Why we love the profit motive: Katine edition


I have to admit to being fascinated by this development project that The Guardian is running in Katine, northern Uganda. Over a period of several years they're trying to see how and if it's possible to kick start development: a noble and worthy goal.

The fascination comes in part from my not quite understanding the mindset of those attempting to do the developing. There was one report about how there were not enough desks in the schools: not enough had been delivered by the Government apparently. But, umm, who would assume that in a poor country the Government ought to be delivering school desks? A table is not really all that high technology, a few burly blokes with machetes and a few days work in the woods would knock up something useable wouldn't it? Why this reliance upon the State, some hundreds of miles away over near impassable roads?

Another example is this piece about how a Coke (that's as in cola, not Charlie) is available in every village store but medicines are not. Or rather, medicines are indeed available in private stores, but not in the State run health care centres. The end of the piece is:

The new battle is now not just to get HIV medicines to people with Aids, but to get a consistent, affordable supply of essential drugs to all who need them. That means that governments in the west, as well as in developing countries, need to make money available, and turn their attention to supply systems. It can't be left to Coca-Cola barons. It's too important to leave to the market. Not just for Uganda, or Africa, but for all of us.

Excuse me, but given that the market does indeed get a consistent supply of drugs to those who need them, surely that means that it's too important not to use the market?

The demise of defined benefit pension schemes


In recent years, many leading private sector companies have either closed or curtailed their defined benefit pension schemes. Just a handful of large companies, including Shell, now offer participation in a defined benefit pension scheme.

In part, this is due to pronounced changes in employment trends. Nowadays, there are comparatively few ‘lifers’, who join a company shortly after leaving school or university and remain in post until retirement beckons in their 60s. In previous generations, working for 40 years for a single private sector employer was not particularly unusual.

However, the cost of financing defined benefit pension schemes has become increasingly challenging, especially since people generally are living longer. Moreover, under recent changes to accounting rules, the net liabilities of defined benefit schemes are now effectively treated as debt in company balance sheets. Certain former publicly-owned companies, British Telecom (BT), British Airways (BA) and BAe Systems, are particularly exposed in this respect. Indeed, in recent years, both BT and BA have seen their share prices seriously impacted by their burgeoning pension liabilities – notwithstanding their own poor trading figures.

The drag on share price performance of sizeable defined benefit scheme liabilities is such that many companies are sharply scaling back pension entitlements. BP recently announced that new entrants would not be eligible to participate in its defined benefit pension scheme whilst Barclays plans to go further by closing its defined benefit scheme to existing members.

Perhaps not surprisingly, generous defined benefit pension schemes still prevail in the public sector – but for how long? Given that the unfunded pension liability of the public sector may exceed a staggering £1 trillion, it seems inevitable that the next government - of whatever political persuasion - will be forced to take aggressive action to reduce very substantially these liabilities.

Privacy for parliamentarians


Recently, the pseudo-celebrity MP, Lemit Opik, called for stronger privacy rules protecting MPs. No doubt many would highlight the irony of an MP with a string of celebrity partners calling for greater levels of privacy, but let's leave cheeky girls aside for now. There is a moral issue here regarding the fine line between political transparency and the right of those in public life.
Mr Opik said "For a long time I believed the cost of public life was public attention, which at times does not please the subject of the coverage, but which nevertheless goes with the territory." This is a crucial point in the debate. There needs to be a culture within politics that MP and Lords are working for us, that they are employees of the people. As such, those entering politics need to accept that parts of their life will be on public display because it could eventually impact on us.
The expenses scandal has revealed and emphasised the need for greater transparency with financial matters. Essentially, the MPs proved that they could not be trusted with our money – this intrusion into our representatives lives by the media only had positive outcomes. It gave the MPs a warning that they couldn’t continue living unchecked at our expense, whilst it gave the electorate the wake-up call that we need to play a role in seeing where our money goes.
But there is a valid case that the intrusion of the media into the lives of MPs has gone too far and is inflicting upon the rights of MPs. Granted, if MPs were left with so little privacy that it severely impacted on their lives, we would put off the best candidates from entering politics, resulting in a sub-standard system.
There needs to be a fine balance struck regarding privacy in public life. In my opinion, there can never be too much transparency when it comes to financial matters, we must know where our money is being spent. But, everybody should be entitled to a degree of privacy – I don’t need to know where an MP goes on holiday.

The environmental dark ages


To hear some environmentalists speak you would think that we are currently in the environmental dark ages. The ever expanding economy (current hiccup exempted) means that we are using up ever more resources, spewing out ever more pollution and generally leading the way to Hell in a handcart.

That they say this when the air and the waters are cleaner than they have been for many centuries, when resources, judged by their price, are cheaper and thus more abundant than ever, causes no little amusement.

