Another fine mess

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In an interview with Friday's Independent, John Armitage, the Chairman of the Olympic Delivery Authority (ODA), said it was "possible that no private sector money would be found for the £1bn Olympic village" and that "the authority has already given up hope of securing funding for the £355m international media centre, which will now be paid for entirely by the Exchequer."

Wonderful. More taxpayers' money down the toilet. Let's not forget that the original budget for the games (with which London won the bid) was £2.4bn. It subsequently spiralled to more than £9bn when ministers realized they had forgotten about security and VAT, among other things. Now, officials are said to be working to a £12bn target. And yet it could still get much worse: when the developer Sir Stuart Lipton was offered the chairmanship of the ODA, he turned it down, saying the plans could not be delivered for less than £15bn. And that, of course, was before all the private sponsorship dried up.

I say they should stop throwing good money after bad. London already has more than enough sports facilities to handle the Olympics, without filling the East End with monuments to the government's vanity. As Simon Jenkins has written:

Athletics should go to the (itself vastly expensive) new Wembley stadium, designed by Foster and Partners to be adapted to the Olympics in an emergency... Football and hockey can go to existing London stadiums, of which there are at least 25. Riding can go to Hickstead, and save the trees at Greenwich. Shooting can go to Bisley (rather than spend £11m at Woolwich) and gymnastics, boxing and the rest to the Wembley Arena. The Dome and Excel are standing by...

The media can look after themselves, and the athletes can stay in hotels. Better still, the whole thing could go to Paris and save Londoners a lot of hassle – or is that too much to ask for?

Hat-tip to Spectator CoffeeHouse

Whose children are they anyway?

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The price of holidays rise during school holidays for one simple reason: demand rises! Many families think about this rationally and take their children on holidays during times when it is more affordable but this obviously results in the child missing days at school. Now local education authorities are fining the parents for removing their children from schools without permission during term times.

Most parents of school children pay their council and income taxes and therefore contribute financially to their education but according to government they give up all rights in having any control over how their children are taught, what they are taught and when and where they can attend school. Parents want the best for their children at all times, admittedly putting them into the state education is going against the grain a little, but after paying all the taxes, what other choices are left. Being able to take their children on holiday, when it is financially suitable should not be something that is dictated to parents by the state. Children miss school in their early years through illness and accidents and yet this does not seem to hinder them in progressing through the education factory.

How best to regulate this? A solution could be to allow schools to test children at the end of each academic year to see if they have learned what they were supposed to (and been taught it well enough) during the previous months. If they fail, keep them back a year; if many of them fail, fire the teacher. Simplicity that allows a rational approach to a child’s education, allowing both parents and schools to see how well children are progressing against their own year group. And if they are doing well, why not take them on holiday, if they’re doing really well, take the teacher along!

Blog Review 856

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This idea of "fake charities" is one that should be pursued more vigorously perhaps? The Daycare Trust is found to be parroting the propaganda of its paymasters, just as one example.

Or the NSPCC which seems to be part of the attack upon home schooling.

On which subject, schooling, why should the vouchers be limited to the poor?

"Capitol Hill has become a veritable vortex of stupidity."

Defining heroes, villains and saints: and their beneficial effects on other human beings.

Government asking blogger why government programme is working as it does. And some people think that government can plan things.

And finally, why we love France.

The handout package

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In the WSJ yesterday was an enlightening article that listed most of what is in the $825bn stimulus package that passed through Congress. Here are the handouts, there's:

  • $66 billion more for eduaction
  • $54 billion will go to federal programs that the Office of Management and Budget or the Government Accountability Office have already criticized as "ineffective" or unable to pass basic financial audits
  • $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities
  • $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects
  • $8 billion renewable energy funding
  • $7 billion for modernizing federal buildings and facilities
  • $6 billion mass transit
  • $2.4 billion for carbon-capture demonstration projects
  • $2 billion for child-care subsidies
  • $1 billion for Amtrak, the federal railroad that hasn't turned a profit in 40 years
  • $650 million (on top of the billions already doled out) to pay for digital TV conversion coupons
  • $600 million more for the federal government to buy new cars
  • $400 million for global-warming research
  • $150 million The Smithsonian is targeted to receive
  • $50 million for that great engine of job creation, the National Endowment for the Arts

$252 billion is for income-transfer payments (cash or benefits to individuals for doing nothing at all)

  • $81 billion for Medicaid,
  • $36 billion for expanded unemployment benefits,
  • $20 billion for food stamps
  • $83 billion for the earned income credit for people who don't pay income tax

...$20 billion for business tax cuts

Depressingly the WSJ can only see, “$90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus."

