The difference between Mr. Chakrabortty and us on foreign aid

Aditya Chakrabortty tells us that it's very important indeed that the UK continue to shift 0.7% of GDP overseas as foreign aid:

No, if you want to see how far to the right our new prime minister will go, watch one area that most papers barely cover. Watch international development.

By development, I mean emergency relief for Syrians bombed out of their homes, healthcare for new mothers and their kids in Sierra Leone and school lessons for girls in Pakistan. Who could be against any of that? The answer is: no one in mainstream politics. It may have been Labour that pledged a target for government aid spending, but it was the Tory-led coalition that made that promise reality so that, of every £100 Britain earns, 70 pence goes to poor countries. That, David Cameron claimed on his last day at No 10, was one of his proudest achievements.

We agree entirely that aiding the poor in becoming rich is a moral imperative. We also agree that there's much that we can do to aid in this process. However, we are with Peter Bauer here, in that foreign aid is all too often taking money from poor people in rich countries to give it to rich people in poor countries.

We exclude from this disaster aid - although even there we insist that sending food which arrives well after the next harvest is not the way to deal with famine. Instead, send money to give to people to buy food. As Amartya Sen has pointed out, modern famines are not about a dearth of food, they are about an absence of effective demand. Let us solve the actual problem in front of us.

But aid as development aid? Again, let us solve the actual problem in front of us. Which is that poor people are poor because they produce little of value. Not just little of value to us but little of value to themselves or anyone else. The solution to that is to aid them in producing things of value. Economic development that is - or, as Madsen of these parts puts it, buy things made by poor people in poor countries. 

With Brexit now to happen there is a golden opportunity for us to aid in this:

Take the example of coffee. In 2014 Africa —the home of coffee— earned nearly $2.4 billion from the crop. Germany, a leading processor, earned about $3.8 billion from coffee re-exports.

The concern is not that Germany benefits from processing coffee. It is that Africa is punished by EU tariff barriers for doing so. Non-decaffeinated green coffee is exempt from the charges. However, a 7.5 per cent charge is imposed on roasted coffee. As a result, the bulk of Africa’s export to the EU is unroasted green coffee.

The charge on cocoa is even more debilitating. It is reported that the “EU charges (a tariff) of 30 per cent for processed cocoa products like chocolate bars or cocoa powder, and 60 per cent for some other refined products containing cocoa.”

The impact of such charges goes well beyond lost export opportunities. They suppress technological innovation and industrial development among African countries. The practice denies the continent the ability to acquire, adopt and diffuse technologies used in food processing. It explains to some extent the low level of investment in Africa’s food processing enterprises.

If we wish to aid developing countries in developing we should buy more of what they produce. And enable them to add more value to it to boot. The best thing we British can do is simply throw open our borders, entirely tariff free, to anything and everything made by poor people in poor countries.

There are those who insist that unilateral free trade causes jobs losses at home. They are wrong of course, that is nonsense, cheaper imports make us richer. But imagine they are right - what better use of the aid budget than enabling development overseas and compensating those who lose from it? 

This free market globalisation thing has led, in recent decades - and as we have pointed out many a time - to the greatest reduction in absolute poverty in the history of our species. We should be, if we do want to aid development, reinforcing what works. Which means opening up, tariff free, to those products of the poor. Once and only if the aid wallahs agree to that will we even start to discuss that aid target as something that might remain. Because only if they agree to that will we know they are being serious about wishing to boost development.

There is absolutely nothing new in the IFS gender pay gap paper

We all know that, on average if you count all men and women, men take home more money in pay than women. We also know that, on average, people who work sixty hours a week take home more than those who work thirty hours a week. And those in banking and law take home more than those in psychology and education.

The Institute for Fiscal Studies has a paper out today (pdf), which has been widely feted across the press, despite the fact that it simply repackages these facts with barely any extra analysis or information, though they do have some cool charts and graphs. I suspect they didn't tell the media that their data is no better than—and in my view a good deal inferior to the official Office for National Statistics numbers.

