others morally bad. To Clerics, the answer was obvious: The Word of God. And believers relied on the Clerics’ moral authority to explain exactly what that meant.

Sceptics, on the other hand, speculated about whether we had a sixth sense, a ‘moral sense’ like sight or smell, that would guide us towards the good. And there were many other unsatisfactory ideas.

Smith’s breakthrough was to see our moral judgements as part of our social psychology. As social beings, he argued, we have a natural ‘sympathy’ (today we would say ‘empathy’) for others. That empathy prompts us to adjust and moderate our behaviour in ways that please others. That is the basis of our moral judgements and what we understand by virtue.

It also promotes social harmony. Smith was not sure why such socially beneficial behaviour should prevail over any other. He put it down to providence. Today — thanks to Charles Darwin’s The Origin Of Species, published a century after Smith’s book, we would attribute it to evolution.

The Theory of Moral Sentiments became a best seller and it so impressed Charles Townsend, a leading intellectual and government minister, that he promptly hired Smith, on a salary of £300 a year for life, to be tutor to his stepson, the teenage Duke of Buccleuch.

To a Glasgow academic, it was a fortune—and it gave Smith the independence and experience to start writing the work for which he is best remembered today: The Wealth of Nations.

Are EU imposed reporting requirements actually worth it?

A report from the Warsaw Enterprise Institute. With some numbers and an interesting question:

New standards under the Corporate Sustainability Reporting Directive (CSRD) make it mandatory to report non-financial indicators to assess a company's impact on the world around it, including the climate and the environment.

As we all know, this is quite the modern insistence. At a superficial level, well, why not? More information is usually thought of as a good thing. And yet:

WEI warns in the report against extending, as some Eurocrats are proposing, ESG reporting to the entire economy. If CSRD were extended to all SMEs excluding sole proprietors with up to 9 employees, the annual direct burden would be between PLN 9.8 and 23.6 billion,

Well, not that many of us will have the zloty FX rate directly to hand but that last, and highest, number is some 5 billion euros. Around and about, good enough for us here. Polish GDP is, just to give an inaccurate sense of scale, around 500 billion euros, perhaps a little more. So, the costs here - at the extreme - are being noted at perhaps 1% of GDP.

This is to do nothing, nothing at all, except the paperwork. Nothing at all is produced other than a report. Nothing is done other than people shuffle paper.

We’re reminded of the solution to Blood Minerals that was instituted under Dodd Frank. Solving the problem of warlords enforcing slavery to mine coltan a system was instituted. In which every US listed company wrote to every supplier at a cost of $4 billion by the SEC’s own estimation. Nothing was achieved by the paperwork - the sales of the minerals simply go to Chinese companies who are not quoted in New York.

Of course, it is possible to argue that in a market economy more information is better. But we’ve also a method of working out how much more information is better - a market economy. If investors and consumers desire this information then those companies that provide it will gain more sales, those revenues will attract a higher multiple, the companies will be worth more. So, the market economy already contains the pressure to produce these figures if - and only if - consumers and investors desire it. If everyone’s Rhett Butler about it - no one gives a damn - then a market economy won’t produce such numbers and won’t carry such costs. After all, 1% of everything is rather a lot. Especially if no one other than the clipboard wielders gives that Rhett about it.

The voluntary revelation of such effects? Sure, go for it. The imposition of them - but the imposition is the proof that, in a market economy, no one is really interested. Because a market economy will already produce them if people are interested in having those numbers. QED.

To repeat Mr. Sowell's question - compared to what?

Europe is failing its children when it comes to air pollution, exposing nearly all children across the continent to air that falls below healthy standards and delaying the clean-up of the sources of pollution, research has found.

Breathing dirty air causes the premature death of at least 1,200 children across Europe each year, and many thousands more are afflicted with physical and mental health problems that could have lifelong impacts, according to the latest assessment of air pollution by the European Environment Agency.

Sure, that’s not good. We’ve managed to get over our feeling that the problem with modern capitalism is the absence of chimneys up to stuff waifs. We’re with the idea that less pollution is - on its own as an idea - a good thing.

But we do still insist on asking that question from Thomas Sowell - compared to what?

Fortunately we’re given a number here. 1,200 children a year. Deaths. No, we do not think that child deaths are a good idea. We do think we should be working to minimise them.

But now think about what would happen in the absence of a modern civilisation. In fact, just think back a couple of hundred years before a modern civilisation. The usual rubric is that 50% of children died before completing puberty - say, age 15. We’ll use that age simply because that is one of the cut off points that the usual population demographics does use.

