Will Wilkinson on The Great Enrichment

Over at The Niskanen Center, Will Wilkinson has written an interesting piece on libertarian attitudes to social justice, giving a Bleeding Heart Libertarian take on what Deirdre McCloskey calls The Great Enrichment (Watch her give the annual Adam Smith Lecture on that very topic). 

Here are a few highlights:

Humans may be natural cooperators with a built-in instinct for distributive fairness, but we’re also natural opportunists who will negotiate over everything, including the very idea of distributive fairness, to increase or preserve our shares. “That’s not fair!” is always a bargaining move and only sometimes a fact.
When people talk about “social justice,” sometimes they’re really talking about “distributive justice.” The immense influence of socialist ideology in the 20th century encouraged the idea that social and distributive justice pretty much came to the same thing. But 1991 was a long time ago, and these days when people agitate for social justice, or refer derisively to those who do as “social justice warriors,” they’re likely to be talking at least as much about the distribution of rights and dignity as they are to be talking about the distribution of material resources and economic opportunities. That’s a healthy development.
You know what’s nuts? What’s nuts is that nobody kicks off a discussion of justice, distributive or social, with the fact of the Great Enrichment. Because the upshot of our best accounts of the most important thing that has ever happened to the human race seems to be that equalizing the distribution of rights and liberties, powers and prerogatives, respect and esteem led to an increase in the scope and productivity of cooperation, generating hugely enriching surpluses.

Read the whole thing here.

The Sun makes Beyoncé sweat

This week man-devil Sir Philip Green was in the papers yet again, dragging Beyoncé down with him. Following the destruction of BHS the media have been quick to pick up on the latest moral balls-up from super villain and Felonious Gru lookalike Sir Phil. 

An investigative piece from The Sun this week revealed that the workers manufacturing Beyoncé’s new athletic clothing line, Ivy Park, work up to 60 hours a week on just £4.30 per day. 

The Sun claims that the garments are being produced in inhumane conditions at the MAS Holdings factory in Sri Lanka, although the brand has denied the claims of poor conditions and assured that Ivy Park has a rigorous ethical trading program. 

Despite not being a Bey, or Bee, or whatever unsettlingly twee name the ravenous Twitter mob has given themselves, I don’t think Beyoncé is in the wrong here, and thus by proxy I suppose neither is Sir Philip unfortunately. 

It’s completely understandable that when you hear of sweat shop workers getting paid pittance and working in grim conditions for exorbitantly long hours your immediate reaction would be the desire to protest with your purse and spend your money on clothes “truly ethical” in their manufacture. But that’s where you’d be wrong, it would be a terrible thing for you to do. 

Anti-poverty campaigns can sometimes work as a blunt tool and end up hurting the people they mean to help in these situations. We have to remember that working in a sweatshop is often a considerably better economic option for those workers than the next best thing, namely subsistence farming in many cases, or other low paid factory jobs. It’s worth noting that while £4.30 a day wouldn’t get you far in the UK, the MAS Holdings workers making Beyoncé’s ugly sports bras are actually on double Sri Lanka’s minimum wage.

Sweat shops are not a good option, but they are the least bad option currently available to many people. Washing our hands of the situation and just closing the sweatshops would make their workers worse off, potentially much worse off. If we want to help people, we should give them new options, not take away existing ones.

One MAS worker also found Ivy Park’s message of female empowerment deeply disingenuous, a fair point when you’re making £100 leggings by day and staying in a boarding house with terrifying unisex showers by night. She said: “When they talk about women and empowerment this is just for the foreigners. They want the foreigners to think everything is okay.” And frankly it’s not, we need to give these women more options, but the answer isn’t taking the best one they currently have away to make ourselves feel better.

There is also research to suggest that while sweatshops are far from providing the “empowerment through sport” Beyoncé’s clothing line promises, sweatshop work does actually help improve women’s lives in other arenas; delaying marriage, delaying young childbirth and extending schooling, particularly amongst teenage girls. 

If we really want to help workers in developing countries lift themselves out of poverty we should buy more of what they produce, not less, and not just Fairtrade either. The boycotting of sweatshop-produced items or the campaigning for closure of factories can in fact have devastating effects and push the poor further into poverty.