In their paper they show that there is indeed a raw gender pay gap, which is reduced substantially by various controls (like hours and having kids). They cut this up and display the data in some pretty cool ways below. But they don't mention that some pretty important facts have been left out of their narrative.

For example: do we think that all young men and women without children choose, on average, the same A-levels choices, degrees, and career paths? I'll answer the question: they don't. In the USA, 95% of the gender pay gap among new graduates is down to subject major choice—some degrees are more lucrative than others.

This, in turn, seems to be because men are more ruthlessly materialistic in major and career choice. And it reflects values men and women express in long, careful studies. Gender difference (whether socially constructed or genetically inborn, or most likely, a bit of both) predicts the world we see much better than discrimination.

When women do go into high earning, competitive fields, they do very well. In fact, one study found that women were more aggressively promoted, and earned more than men, so long as they didn't exit the workforce.

In fact, Harvard economist Claudia Goldin found (pdf) that the gender pay gap only existed in industries where there are increasing returns to hours: where 80 hours a week is worth more than double 40 hours a week, and where flexible hours are impossible for technical reasons. In these fields women were less productive because they chose to have a work-life balance that men avoided (and not just because of kids). Since they were less productive, firms paid them less.

Is this a bad thing. Well, it depends whether you think money and career success are the only important ends in life, and it depends whether you think that men and women have to have (on average) the same paths in life to have equally good paths in life. I don't think it's worse to work thirty flexible hours a week than it is to work six ten-hour days, and I think it would be dystopian to try and make everyone's careers similar.

What we want is equal work for equal pay, and according to our best analyses of the gender pay gap data, that's what we have. Today's IFS paper adds nothing to our understanding.

Children are the cause of the gender pay gap

Yet another piece of research telling us what we've been telling us all for some time now. There is, in reality, no such thing as the gender pay gap. There's a motherhood pay gap and, obviously, children are the cause of it:

Mothers who return to work end up earning a third less than men as the birth of a child cuts their chances of getting promotions and pay rises, a study has found.

This is mainly as a result of mothers tending to work fewer hours than colleagues who are not parents, according to the Institute for Fiscal Studies (IFS).

“Men’s wages tend to continue growing rapidly at this point in the life cycle (particularly for the highly-educated), while women’s wages plateau,” said the IFS.

From other research we find that each child reduces a mother's earnings, on average of course, by 9%. At the same time fathers earn around (but not dependent upon the number of children), some 8% more than non-fathers. That's all we need to explain the pay gap.

Another way to put this is that there is discrimination going on, indeed there is, but it's by parents themselves over how they wish to live their lives. And being the good little liberals we are we think that's just fine - the point and purpose of the whole system is that people get to, as much as is actually possible, live their lives as they wish to.

It may well be that you think matters should not be this way. We don't think it surprising, in a mammalian and thus viviparous species, that it is. But if you wish to change it from the way it is then you're going to have to change human behaviour. Given that the gap is produced by mothers, on average of course, desiring to be primary care givers to their brood, fathers to be primary providers, that's the behaviour which will have to be changed. Good luck with that.

Finally, we would note that the sort of thing that would need to change would be time off at the time of birth, insistence of flexible hours by fathers and so on. A different self-sorting that is of new and established parents. We made this point here, right here, over a decade ago and shared parental leave was the legislative result. Yes, that was us, in fact it was this writer.

Pay audits, equal pay for equal work, the usual shouts, just won't cut it. As long as there's a gender imbalance in primary carers, and such primary carers value that role more than climbing the greasy pole, then the gap will persist. At which point, well, whattchagonnadoaboutit?


Will Boondoggling Help UK Exports?

Theresa May, like George Osborne, recognised the importance of exports for Britain but her solution is similarly simplistic. George Osborne doubled the UK Trade and Investment budget and Theresa May has grossed the quango up to become a Department of State under Dr Liam Fox with three ministers and the usual baggage train of advisers.

