Tuesday, 28 February 2012

The American Culture Wars.

I fear for the United States of America. Their politics is becoming increasingly polarised, and neither tribe is anywhere close to the right answer.
Let's look at the Democrats first. They are broadly anti free-trade, pro-union and increasingly collectivist. This is broadly the economic and social dead end that most of Europe is running down. The party sounds a lot like the Labour party on tax issues. They are absolutely convinced all the problems could be solved by extending taxes on 'the Rich', who are to blame for substantially all the economic problems of the country. They have the same punk Keynesian headbangers as over here, and the activists are just as prone to the same PC idiocies. They are, however misguided, sane when compared to the Republican party.

The Republican party is currently choosing someone to lose against Obama. The one guy plausible enough to stand a chance was deemed "unamerican" for speaking mandarin Chinese. There is a savage proletarian mentality which goes beyond anti-intellectualism and strays into an open hatred of learning. Ignorance is 'American'. Being fat is 'American'. Wasting fuel in enormous trucks is 'American'. The very science which has made America pre-eminent is utterly rejected. There isn't a sensible rejection of climate change, for example. It's a rejection of something that might make those big, gas-guzzling trucks uneconomic, which comes from the same place as the rejection of the "theory" of Evilution. The fact that anyone could consider Rick Santorum, or Sarah Palin a potential POTUS is ridiculous.

A serious contender for the Republican nomination suggested that letting gays serve openly in the military (something that has caused no problems in the far more heavily committed British or Israeli armies) is part of a "war on christianity". He said this apparently after thinking, aloud and in public. The fact that the obviously flawed Mitt Romney is basically the shit that stinks the least indicates that this party is really only interested in talking to itself. The Rot set in with Bush Jr. but the God nuts have the GOP by the short 'n Curlies.

Neither party elites are willing to sell globalisation to their supporters, for example. The fact that the Americans are the principal beneficiary of this process is neither here nor there. Americans think the Chinese are Taking 'their' jobs, that their culture is under threat (from what depends on which tribe you're in); that there is a terminal decline (though once again, the cause of that decline depends upon which tribe you're in).

But it's not Immigrants, the 1%, Chinese, the UN, goddamn eviloutionists or whatever who are destroying America. It's the US political culture. The bureaucracy is rampant. Companies are fleeing the US. Capital markets round the world are closing to US capital, because of the sheer arrogance of the US tax authorities which make it just too much trouble to have an American as a client. And going to America, with the TSA who verge between dangerously paranoid and actually insane, is becoming unpleasant if not down-right dangerous. The DEA has destabilised an entire continent, South America; and the War on Terror is in danger of doing the same to Central Asia. The USA has been betraying its history and ethos with rendition, torture and support for less-than savoury regimes. America has been resting on its laurels for some time, and will lose allies fast when it's no longer the biggest boy on the block if it continues in this vein.

The fact is both political tribes are wrong, in different ways on more or less everything. This is extremely worrying. The Democrats think the Bush-era tax-cuts are to blame for everything. Republicans want to blame everything on discretionary spending. The Republicans won't touch the bloated American Military, the Democrats won't touch Entitlements. Both sides are getting what they want and the result is an almost Brownian deficit, as both sides are talking to themselves. Neither side is interested in the rest of the world.

This is a car-crash waiting to happen.

There are free-trade, balanced budget Democrats. There are socially liberal, fiscally sound Republicans. There are people interested in the world in both parties. They are not setting the tone of debate. The recent brinksmanship over the Budget ceiling may have caused the parties to re-examine their shibboleths or face a US default on its debt, but it was a dispute between headbangers. The only hope is this dialogue filters through to the parties' activists and they re-examine their ideas, because at the moment, The USA looks a lot like a richer version of Britain in the 1970s. Ungovernable, as the tribes are just not willing to talk to each other, and I see no Thatcher on the Horizon. The Americans I know, which includes a range from London ExPats to West-coast software engineers and deep-red-state soldiers, are being failed by their political culture. Yes, a political failure worse than Europe's. At least Sarkozy and Merkel are trying to address the issues, and someone sane might replace them.