The 0-15 age group is about 15% of the EU’s 450 million people. Translating that to the 750 million of Europe will be wrong but still instructive. 110 million children, of whom we would expect 50% to die before they are 15. Divide that by 15 to gain an annual toll from the absence of civilisation.

7.3 million children a year dead from not having modernity. 1,200 a year dead from the pollution - just the air pollution - effects of having modernity. We’re probably onto something of a winner here. Not that a civilisation or socioeconomic system should be judged solely by the child death numbers but we think that would be something usefully very high up indeed any shortlist if we’ve got to pick the one and only measure.

No, this is not to say that we shrug and accept those 1,200 choking their way into an early - possibly white coffin - grave. Rather, we concentrate on the idea that everything, but everything, has costs and benefits. So, we must be aware that yes, reducing air pollution might well reduce the number of grieving parents. But rolling back modernity will increase those funereal processions. We should only be doing the things - if we are to use this sole measure of child deaths - which reduce the net number of them. Or, as we so often say, where the benefits outweigh the costs.

Having fewer coal powered electricity stations might well be a good idea concerning air pollution. Not having dispatchable power 24/7/365 might well kill more. We do not say it will, we suggest it might and that that’s the sort of decision making that has to be done.

Or, as we insist at a higher level of abstraction. Anyone at all who insists that we must solve this particular and specific problem regardless of the cost is wrong. For the cost might well be greater than the problem being complained about - compared to what is the grand question to be asked of everything.

Never buy today what will cost the taxpayer more tomorrow

HM Treasury has this motto above the entry door. It should be re-named the Ministry of Prevarication. 

Examples such as HS2 are many, but nuclear reactors currently lead the way. Hinkley Point C apart, the last reactor to be built was Sizewell B, announced in 1969 but not approved until 1980. After three years of wholly unnecessary wrangling, building commenced in 1988 costing just £2bn at 1987 prices.

25 years later, the Treasury got around to approving another of similar size at an estimated cost of £12bn. It was, according to Dame Sue Ion at her Gresham’s lecture in April, the most complex ever and, we can infer, doomed to be late and hugely over budget.  

After several postponements, opening is now expected in September 2028 (but don’t hold your breath) with spending also up to £32.7bn and counting. Insanely, the government has announced a duplicate at Sizewell C with an actual decision sometime in the next Parliament.

“The Department for Business, Energy and Industrial Strategy said today [29 November 2022] that the lower cost of financing a large-scale nuclear project through this scheme was ‘expected to lead to savings for consumers of at least £30 bn on each project throughout its lifetime’ compared with the existing arrangements governing the financing of Hinkley Point C.”

That is clearly fantasy, not least because it is based on the discredited Resource Asset-Based (RAB) financial model - which HM Treasury likes. At £33bn for 3.2 GW, the cost per GWh would be more than £10 billion compared with £50,000 for small modular reactors (SMRs).

Under the RAB model, users have to start paying for the electricity years before they actually get it and then will have to pay “whatever level is necessary, however high, to generate enough income to provide the plant owners with their guaranteed income,” defined as return on investment. 

This is another version of the cost-plus model which, in defence procurement, has cost the taxpayer billions. So no wonder EDF are happy to see building costs sky-rocket. The point here though is that if HM Treasury had approved another 3 GW reactor when they should have done, 20 years earlier, it would have been built at 90% less cost and we would not now be panicking about the lights going out.

More recently, the Prime Minister announced Great British Nuclear (GBN), but it took a full year for the Chancellor to approve it. The good news is that after years of refusal to even consider SMRs, they are suddenly top of the agenda. Pig-headedly, Ministers still want more Hinkley Point Cs, but the new flavour is SMRs. The interim chairman of Great British Nuclear hosted the first meeting of potential SMR suppliers on 19 April. But there is more dithering in the pipeline. 

The following examples of prevarication are all taken from the slides used on that occasion.

First, there are less than a dozen potential suppliers, but it is going to take six months to issue and receive tenders. It will then take up to six years, until the end of the next Parliament, to reach a “Final Investment Decision” (slide 19). HM Treasury will help with (unspecified) development costs but to save money, only wants one SMR supplier, but also a competitive market. To his credit the Interim Chairman has pointed out that just one supplier does not make a competitive market.