UKTI has been a muddle since it was created twenty years ago as an unholy marriage of FCO trade, and the Business Department’s overseas, interests. The worst of both resulted in a non-stop rotation of management with each giving only the illusion of progress.

The last daft idea was to disperse the central UKTI staff across Whitehall. According to Francis Maude, the then Chairman, this would infuse the spirit of exporting across all government and thence throughout the country.

The new department’s boondoggle at the Rio Olympic Games, “The British House”, provided typically mis-targeted promotion: “guests to the House can expect to hear from high profile VIPs, Ministers, and inspiring industry-leaders from the UK.”

Meanwhile the House of Commons Business Select Committee set up an enquiry into UKTI in 2015. Evidence was taken and their report, due in May, has yet to appear and may never do so. On the one hand, Government considers exports of overwhelming importance and, on the other, Parliament is preoccupied by more newsworthy events such as Sir Philip Green and BHS.

The April-appointed Lord Price, previously MD of Waitrose, and Catherine Raines, are probably the best ever UKTI chairman and CEO. Now they are swamped with politicians who know nothing of exporting, one must fear the worst.

The Department for International Trade needs focus. One reason UKTI has always failed is its excessive number of initiatives: government should focus only on what the private sector cannot do for itself.

The British Chambers of Commerce are building international networks for small businesses; they should be left to get on with it with support from FCO overseas posts where required. Large companies have their own UK-based specialists. In other words, UK based UKTI staff, apart from the very few policy makers in Whitehall and those setting up major overseas missions, should be disbanded. The focus should be on networking through overseas posts.

Unfortunately, as the National Audit Office have routinely reported, the FCO is temperamentally unsuited to deal with anything as vulgar as trade. Leaving overseas posts with the FCO whilst taking international trade away (it had a half share in UKTI) will not help.

The only other area for government involvement is with the big banks who claim to support small exporters but, in practice, demand their umbrellas back whenever it rains. Transferring UK Export Finance from the Business, Innovation and Skills Department to the new Department for International Trade is a good idea but monitoring the big banks needs to go much further if the banks are to practice the support for exports that they preach.

In short, international trade should not be built up into yet another great Whitehall bureaucracy, with politicians scrabbling for power, but be shrunk to focus on what only government can do and be accountable for that.

The problem with technocracy

Once again we see the basic problem with technocracy:

Adults will be told it is fine to drink in moderation in new guidelines on alcohol intake unveiled by the govern­ment — in a slapdown of Britain’s top doctor.

The rules, to be announced soon, will set the recommended weekly limit for both men and women at 14 units, a reduction of seven for men, and explain that every drink comes with a small health risk.

The dangers of alcohol, like the dangers of rather a lot of things in this life, come on a curve. No booze at all leads to shorter lifespans than some, too much to shorter again. Where those curves are is of course an empirical matter but the too much, leading to the same dangers as none, is well out beyond 14 units a week for men. Up more at 30 to 40 units in fact.

That this is true of much of life is obvious - no food is not known to be good for us, 5,000 calories a day plus a sedentary lifestyle similarly not all that healthy. A diet of pure sugar won't keep you going all that long but an insistence on "no refined sugar" is to make the opposite mistake. And on the larger scale of course a tax rate of zero percent raises no money from that particular tax while there really is a rate which is "too high" in that raising it further will produce ever less revenue.

It's superficially attractive that we have experts who decide how these curves work and then tell the rest of us. Certainly we think that pointing out that the peak of the Laffer Curve for UK income tax is somewhere around 40% or so, less than 50% or so, is an empirical result which we think experts should mention.

And yet there's a problem with such technocracy. It's akin to the trade protection and tariffs problem. The people who will end up as the technocrats on any particular subject are going to be those with a whole hive of bees in their bonnet about that particular subject. We end up being ruled by the Single Issue Fanatics, as Bernard Levin used to put it. 