The hope is the sheer variety of the USA, and it's endless capacity for re-invention, might see the Republicans reject theocracy, and Democrats reject punk Keynesian "economics". Both parties need to rein in the Bureaucracy, embrace free trade, basic social liberalism, and balanced budgets, because the world's demand for T-Bills will not last forever, as one day soon a billion Chinese or Indians will be as rich and more powerful than 300m Americans.

Thursday, 23 February 2012

Cycle Safe

Today's cycle-safe debate in parliament was attended by 75 MPs, not alas, mine. He was speaking to a handful in the main chamber on pensions.

So. Basically, everyone agrees with the Times' campaign. Labour's shadow transport minister basically laid out a list of cyclists' demands. Of course she did, Labour can't see a bandwagon without jumping on it. There was however one key concession mentioned by the minister for cycling (I did not know we had one). Cyclists are to be written into road design criteria.

That's where campaigners have to focus. If we can get every junction, and where possible & appropriate every road, redesigned for safety for all road users, as and when they're maintained, then in 10 years we will have a network to be proud of. Even transport for London are starting to take notice. There's clear political momentum. Unfortunately, my experience of Tory councillors in particular is one of visceral, tribal, savage loathing of cyclists. Cyclists, you see are assumed to be Liberal Democrats.

Thankfully the biggest win of today (and it's not much) is that the idea that Cycling is a fringe activity, for weird beards in sandals, with thermos' of nettle tea, is a thing of the past. There was no money. Did anyone expect there to be, at this stage, in this economic environment?

Wednesday, 22 February 2012

London's Brave New Cycling World. Will I Like It?

Dutch-style cycle infrastructure is on the way to London. It'll be half-arsed at first but we'll get there in the end. Making cycling a viable transport option's got a kind of political inevitability, like smoking bans and compulsory "traffic light" badges on food, because cycling has developed a lobby, which is growing in power. (As I am talking about politics, whether it's RIGHT is utterly irrelevant). I can see politicians being brow-beaten into jumping on the cycling band-wagon, and this is good. This post by "As easy as riding a bike" shows how the new infrastructure works. Bikes cross junctions on their own phase, without control, then when they're out of the way, the Cars go. It's all very Ernest, but one comment...

This may, of course, be more problematic with higher pedestrian movements, or with rather less civilised cycling behaviour...
... got me thinking. Herein lies the problem: The Current British cycling culture. I left London 6 years ago, when cycling for transport was very much a minority pursuit. As a result, I am conditiononed to be hyper-aware, and hyper-aggressive in traffic, because that's what you needed to stay alive back then. Red Lights - pah! Much more important to get out the way. Cars - the enemy, who will be smashed for the slightest transgression. Helmets - for the weak. High Viz - symbol of supplication to the God car, and evil. In short, on the road, I have developed a War-zone mentality.

Will I use the new infrastructure when it's built? I don't use the cycle lane between Russell Square and Tottenham Court Road, though it's the only near-Dutch standard infrastructure around. Why not? Because I know the road and it's users and much as I fear a car, I can predict a car's movements in a way you can't predict the movement of an immigrant on a Halford's cheapo, or tourist on a Boris Bike. Years of conditioning have got me bum up, head down, sprinting to keep up with the cars, I become as one, and I rather like it. I imagine new cyclists will start in on the bike lane, and some of the fastest and strongest will join me on the road. As I get older and slower and buy a Pashley, I may find myself pootling down the bike lane, as I do when I find myself on a Boris bike (which I suspect are made of the same stuff found in the core of impacted stars). But as it is, the smell of diesel fumes brings out the competitive, aggressive road warrior in me. It's not just me, the Mayor is another paid-up member of the "muscular commuter" tribe, who regarded the daily dicing with death as merely adding spice to life. How did he describe navigating Euston circus underpass, or Elephant & castle roundabout?
"OK if you're confident..."
Of course, it's people like me & Boris who have put of the old and the young, the women, the parent off cycling. You have to be young, strong, fit and confident to be a "vehicular cyclist". We've enabled road engineers to ignore cyclists by finding a way through the streets. We give the APPEARANCE to politicians, that cycling is an option to people aged 8 to 80, when it isn't. Things which appear to the uninitiated as reckless were merely survival techniques as we navigated roads designed without a thought to the cycle, but this enabled to blame the victim when cyclists get killed (90% of fatalities are the Motorist's fault). For example, I actively sought out the most congested routes on the basis that a stationary car can't kill you.