So for now at least you can wear your Beyoncé branded swimsuit to the park with peace of mind that you’re not actually making it any worse, for workers anyway. 

There's a reason fintech companies like the European Union

There's a reason fintech companies like the European Union

The Guardian tells us that those unicorns, those privately owned and venture capital funded companies over in the tech sector, like the European Union and wouldn't want Britain to leave it. There is, of course, a reason for this over and above that general love of a centralised European superstate. That reason being that much of the London scene in this sector is, given the background of The City itself, involved in financial technology. And there's one specific rule that greatly aids such fintech within the EU:  

Slack in the USSR

It's funny how some things just slip down the memory hole. It's now been more than a quarter of a century since the Soviet Union collapsed, so it feels like ancient history. It's completely intangible, and the world it inhabited is totally gone. We know the USSR failed, but does anyone think much about why and in what ways?

Lucky for us, Jose Luis Ricón has, in a series of posts, combed through the evidence on communist Russia's healthcare, GDP growth, and food consumption.

On healthcare, he concludes:

The Soviet healthcare system heavily underperformed most of the countries that we can use as meaningful comparatives. Relative to other countries that began from the same situation of poverty as the SU, its performance wasn’t better than the systems of those countries. After the 70s, health outcomes deteriorated, and the utter failure of the system became apparent.
Despite the high number of hospital beds and physicians, the Soviet Union wasn’t able to deliver better healthcare outcomes to its population, relative to developed countries, even though they made great improvements in the 20-50s era. This should make us wary of making hasty comparisons based just in some indicators instead of considering the bigger picture.

On GDP growth:

Given this data, the Soviet Union was the mediocre economy economists say it was, not a healthy, growing, superpower. If the USSR had an impact in the world, it was due to its size, natural resources, population, and strong military, not because it was more productive than other countries.

And on food consumption:

Was Soviet caloric intake higher than the US’?
No. In saying this, I’m saying the FAO is wrong, and that Robert Allen, who based his calculations in FAO data (and used their multipliers), didn’t notice. To say this, I had to go through a full literature review, and I come to this opinion. Before reading my post, you were totally justified in believing that caloric intake was higher. Not anymore. Unless some FAO official tells us why did they used their coefficients, that seem to go against the Sovietological literature.

Go read the whole things!

Can we stop this nostalgia for manufacturing jobs please?

Can we stop this nostalgia for manufacturing jobs please?

We're told, endlessly, that we must do more manufacturing here in Britain. The underlying argument being that manufacturing jobs are good jobs, that they pay well, and that given that we'd like to have more well paid jobs therefore we must do more manufacturing. This argument is really just evidence of the ghastly conservatism of large portions of the British commentariat. For the truth is that the marginal manufacturing job is not well paid.

No, everyone’s tax returns should not be public

Following the Panama Papers scandal, publishing tax returns is in vogue. The pressure on politicians to release theirs has reached the point that it has essentially become a necessary pre-condition for leading a party or running for President. Those who don’t are assumed to be suspicious and those who do are scrutinised as immoral for paying too little or, apparently, immoral for paying too much because they’re too rich

Without being hyperbolic, it is fair to raise concerns about the effect this can have on how people judge what the grounds for electing someone are. Much more worrying, though, is the idea that all tax returns should automatically be in the public domain. As in Scandinavia, the details of how much each taxpayer declares and pays would be available for anyone to peruse online. 

One argument is that fear of scrutiny would reduce evasion and avoidance. In the case of evasion, which is illegal, this makes little sense. The fact that HMRC see your return is enough of a disincentive to evade tax. And if your accounting is good enough to get past the government, it can probably outwit over-zealous armchair tax experts.

As far as avoidance, which is legal, goes, it is ambiguous how much of a difference this would make. Would the ‘shame’ of your co-workers and neighbours knowing that you use offshore banking or pay yourself through a shell company be enough to dissuade most people to stop avoiding tax? For those who were dissuaded, it is just as likely that they would declare less rather than pay more, which would perversely promote more law breaking. 

In any case, a far more effective solution would be to simply close perverse or unfair loopholes. However, the real intent of ideas like this is to affect a societal shift that promotes the idea that obeying the law is insufficient and that there is a moral obligation to pay as much tax as you can.