This is a list that damns the US to a long and rocky road to recovery. But there will be many in the US who will be able to furnish their pockets with the creative wealth of the hard working, and most of those voted for change. This is their reward.

Brussels Dispatch: Human Action v. The European Union

We are in a world that is tilting over the edge of the very deep hole of global recession. Once we have fallen in, our only way out is through encouraging capital growth through real savings and promoting a more resilient understanding of property rights and free markets; or our continued descent will be through bringing in an unprecedented epoch of handouts from the state, more intervention and unpredictable behaviour-altering regulation. Nowhere is this ideological division more cleanly delineated than in development policy.

I look forward to sharing my observations and commentary with you – and the success of any blog lies in the quality of the feedback.  So I offer the assurance now that all contributions will be read by me – and who knows? – perhaps the best ones even circulated more widely here in the Parliament.

My basic principles are that government’s only legitimate function is to protect three things: Life, Liberty and Property. Anything else it does is a usurpation of that liberty – and obviously all taxation is robbery backed by coercion, masquerading as social responsibility. Furthermore, we must abolish the Bank of England and return to the gold standard. I reduce the essence of Conservatism to: “Trust the People”.  Winston Churchill, quoting his father, said that.  Why don’t we give it a try sometime?

Benjamin Harnwell is Secretary General of the European Parliament’s Working Group on Human Dignity; and Chief of Staff to Nirj Deva MEP, Conservative International Development Spokesman in the European Parliament.  He is writing in a personal capacity.  This blog appears on Fridays.

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A Preface for Rebellion

My office colleagues were all delighted when Eamonn Butler invited me to write a blog for the ASI. Not because they share my long-held respect for the ASI – but because more simply they hope it will take significant pressure off their ears, which up until now have been numbed to bleeding by my continuous griping at the way socialism is ruining our country. My lamentations have now found a new outlet.

I have the great honour of being the Chief of Staff to the greatest MEP in the European Parliament, Nirj Deva.  He is a fine man, and has affably encouraged my gradual shift in economics from the standard mushy-Keynesianism that any unthinking person assumes by default, via the rather more acceptable monetarism, to the true pinnacle of absolute truth. I mean of course Austrolibertarianism in the footsteps of Mises, Hayek and Rothbard etc.

One of my main duties here in Brussels is to draft the amendments for my boss to the ceaseless flood of reports that washes through the Development Committee and the Foreign Affairs Committee. In case you didn’t know, International Development is the last great arena where the traditional ideologies can still vie for power. Here socialism lives as in its glory days of old. It is as if the fall of the Berlin Wall simply passed the euro-comrades by. Nirj’s principal (and principled) opponent on the Development Committee is Glenys Kinnock - and the land on which all our battles are fought remains the timeless: Is government the solution to existing problems or their cause?

Ivy League Empathy

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Princeton University has announced its lowest tuition and fees increase since 1966. The prestigious American institution’s cost raised only 2.9% this year to $47,020. Many other privately funded American institutions are headed in the same direction.

Out of all other American institutions Princeton has made the most earnest effort to provide affordable education to their admitted students. In 2001 Princeton developed the most progressive need-based aid program in the United States, including an unprecedented “no loan" policy. This policy “offers every aid recipient a financial aid package that replaces loans with grant aid (scholarships) that students do not pay back." So for an underprivileged American student, it is a godsend to receive an acceptance letter from the school.

Although it appears to be a great model for other American universities to follow, it is a tough feat to accomplish. Princeton can afford to provide all of that aid because they have extravagant funds to pull from. Princeton has the fifth largest endowment out of all American universities, hovering around $10 billion. Back to the lowering rates overall, since privately funded institutions are becoming less expensive, wouldn’t it make sense for state funded schools to become even cheaper? Unfortunately this is not the case. “State universities are expected to hike tuition to make up for cuts from state governments."

So what does this mean for the future of American university education? Well, successful private institutions can afford to lower their rates and even provide many of their students with full grants, while the state funded ones are forced to increase their rates.