Lots of new cyclists have joined the ranks since then, hordes of us now swarm up and down Old Street every day. And the future is clear - London, will become a cycling city and the rest of the country will follow (and be much better off for it). The newbies politely stop at red lights and pootle along, in the door-zone cycle lane thoughtfully provided by a road engineer who's probably never ridden a bike in 30 years. These new cyclists, trusting in the magic blue or red paint are oblivious to the danger of going inside a lorry, up the carelessly placed filter lane, to the Advanced Stop Line, where you wait, to be passed by a driver at his most careless and stressed. I feel safer in the traffic, occupying a primary position (known as "in the way" to a motorist) and where possible a long way down the road when the lights change. However London, broadly lets the new cyclist get away with stuff I'd never dreamed of doing when I lived there, because transport cycling is becoming mainstream and even idiot occupiers of angst-boxes are looking out for people on bikes. Most of the time.

Are we vehicular cyclists going to be an anachronism? An de-mobbed, away from the cars, and into the cycle lane. We'll be safe, but will we be missing the action & danger. Will I cope in the bright, shiny, new, safer, more polite world, for which we cycling activists have been agitating for decades, but which will mean, in practice, waiting patiently behind someone dawdling along on an upright? Is it hyperbole to think of General MacArthur's "Old Soldiers never die, they just fade away".

Sunday, 19 February 2012

The 'War on Drugs' is a complete failure.

Many of the people who support the continued waging of the 'War on Drugs' cite the social breakdown caused by drugs, so it's perhaps worth reading this post by Jim Brown, a probation officer, who sees first hand the problems caused by drug use, so he's bound to support the mass criminalisation of poor drug users, right?

Virtually no aspect of the current regime works, in fact much of it compounds the problem and is hugely expensive along the way.
But some drugs are so dangerous that they cannot be tolerated, right?
We've all known for years that the middle-classes can manage to keep a good job and hide their drug use because they have the means to fund the habit without recourse to acquisitive crime. In the absence of a chaotic lifestyle and criminal activity, there's also evidence to support the thesis that many can maintain a recreational level of consumption, similar to that of responsible alcohol users
So he's in favour of legalisation? Well not quite.
just to be clear, certainly in relation to heroin and similar substances, I'm not advocating decriminalisation, but rather a return to the situation pre Misuse of Drugs Act when heroin could be prescribed and hence controlled by the medical profession
But his views on addiction do seem similar to those of the notorious right-winger, Theodore Darymple. That addiction is an excuse of those with chronically chaotic lifestyles to excuse self-destructive behaviour. People blame the drug, not their own folly for the state they find themselves in. This is easier on the Ego than the reality that some people just can't cope.Darymple, writing in 2006...
Addicts want to place the responsibility for their plight elsewhere, and the orthodox view is the very raison d'ĂȘtre of the therapists. Finally, as a society, we are always on the lookout for a category of victims upon whom to expend our virtuous, which is to say conspicuous, compassion.
The answer, in whatever way it's done is to punish acquisitive crime, with drug habits being neither mitigating nor aggravating circumstances, and leave those who just enjoy a different drug to that decided is acceptable to "society" to their habit. Any problems from over-use of drugs should dealt with by the medical, rather than the legal and law-enforcement professions. More and more law-enforcement professionals, Doctors and people with the ability to find their arse with both hands and a map are starting to put their heads above the parapet by saying mass criminalisation has failed. Let's try something else. Sooner or later sociologists and politicians will join the reality-based community.

People like to get high, stoned, pissed or otherwise anaesthetised or stimulated. Leave 'em alone until they nick someone else's stuff, or punch another in the face, then punish them for that. People, not the consciousness-altering substances they may consume have agency.