It's a standard analysis of the problem with trade tariffs. Those who gain from the protection they provide are a concentrated interest- those few who produce whatever the tariff is placed upon. Those losers are the dispersed interest of everyone else. We don't care very much, and therefore make very little noise about, tuppence on every toothbrush. Toothbrush manufacturers are very interested indeed, and will be most vocal, about 2 p on every brush they sell. And will thus be insistent about the vital interest of protecting British teeth from the horrors of Chinese competition.

So it is with our technocrats. Those who take a sufficient interest in how much other people drink are going to be those who are very interested in being able to control how much other people drink. The Temperance Lobby in short. Those who wish to control how much people smoke are going to be those against smoking itself. Those who work to regulate e-ciggies will be those who really don't think they should exist at all. "Proper" salt levels will be determined by those with a bugbear about salt for whatever reason.

It is that concentrated and dispersed interest again. As soon as there is some small part of government which determines such details that small part will be colonised by the fanatics.

Which is the basic problem with technocracy. It doesn't end up with those who know what they're doing running matters, it ends up with the fanatics as they're the only people who care enough to regulate the rest of us. And if we're honest about it rule by fanatics doesn't have quite the same ring to it as rule by experts.

All of which is rather why we are fanatics ourselves. Fanatics for there being fewer rules and rather more of that dispersed interest making itself known by what people get on and do themselves rather than the imposition of absurdities by those with the power to do so.

The failure of neoliberalism is being grossly overstated

Martin Jacques, modern Marxist par excellance, is simply screaming with joy at the idea that neoliberalism has failed. We fear that the catalogue of said failure is being really rather misunderstood. His contention is that poverty and inequality have increased as a result of all this global free marketry. We would insist that this is not quite so.

But how did neoliberalism manage to survive virtually unscathed for so long? Although it failed the test of the real world, bequeathing the worst economic disaster for seven decades, politically and intellectually it remained the only show in town.
They go to the heart of the neoliberal project that dates from the late 70s and the political rise of Reagan and Thatcher, and embraced at its core the idea of a global free market in goods, services and capital. 
It should be noted that, by historical standards, the neoliberal era has not had a particularly good track record.
But by far the most disastrous feature of the neoliberal period has been the huge growth in inequality. 
The reasons are not difficult to explain. The hyper-globalisation era has been systematically stacked in favour of capital against labour:

It's not really necessary to read the rest of it to find out how it goes on. Any competent programmer can turn out a script to produce this stuff to any length in an hour or two.

But we do really insist that it is necessary to fact check such claims against the universe we live in rather than that phantastical one which lives in the heads of ivory tower Marxists. And the most notable economic fact of all history was that Industrial Revolution. The one which heralded an economic system which, for the very first time, produced a sustained, significant, rise in the living standard of the average person. The most notable economic fact of the past few decades has been this

WASHINGTON, October 4, 2015 – The number of people living in extreme poverty around the world is likely to fall to under 10 percent of the global population in 2015, according to World Bank projections released today, giving fresh evidence that a quarter-century-long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030.

The Bank uses an updated international poverty line of US $1.90 a day, which incorporates new information on differences in the cost of living across countries (the PPP exchange rates). The new line preserves the real purchasing power of the previous line (of $1.25 a day in 2005 prices) in the world’s poorest countries. Using this new line (as well as new country-level data on living standards), the World Bank projects that global poverty will have fallen from 902 million people or 12.8 per cent of the global population in 2012 to 702 million people, or 9.6 per cent of the global population, this year.

That percentage was more like 95% of the global population in 1700, in 1960 still 50%, in 1990 35%. We have extended that roughly free market, roughly capitalist, economic method, the one that made us and our forbears rich, to rather more of the globe. That's what this free market globalisation actually is and was. And just as it made us rich it's making near everyone else rich too.

Neoliberal globalisation has led to a fall in global inequality, it's the most pro-poor economic policy ever adopted and it has led to the greatest fall in absolute poverty ever in the history of our species. We'll take that as a win for neoliberal globalisation ourselves.