Affordable education in the private sector is quite the proposition.

The rise of Mugabenomics

Gordon Brown has reportedly said that the government must use simpler language about the credit crunch, because banking and financial-policy jargon just confuses everyone. Well, I can sum it up quite easily: we’re bust, and we’re going to print money to make ourselves feel richer.

Of course, Alastair Darling has been denying for the last month that he’s not going to print money to get us out of this jam. He doesn’t want people to suspect that we are doing a Zimbabwe or a Weimar Republic – turning out so much cash that it soon becomes worthless. That would ruin savers and truly mess up the economy. Indeed, the mere threat that the government would risk it could make things worse – it would suggest that the situation was even worse than we feared, that the government was no longer creditworthy, and that everyone should sell Britain’s currency before it’s too late.

So Alastair Darling might just like to hang on to the jargon ‘quantitative easing’, which he’s now given the Bank of England the green light to do – because it masks the inconvenient truth that, yes, the government is indeed printing money.

Another reason why that’s worrying is that it’s a last-ditch remedy. We’ve tried cutting interest rates to stimulate things. Now they’re rock bottom, but people still aren’t borrowing to buy new cars or bigger houses, and the banks aren’t exactly helping either. So like a cancer patient who’s tried everything and resorts to experimental drugs, we’re now resorting to experimental financial cures.

Of course, these days it is nothing so crass as just inking up new tenners. Instead, the Bank of England will press cash into people’s hands simply by buying assets from them. In practice, it simply buys assets like shares and mortgage contracts from the banks. That gives the banks cash they can lend to the rest of us. We go out and spend, and the economy revives. QED.

The Americans have been doing this for quite a few months already, though there is little sign of borrowing getting easier or spending going up. Japan’s experience isn’t heartening either: in response to the earlier crisis there, the central bank spent furiously and ended up with seven times the bank assets it started with, but nobody’s really sure it made much difference.

It’s possible that America and Japan simply haven’t done enough. In each case, the size of the boost has been not much more than 5% of these nations’ income – maybe not enough to convince people that the hard times are over. But the risks of over-egging it are enormous.

The Bank of England already buys bank assets, but usually it only buys the best. Now it’s proposing to buy a lot more, and buy much dodgier ones. So there is a fair chance that the Bank will be spending our money and ending up with a lot of worthless shares and paper promises. Thanks, Alastair.

The most serious threat, though, is the re-emergence of inflation. That’s not the problem right now, when prices are falling. But they’ve fallen rapidly, in the wake of a real drop in confidence about the future. What worries policymakers is that confidence could return just as rapidly. Then we’d all rush out to spend that extra cash the Bank’s given us, and prices would simply shoot up.

What worries me is not that. It’s whether our authorities can actually rein things back in again. Governments and central bankers rather like a bit of inflation: all that extra money makes us feel prosperous, encourages us to spend, and boosts business. But like a drug, the high you get from inflation only persists as long as you take larger and larger doses of it. And larger and larger doses are ultimately destructive. So eventually you have to kick it – and that makes you feel bad for a while. But governments don’t like making us voters feel bad, for obvious reasons.

The problem with ‘quantitative easing’ is that it could deliver a really big dose of inflation, and coming off a really big dose of inflation would make us feel particularly bad for some time. Do our political leaders really have the steel to curb that excess, or will they let us drift into the destructive high-inflation low-output ‘stagflation’ of the 1970s? Well, what do you think?

Money is an incredibly powerful tool. It shouldn’t be used to create a fake boom – as it’s been used in Britain and America for the last fifteen years – and it’s far too potent for economic fine-tuning. This downturn is exceptional, so maybe we should send it to work right now. But only if we believe ourselves strong enough to deal with the consequences, which could be highly destructive if they are not dealt with firmly.

Blog Review 855

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In engineering you can have good, fast or cheap. Pick any two you like. It would seem that the same applies to a stimulus package.

Russian law and history seem to be repeating themselves.

Even the government seems to think that the minimum wage is too high now.

Hyman Minksy's views on the recovery. It doesn't really matter what the banks do at present.

Huge subsidies to solar power don't really seem to work.

These tidal barrages might not be quite all they're cracked up to be.

And finally, Jonathan Porritt's solution. We should all go back to being peasants again.