When Boris Johnson announced GBN, he said: “Our aim is to lead the world once again in [nuclear] technology”. But on this timetable, we will not be world-leading but world-following.  Most other top nations are either installing, or planning to install, SMRs right now.

Mr Johnson said nuclear power would supply 24GW, or 25% of Britain’s electricity needs in 2050. Someone present said he had just snatched those figures out of the air, and they may have been right.  Those figures have been used ever since despite no clear justification. The 25% may be about right, but the electricity market in 2050 will need to be about six times larger than it is now, as other forms of energy convert to electricity. Arithmetic is, strangely, not one of the Treasury’s skills. We shall need closer to 60GW than 24GW.

According to slide 10, due to the closures of existing plants, nuclear will provide just 7.8% of our electricity needs in 2035. Yet somehow it will provide 25% (using the 24GW figure, never mind 60GW) by 2050.  That is about as likely as my becoming a prima ballerina. An additional 52GW is about 230 SMRs (assuming 400 KW each), not just a small fleet from one supplier, starting at the back of the queue.  

HM Treasury needs to do a bit of re-thinking – and do it fast.

But why would poor people buy the average item?

There’s a certain obviousness to this:

Suncream prices a third higher in April before families jet off on summer holidays

Well, yes. The reason producers charge more at different times of the year is because they can. So that’s solved then.

This though is a very common mistake:

Skin cancer charities have expressed concern that, with the average cost of a bottle of sun cream now at £19.95, poorer families are being priced out of sun protection.

We see this about all sorts of things. The average cost of housing, or average household groceries bill and so on. It doesn’t greatly matter which average is being talked of either, mode, mean or median.

Why would - or even should - the poor even be attempting to buy the average product? We did check this, Lidl offers perfectly acceptable suncream at €3.99 in its Irish stores. At least one of us has stuck the same stuff on grandchildren in other countries.

That is, the affordability of something to the poor isn’t, in the slightest, determined by the average price across the economy. For there are brands designed to extract the maximum from the richer, just as there are those designed to extract a few pennies from those poorer. What matters for availability to the poor is not the average price in the least, it’s the lowest price.

Poor folk cannot, for example, afford the average house. So what? What matters is whether the poor can afford housing, some of which will be smaller, cheaper, in less appealing places - you know, for the poor. The poor can’t afford the average grocery basket - so what? Is the diet affordable by the poor still sufficient?

All of this before we even examine the numbers themselves - someone really thinks the average bottle of suncream costs £19.95 do they?

This strikes us as being grossly silly

Britain's biggest banks have failed to pass on higher savings rates to customers, despite repeatedly increasing costs for mortgage customers.

That strikes us as blindingly obvious. Perhaps that’s just because we actually understand such things.

Banks live off the interest rate margin. The gap between what they charge to those who borrow from them and the amount they pay out to those who lend to them - or deposit with them. It’s entirely a commonplace that as interest rates in general have been rising recently then that rate margin has been expanding. It’s in literally every single one of bank financial reports and all commentary upon them.

The reason why is that the artificially low rates of the past decade and a half compressed those margins. On the very simple grounds that few are willing to deposit at a negative interest rate. Yes, such did exist in some places these past few years but here in the UK deposit rates tended not to actually go negative - they stuck at 0%. But of course lending rates dropped like a stone, those margins were compressed.

This is all a result of QE and as QE is unwound therefore those margins are increasing again. Back to what they were in fact. Shrug, seems simple enough to us. This is all a part of a return to normality. So, quite why the complaints about it we’re not sure.

But then we get this:

In its letter to MPs, the FCA said that its new Consumer Duty rules will “require firms to be able to justify and explain the rationale for the speed with, and degree to which, they make changes to their various savings rates”. The new rules take effect on July 31.

Firms operating in an open - yes there are new banks, there are new places to make deposits - competitive and free market now have to justify their pricing decisions to the bureaucracy? No, that strikes us as being very silly indeed.

If there are concerns about the possession of market power allowing non-market prices to be set then change the amount of competition so that the market power doesn’t exist. If that problem does exist then that should be done anyway. But having to explain prices to the clipboard wielders is to give those bureaucrats the pricing power themselves. That’s what’s really meant by “justify” here, that banks will have to change their prices at the whim of the civil service.

No, that didn’t work in the Soviet Union nor has such price setting ever worked anywhere.

If the analysis is that market power exists allowing non-competitive pricing then change the market structure so there is no market power. Anything else is very, grossly even, silly indeed.