A win that we really think we shouldn't abandon at the insistence of ivory tower Marxists nor anyone else. After all, what is the basic claim being made? That the poor should get rich? Isn't that exactly the result which is being delivered?

As naked a call for your and my money as you'll see

The National Housing Association tells us that the housing benefit bill is now double what it used to be:

Private landlords in the UK received twice as much in housing benefit last year - £9.3bn - as they did a decade ago, a report says.

The National Housing Federation (NHF) study said the increase was due to a big rise in the number of private tenants claiming housing benefit.

This is really a rather naked call for the members of the NHF to get that money instead:

"It's more expensive to house people in the private rental sector than the social rented sector, because social rented properties on the whole have been subsidised when they are built. Private rental properties are bought on the open market," said Richard Lambert from the National Landlord Association.

"Unlike housing associations private landlords have to charge the kind of price that covers their costs and that inevitably means that private renting is going to be more expensive than social renting."

You pays your money and you gets to choose which sort of subidy you're forking out.

It's worth noting that social housing landlords also collect housing benefit through the rents that they charge. So this really is a shout that "Oi! We want that money!" rather than someone telling us how the nation's housing bill might be reduced.

Oh, yes, we should mention who the NHF are:

That’s why we represent the work of housing associations and campaign for better housing.

Actual campaigning for better housing would be campaigning to reduce the cost of housing. Rather than, as here, entirely partial campaigning that one group of people should be receiving the subsidy rather than another.

All of which makes us the only people actually camapigning for better housing of course. For it is the cost of the permission to build upon a piece of land which drives UK housing costs up. The solution to this is simply to blow up the Town And Country Planning Act 1948 and successors. As we recommend and as just about no one else does.

We agree that we're rather out on a limb on this idea but then that's because we're the only people taking the problem seriously. Everyone else is, as above, merely squabbling over who gets the subsidies. Our suggestion gets to the root of the problem and would abolish the need for subsidy altogether. Which is rather why none of those fighting over the subsidies is willing to agree to the actual and effective solution.

Finally, some decent figures on wealth inequality

As we've noted around here before the usual figures on wealth inequlity that are bandied about are pants. Those who shriek about them never really do quite come clean and tell us that much of it all is to do with the life cycle, most of us starting adult life in debt and gaining assets along the way. There's also the studious refusal to consider the effects of the things we do to reduce wealth inequality. For example, private pensions are counted as wealth, the state pension not.

At which point we hugely welcome the new ONS report:

The Office for National Statistics (ONS) said the average household was worth £225,100 in 2012-14, when it carried out its latest survey of the country’s assets.

Since the previous survey two years earlier, the top tenth of households had seen a 21% increase in their wealth, including property and shares. That was three times as fast as the increase over the same period for the poorest half of households, who saw their wealth rise by 7%.

It left the top tenth of households owning 45% of total wealth, while the bottom half were left to share just 9%. The poorest 1%, meanwhile, owned just 0.05% of wealth.

No, not that bit, that's just the Guardian chuntering along and ignoring the good bit of this new report:

The Office for National Statistics has calculated “human capital”, which puts a monetary value on a person’s qualifications, age, health, personality and skills, measuring the total potential future earnings of everyone in the labour market.

The value of the UK’s human capital increased by £890 billion to £19.2 trillion last year.

The average employed person had a “human capital stock” of £471,000 at the end of last year, a rise of £18,000 compared with 2014. Those with a degree are worth £628,000 while those with no qualifications £274,000.

As we've pointed out before human capital entirely dwarfs any other kind in a modern economy.

Britons are also getting wealthier. The total value of the UK, its homes, streets, pension funds, even its social clubs, is now £8.8 trillion — equivalent to an average of £135,000 per person, or £327,000 per household.

Human capital is very much less unevenly distributed than financial capital. And when we add in, on top, the effects of the things we already do to reduce wealth inequality (which we could largely call "the welfare state") we would find that wealth inequality is both very different and very much lower than we've been told.