This could result in unexpected and arbitrary changes in the tax system to respond to immediate public anger and increased focus on populist, rather than efficient, tax shifts. It would also foment an unhealthy culture of envy, resentment, and suspicion. Perversely, it could also entrench class divisions and snobbery towards people with below average incomes. Furthermore, Norway and Sweden have had to restrict availability of tax returns, as complete transparency abetted burglary and promoted tabloid voyeurism. 

The sentiment that ‘if you having nothing to hide, you have nothing to fear’ is always sinister and we are already in an era defined by a creeping erosion of privacy. Further attacks on the ability of individuals to conduct their own affairs without being constantly monitored by everyone else can only be negative.

Why shouldn’t companies sue governments?

Trade deals are always controversial and increasingly excite populist rage on left and right alike. The negotiations of the TTIP (between Europe and the US) and the TPP (between the US and East Asia) have attracted an even greater level of hostility than normal, with people who should (and do) know better jumping on the anti-trade bandwagon.

Admittedly, some of the criticism is well deserved. It is not necessary or wise to have conducted the negotiations in secrecy, with details being leaked incrementally. Increased protection for intellectual property may prove problematic. And both deals are regional as opposed to global deals that add to the growing spaghetti bowl network of exclusive deals, adding to complexity and undermining efforts at comprehensive and uniform global liberalisation.

However, the greatest ire magnet is the provision for facilitating investor-state dispute settlement (ISDS). Essentially this allows foreign companies to claim against governments who cause them to lose profits. Pressure has already caused ISDS to be dropped from the TTIP proposals, although it is likely to be brought back, given the US favour it and the EU’s mooted alternative of an investment court system has been held to be illegal by the German Association of Magistrates.

Although ISDS already exists and has been part of most trade agreements, the idea of corporations being able to sue governments is anathema to many people. Surely allowing multi-nationals to sue whenever their profits are curtailed is an attack on democracy, consumer protection, egalitarianism, and the environment?

Equally, though, governments should not have the power to act arbitrarily. Investors and businesses require a predictable environment that does not change at a bureaucrat’s whim. If, for instance, a country shuts down its nuclear power plants unexpectedly and without good reason, the owners of the plants are not being unreasonable in seeking compensation, given that they invested on the reasonable assumption that this would not happen.

Whilst companies act out of self-interest, this can produce good results. It may be popular for a country to, say, pass laws against smoking. A tobacco company seeking compensation may only be interested in its own bottom line. But the effect of this threat can be to prevent an incursion into the lives of individuals who should decide for themselves whether to take risks like smoking.

The biggest fear is that TTIP will force privatisation of state assets. This is mostly incoherent nonsense. It is true that companies who are victim to nationalisation of their assets will be able to sue for recovery of lost profits, hence the popular meme that, ‘privatisation of OURNHSTM could never be reversed’.  This is a distortion. 

ISDS does not give investors the power to change government policy, and allowing other providers to compete with OURNHSTM has been expressly ruled out. All that would be required is compensation of companies losing out from re-nationalisation, which is eminently fair. Also, privatisation would actually need to happen in the first place, which is highly unlikely, given the quasi-religious fervour surrounding OURNHSTM.

Execution of government policy is regularly challenged through judicial review. Suing for lost profits, and even loss of prospective profit, is a standard remedy in contract law and tort. The fact that ISDS is arbitrated through confidential international tribunals is necessary given the international nature of the disputes and often positive given it is governed by institutions like the London Court of International Arbitration, which more reliable than many national courts. Not to mention that all arbitration is confidential and much of it is conducted internationally anyway. 

Nothing about ISDS is especially radical. 

What did anyone think would happen with a higher minimum wage?

What did anyone think would happen with a higher minimum wage?

That the Chancellor insisted that the national living wage came into being is true. That this is a rise in the minimum wage for those over 25 is also true. And that there will be some adaptation in the labour market to this is also blindingly obviously true. How could it be otherwise? It is thus with some astonishment that we see people who in general would support a higher minimum wage complaining about the effects of a higher minimum wage. For example, this letter from Liz Kendal MP: