Profit is good

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Anton Howes is spot on. The next government must not only implement a Swedish-style school reform in Britain, it must retain its essential features. In addition to allowing parents and children to choose a school (even outside their area), it must facilitate the establishment of new schools, including ones set up for profit.

One reason why the Swedish scheme has attracted massive parental support is that nearly all applicants gain their choice of school. That has meant a huge programme of school-building, spearheaded by private firms seeking profits. Without investment and energy from that source, a British reform would be vapid and half-hearted, and would fail to attract the support needed to make it irreversible.

There is still in Britain a resentment of profit, probably surviving from wartime and postwar collectivism. There is a still-widespread view that public services should rely on a dedication to public service rather than the pursuit of more personal motives. This is misconceived. It is the profit motive that spurs people to supply goods and services that people want and need. Services that depend on motives which lack the incentive to satisfy customers are prone to producer capture, and end up with unions and administrators doing a self-serving pas-de-deux which excludes the recipients of the service.

The supply of food, no less important than education, is provided for profit. It would be very different if its supply were decided by civil servants, funded out of taxation, and available only from approved outlets. The 1980s saw many goods and services moved into the private, profit-making sector, and improve immeasurably in consequence. Now is the time to extend the same advantages and improvements to some of the areas which still lack their benign effects. Schooling will be the first and most important, but others must follow.

Dr Pirie's latest work, 101 Great Philosophers, is available to buy here.

The Irish referendum

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Ireland's Lisbon Treaty vote puts the spotlight on the Czech Republic's ratification and David Cameron's UK referendum promise

Well, it just goes to show that the European Union has no problem getting people to vote for it, as long as they are bankrupt. When Ireland was looking OK, it voted No. Wrong answer, so it had to vote again. Now it's bust, it has fallen sobbing into the arms of the subsidy providers. Britain joined in 1973, and the East European states twenty years later, for just the same reasons. They were suffering a deep economic malady and thought it might be cured, like scrofula, simply by touching.

Now it's down to the Czech Republic. I cannot imagine that its robustly free-market and Euro-sceptic President, Vaclav Klaus, will be in any hurry for his country to ratify the Lisbon Treaty. He's already taken a stand against it. If he can hold out until May 2010, he knows that there will probably be a change in government in the UK, and that the Conservatives have promised a referendum if the Czechs haven't already decided. So he can let the UK take all the flack that will surely come from Brussels (and Paris). I think both of us could live happily with that.

Dr Butler's book The Rotten State of Britain is now in paperback.

It gave him nothing

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Michael Moore has a new documentary out, titled. "Capitalism: A Love Story". An investigation into the failings of the economic system that is a central tenet of American life in light of the recent financial crisis. At the premiere in Washington, DC, Michael Moore responded to a question about his supposed earnings to date, "[you have] amassed a fortune of over $50 million, some have said and -" Moore interrupted, “Really? Are you kidding me? Seriously? Wow. Where did it go?..Well, capitalism did nothing for me, starting with my first film.."

Mr Moore never had it handed to him on a plate. He had to work hard to get to the level he has. He despises capitalism because that's what it means. Working hard to make a living. The system he wants to replace it with is one that is founded on theft, violence, a regal liberal elite that subjugates the masses, state authorised freedom and massive subsidized sectors of society.

Michael Moore's films are the only reason why illegal downloading should exist.(Some would probably want to include Michael Bay films on there as well). It is the only way his films should be distributed. He should be made to sit down and perhaps think about his wealth and what he would have been rewarded with had he made films in communist Russia or North Korea. Indeed imagine if he had made films criticizing those regimes. Mr Moore should be grateful he lives in a free country and is somehow rewarded for his dross documentary films. Freedom and free exchange has granted him untold wealth, but he fails to see it. It is doubtful he ever will if his films are a reflection of his intelligence.

The purpose of profits

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There's still a desperate and really rather sad misunderstanding of the purpose of profits out there. Our first example is about rubbish and recycling:

It is far more profitable and much less labour intensive to dump unsorted garbage in a landfill than it is to separate it for compost or recycling.

Quite contrary to the imputation of the author this means that we should indeed be throwing the garbage into a hole in the ground. It isn't just that time is one of the things we are all short of, that three score and ten passing by much too quickly to want to spend unnecessary time sorting rubbish. Here profit is showing that we are using fewer resources by dumping unsorted than by sorting. This is a good thing, profit is telling us that we are being more efficient: and more efficient with our scarce resources means that we get more out of whatever resources are scarce. In short, profit is showing us what makes us richer.

Our second example is about schools (and cries of "rubbish!" in regard of the UK educational system will be ignored, however true they might be):

The Conservatives, however, are planning to keep their "Swedish schools" profit-free and rely on charities, voluntary groups and other philanthropic types.

Ignorance of the purpose of profit is not limited to foolish environmentalists of course: it seems to be a failing of our next Prime Minister as well. For he and his sidekick are missing the second point of profits: the hunger for being allowed to keep them. It is this, the idea that we might individually get rich by making profits which leads to the society as a whole getting richer as we struggle (and the successful succeed in) to find newer and better ways to be efficient with those scarce resources.

Profits are both a signal that we're doing something right and a temptation, an incentive, for people to do those right things: look for and find ways to be more economical with the resources available.

No surprise in an environmentalist not quite getting it but if a Tory PM in waiting can't understand it, what is the world coming to?

A flawed revolution

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Anders Hutin, one of the chief architects of the much vaunted Swedish schools reforms claims that the Conservatives are missing a crucial ingredient in their proposed attempts to recreate the Scandinavian policy phenomenon. Profit. In an article for the Telegraph, he explains that about 75% of the new 'free schools' created after the reform are profit-driven. By leaving the 'revolution' to non-profits and parents, Hutin points out that the emphasis will be on increasing waiting lists, as they mark out the desirability of a school. For-profit schools on the other hand are more likely to see every pupil as a potential new source of income, and will expand their capacity in order to accommodate them.

Michael Gove, the Shadow Schools Minister, despite recognising the desperate need for liberation of the state-funded schools sector, seems afraid to be seen to be privatizing state-run education, even though it is a continuation of Lord Adonis' Academies scheme. If these reforms are so central to the Conservative agenda, as Cameron keeps claiming, it is only right that the full extent of their intentions are made clear. Hopefully, the rapidly approaching conference will shed some light on whether or not Gove will make the right call on for-profit 'free schools'.

The Conservatives should certainly not be so complacent as to hope that their reforms can act as merely the next stage in liberating the state-funded supply of schools. As Sweden showed, it takes time for the grassroots revolution to take root, and if it progresses too slowly, the entire venture could be scrapped or stalled by a future administration. Gove's reforms will need all the boost they can get if they are to be both successful and lasting. Once they are established and recognised as an invaluable policy, the likelihood is that even Labour will cease to oppose the use of profit, much as their Swedish counterparts, the Social Democrats have done. Regardless of the political reality, Hutin explains that Britain is perhaps best-placed to benefit from the reforms that he designed, due to the high demand and extraordinary lengths that parents will go to in order to secure a good place - although this offers hope to reformers, it is a savage indictment of state education in this country.

Let us be

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The party conferences, with all their policy announcements, pledges and sniping, raise the issue of what the public wants and expects from their government. They also bring about discussion on who exactly a particular government would favour. Segments of society are seized upon left right and centre by every party, and are either demonised or showered with promises of a better life.

Brown has stated that Labour sets out to satisfy the "values of the mainstream majority." This though is wherer governments are going wrong; they shouldn’t embody the views or values of the majority; they shouldn’t embody the values of anyone. By taking a normative stand, no matter how populist it may be, a minority will be punished or sidelined. Vilify the bankers and they might stop creating taxable wealth so quickly. Cast bored youths as feral animals and they will bite back. Introduce supervising housing for young mums, and all stigmatisation of them seems justified.

In truth, the neglected but vital role of government is to protect the liberty of those governed by it. A government should uphold a legal system that allows individuals to live peacefully and safely, with their lives and property protected from the harmful actions of others. It can also have an important role providing public goods such as roads and national defence. Evidently, it is important that a government is not against the people. However, when governments try and act for some people, they are acting against others.

The UK is a network of communities, and people have different values, priorities and cultures. One of humanities' great skills is our ability to work productively with one another, while new technology increasingly allows us to connect with each other and create solutions to problems in a way never before seen. Cameron talks sense when he speaks of the importance of Burke’s ‘little platoons’, and the way in which communities and groups are able to achieve their own goals and solve their own problems. While as a country we expect the governments to take up crusades and hand out solutions on a platter, there is much that could be done without requiring the values and priorities of one group, regardless of how large it is, becoming forced on another.

If governments stopped looking to change the course and values of people’s lives, we might just be that little bit happier, productive and more successful.

The Tyndale Centre: not knowing what they're talking about

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The latest little report attempting to scare the bejabbers out of us:

The centre, a partnership of seven universities including Oxford, Cambridge and Manchester, says that the economies of developed nations will have to shrink and consumption of almost all types of goods will have to fall “in the short to medium term".

...

“It’s a very uncomfortable message but we need a planned economic recession. Economic growth is currently incompatible with reductions in absolute emissions."

Ah, no, I'm sorry, but that argument just doesn't work I'm afraid. And it doesn't matter what the climate models say, nor whatever new gremlins you've found within them. For this is an economic argument and that's not one that a bunch of atmospheric physicists, however eminent, are going to win. Especially as they seem not to understand it in the first place. Assume, arguendo, that everything they're saying about their models, emissions, warming etc is correct: they're still wrong.

For the real argument, after we've accepted their part about the physics and chemistry, is what do we do next? Our aim is, of course, to maximise human utility, to make ourselves and those generations coming after us as rich as is humanly possible (properly rich, not just in cash). This is the very basis of the argument of the Stern Review. Indeed, despite the Stern Review making a few desperate contortions to get to the desired conclusion, the essence of his argument is entirely sound. What balance of spending money now, of investing, of curtailing consumption, will maximise human welfare in the future while causing the least cost to us now? Should we be pushing adaption? Should we be trying mitigation, reducing emissions? Simply let rip, grow the economy as fast as possible and let the rich people in the future deal with it? Stern's answer is that in order to avoid a possible loss (yes, "possible") of 20% of GDP in 2100 we should be willing to give up 1-2% of GDP now. This is through a mixture of both adaptation and mitigation.

As I say, Stern contorts quite a lot to be able to justify that conclusion but let's again accept it, arguendo.

Now the Tyndale Centre says no, this isn't enough. We must be giving up much more than 1-2% of GDP now: but we are still avoiding only that 20% of future GDP cost. That is, Stern's carefully worked out cost benefit analysis tells us that the cost of the 20% of GDP benefit is 1-2% of GDP. This is a good idea. However, if someone comes along now and says, no, the cost of avoiding that 20% of GDP hit in the future is 5% (or whatever) of GDP now then it becomes, by Stern's very arguments, a bad idea. Thus we shouldn't do it for we will be making the future poorer than it need be.

This is what the Tyndale Centre doesn't seem to understand. By insisting that we must cut GDP now in order to avoid climate change they're actually telling us that we shouldn't bother to try stopping climate change. Forget mitigation altogether, we should just let rip with the economy and let those vastly richer than us people in the future sort it out for themselves. Let them adapt, not us mitigate.

In other words, the more people tell us we have to restrain the economy now in order to avoid climate change the less we should actually restrict the economy: for our descendants would be better off with the climate change but with the wealth we can bequeath them.

 

Tories' care home costs plan

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Cameron's 'thoughtful revolution' in elderly care needs more thought about principle.

The latest fusillade in the Conservatives' 'thoughtful revolution', which Philip Salter reported on here, looks – well, completely devoid of any thought at all.

In fact, this latest vote-winning wheeze shows how devoid of principle or imagination the Conservatives have become. (Not that this is much of a criticism, since all parts of the political class are naturally more interested in votes than in either of those.) Indeed, it looks like a quick-fix plan to match Gordon Brown's costly promises on the same subject

The plan is that if people pay the £8,000 at retirement, then the government will give them free long-term care when they need it. It is absolutely extraordinary. It means that the Conservatives – the Conservatives – are proposing a new form of national insurance. An extension of the Welfare State. It means that a Conservative – a Conservative – government would crowd out private insurers who might just be able to do that sort of a job better and cheaper than Whitehall bureaucrats. (Admit it, that has been known.)

If anyone in the Eton-Islington Axis was actually moved by principle rather than PR, they'd have consulted two decades' worth of think-tank reports pointing out that things like long-term care – and healthcare in general – are best provided through a partnership between individuals, insurance, and the state. The deal should be that if you fund or insure yourself for a reasonable period (say two years) of long-term care, then yes, the state will pick up the tab for the rest – since it's those unpredictably long stays that give insurers the collywobbles. It certainly shouldn't be that the state insures everything.

As an insurance company, the state sucks. It should focus on its proper role – welfare needs and the provision of things people can't save or insure for – not advancing into new areas that never occurred to Aneurin Bevan. Now that would be a thoughtful revolution.

Dr Butler's book The Rotten State of Britain is now in paperback.