However, it is their next step which is so dangerous. We must localise all production, not eat food from outside our own region: depending upon who you talk to it might be from outside your own garden, town, county or bioregion but international trade is certainly very naughty indeed. In fact, we shouldn't be getting anything at all from other countries, let alone the other side of the world.

Localism in government is to be admired, localism in production and consumption rather less so.

A new book on the end of the Roman Empire points to this as the defining economic mark of that age:

An emphasis on "localization" as the fundamental change following the fall of the Roman Empire, and numerous micro-studies of exactly how that localization occurred.  Cities shrank, trade networks dried up, etc.

Not for nothing do we decribe that time as The Dark Ages. Last time around it came about because of the collapse (for whatever reasons) of a political power. Let's not inflict it upon ourselves in the name of environmentalism, eh?

Letters from the Lakes


One problem with being on holiday (although, clearly, I'm not really complaining) is that you get much longer to read the papers. And for someone with libertarian leanings, that means that every leisurely breakfast is inevitably accompanied by news of countless new government initiatives – most of which are pointless, intrusive, expensive, or all of the above. Deeply depressing stuff.

If I had a shorter fuse I'd probably end up hurling my cornflakes at the wall. As it is, I just feel compelled to write letters to the editor. Below are a couple of unpublished ones I sent to The Times while wandering around the Lake District.

On the idea of 'minimum space requirements for new housing...

Sir, Rebecca O’Connor reports that new-build British homes are among the smallest in the world. I can well believe it. But couldn’t this have something to do with our planning system, which forces developers to meet minimum density requirements and obliges them to set aside land for loss-making ‘affordable housing’? Whatever the Commission for Architecture and the Built Environment might think, we don’t need more regulation to fix this problem. We just need to free developers to build the sorts of homes that people actually want to live in.

And on Mexico's drug war...

Sir, Your leading article of August 11 is misguided. Decades of bitter experience have shown that no amount of military might can win a ‘War on Drugs’. Indeed, all such interventions actually achieve is to raise the market price of these substances, and give the cartels an even greater prize to fight over. The human cost of this failure is enormous. Surely it is time to accept that the only sensible solution is to take narcotics out of the hands of gangsters, and legalize, licence and regulate their production and sale. As well as depriving criminals of a lucrative market, this would have considerable health and social benefits, reducing the incidence of overdoses and poisoning, and making treatment of addicts much easier. Empirical evidence from Portugal, which decriminalized drugs in 2001, bears this out.

In future, I think I'm just going to stick to the sports pages.

Monster in the media


Its not just in music and radio that the BBC distorts the market and creates an unfair playing field. It has the same effect on the UK's online space. Even though the BBC is neither a newspaper nor magazine it competes with its huge online prescence, paid for by the taxpayer via the TV tax.

The Conservatives have been complaining about this Gorilla in the room before:

Back in 2003, John Whittingdale, the Shadow Culture Secretary of the time, said that the website should be closed down. Last year, Phillip Davies, another Conservative, said: "Basically the BBC with its massive licence fee does completely distort the market and makes it virtually impossible for its competitors." But given bbc.co.uk's popularity, closing it down would not be a sensible option for any government.

The trouble is that the BBC is trying to do all things media and its site suffers for it. Its not just the Conservatives that are concerned about this either:

Do we really have to count on the BBC to reveal that "Blue Square Premier side Tamworth have completed the signing of former West Brom youngster Anthony Bruce"? Surely this would be better left to theTamworth Herald's website, or the Blue Square Premier's site, or theNon-League Paper. Tamworth are, after all, a non-league football team which last season had an average gate of only 815.

Harry Underwood has it right. This is why Murdoch is mad enough to start charging for content.

Welfare isn't working


Further evidence of how ineffective our welfare system is at galvanising people into finding jobs can be seen on Channel 4 over the coming weeks. The programme 'Benefit Busters' (Episode 1 from Thursday can be seen here) follows the work of A4E as they attempt to return those on benefits to the workforce. The first episode focused on lone mothers as they undertook a 6 week course titled 'Elevate'. The company receives £100 per week per participant and a bonus should they find a job.

The programme shone a light on the unintended consequences of welfare. One participant openly stated that as benefit recipients, "they got too much for doing nothing" and that benefits, "did not give people the initiative" to act over their own lives. Even though they successfully placed the course's participants one lone mother had to go back on benefits due to the difference between a low wage job and a life on benefits. A politician view the latter problem and promptly recommend that the minimum wage be increased, there would be relatively few of them who would grasp the fact that taxes considerably eat into the earnings of the poor. Those in minimum wage jobs who can be rewarded with more money on benefits need to have their allowance levels raised so they are removed from paying tax.

We are paying for attitudes to work to be repaired following the damage that welfare has imparted upon its recipients. This is why we should be looking at reforming the welfare system (as we have suggested here in Working Welfare). The Channel 4 series continues next week looking at the long-term unemployed and examining their approach to life. From this series it is plain to see that government welfare destroys lives.