Greenpeace demands that companies profit by doing unprofitable things

There's ever such a slight problem with this insistence from Greenpeace:

“Recycling isn’t the solution to the problem, but it is an essential step. In the future, companies need to reshape their business model to move towards a circular economy. They should make profit from good recycling, recovering materials and producing long-lasting batteries. Consumers need to make their demands heard.”

That being that recycling mobile phones isn't a profitable activity meaning that it would be very difficult indeed to make a profit by recycling mobile phones.

As an example, we are told that:A 2015 report on recycling e-waste noted that people tend to maintain old phones in their desk drawers but recycling lithium ion batteries could be a lucrative revenue stream for phone companies. It estimated cell phones would be worth €25 (£21) per kilo if recycled, with smart phones not far behind at €19 (£16) per kilo.

That's this report. Their method of calculation is, well, once we have recycled phones back into their component parts then those component elements would be worth £16 per kg.

What they don't even begin to think about is, well, what's the cost of recycling phones back into their component elements? Quite, that's like looking at a mountain and stating that it's worth billions. Without including the idea that it will take tens of billions to mine it.

Further, what Greenpeace is resolutely not talking about is that it costs money to collect items into piles that you can then apply a recycling process to.

At which point we really do need to become rather economic fundamentalist on their backsides. We have a system for working out whether it is worth doing something, recycling something. It's called the price system. If something costs more to do than the value of the output then this is not saving resources, this is wasting them. And, yes, collecting then recycling phones costs more than the metals extracted are worth. Which is why no one does do it as a profitable activity.

There are people who will accept phones that other people have collected, yes. But that's not taking into account a rather large part of the costs, is it? 

Can Channel 4 News stomach the unpalatable truth about quinoa?

Back in 2013, we reached peak Comment is Free when Joanna Blythman wrote "Can vegans stomach the unpalatable truth about quinoa?" She blamed everyone from vegans to fat cat exporters for pricing the superfood out of the reach of Andean peasants. Blythman's piece while strong on virtue signalling, was light on peer-reviewed research. In fact, since writing that piece two interesting papers have come out of the ether to show that her fears were unfounded. I hoped that the media had moved on from the Quinoa Guilt-Trip. 

Not so, sadly. Channel 4 News put out a sensationalist report suggesting that Western demand for Quinoa was fuelling a malnutrition crisis in the Andes (despite the fact malnutrition rates have halved since 2007). In fact, it's got so bad that some Peruvians are eating greasy fish and chips (the horror!). Bizarrely, in a rush to guilt trip vegans and hipsters, they seemed to ignore the real story. That Peru is experiencing its coldest winter in over 100 years, a winter that's killed over 100 people (not to mention thousands of Alpacas).

What reason do we have to doubt Channel 4's report? 

UC Berkeley economist Andrew Stevens looked into the diet of heavy Quinoa consuming regions of Peru. He found that Quinoa consumption was relatively unchanged in heavy consuming regions, and where there were shifts away from Quinoa consumption it was down to increased choice and changing tastes (maybe Andeans like fish and chips?) not price rises. In fact, Quinoa only made up about 4% of of a typical Peruvian household’s expenditure on food. 

Quinoa farmers are some of the poorest people in Peru, but according to a study by Marc Bellamare, Seth Gitter, and Johanna Fajardo-Gonzalez, Quinoa price rises have had massive financial benefits to them. They find that as prices rose between 2004 to 2013, it boosted farmers' income and increased their welfare (measured in goods and services) by 46%. And these benefits didn't just go to farmers. 

As Bellamare and Gitter write:

We find that increases in the purchase price of quinoa are associated with a significant increase in the welfare of the average household in areas where quinoa is consumed, which suggests that the quinoa price increase has had general equilibrium effects extending to non-producers. 

Hopefully, Channel 4 news will follow up on their report, and let their viewers know the real facts. But I wouldn't hold out hope - some people never learn.