Saturday, 18 February 2012


The Economist this week deals with the regulatory labyrinth of the Dodd-Frank act. It put me in mind of the regulation of my dusty corner of the financial services industry. We stockbrokers, managing money and advising clients on stocks, shares, unit-trusts, investment trusts, bonds, managing money in ISAs, Pensions, for Charities, trusts, companies, relying on long-term advisory relationships with clients. This is not an industry with a track-record of mis-selling products. Nor was it one, unlike the superficially similar IFA sphere, replete with cowboys. There were not many complaints from customers, even during the crash, because it would be a short lived career if I made promises I couldn't keep. Hoary old brokers had seen it all before, and advised the young-guns to hold the line, stick 'em in Gilts and wait. An advisory relationship is one where the broker gives his opinion, and the client is free to take it or leave it, but I am not selling a trade, I am building a business. I want my clients to be happy with my advice in 30 years time.

Nevertheless, "deregulation" was blamed for the financial crisis. We were unregulated and so that couldn't be tolerated. Something must be done, regulating blameless stokbrokers is "something" so the FSA will do it. There were brokers without qualifications, many of whom had been running money with great success since before "big bang". Stockbrokers were advising people, without keeping detailed records of every phone-call, which offended the horrid little bri-nylon Gauleiters of the FSA. The idea that a client might just want you to give advice on a pot of money, for a particular purpose - inheritance, or school-fees for example, without knowing the clients income, expenditure, mortgage, inside-leg measurement and so on just did not compute with the FSA.

So the new round of regulation, the RDR sees every broker have to take more exams, much of the content of which is entirely irrelevant or obsolete in one tax year. As most "wealth managers", as the FSA seems intent on rather grubbily calling Stockbrokers are self-employed, we will have to find the money for these exams out of income. This extra focus from the FSA doesn't come cheap. My FSA and FOS fees, which I pay every month, have tripled in the last couple of years.

I don't see how my clients benefit from the vast amount of extra information on them we are obliged to store about them on our computer systems. Indeed, much of it, if I am doing my job correctly, I already know. But this won't wash, I have to be able to prove that I've asked my client about his health. The client cannot opt out, or keep his mortgage balance private from his stockbroker. For my clients, this will simply be a question of a detailed fact-find to satisfy the regulator, and hopefully their service will continue.

But for much of the industry, the clients will end up being the ones paying for this regulatory focus. Those FSA and FOS fees will be passed on to clients. Clients who've dealt occasionally will be subjected to an intrusive fact find or lose any opportunity to ask for any advice at all, ever. Long-term clients whose fees are currently low will find their existing arrangement "tidied up" as they're "re-papered". Their fees are extremely unlikely to go down.

It gets worse. The first firm I worked for was the now long-defunct Gerrards, now subsumed into Barclays wealth management. Gerrards, itself a merger of Capel Cure Meyers and Albert E Sharp's was a large, but otherwise old-school private client stockbrokers. The senior management, for whom I (then a wet-back, just out of the Army) was a bag-carrier, decided that the brokers out in the branches, doing their thing was a risk which it couldn't afford in the new N2 world. Instead, an "investment process" would be created. An Asset Allocation committee would set the appropriate split between cash, Gilts, bonds and equity for clients, who would be put into 3 "risk" categories. An investment committee would then decide which individual equities or bonds would form the "core holdings" within these asset classes.

Brokers who had up till this point been owners of their own businesses, and who gave as much or as little advice as their clients felt they needed to navigate the financial markets, were reduced to salesmen, actively ringing up clients who neither desired nor needed the advice to switch long-term holdings on the say so of a team of analysts (Which by this stage, I had joined). Analysts were encouraged to advise switches and congratulated on the basis of the commission generated. Brokers were thus encouraged to churn their client's accounts. Portfolios were monitored for compliance (not straying from the "recommended" list). People who had enjoyed playing the markets with a trusted broker, were now forced into what amounted to an expensive index-tracker. Don't like Vodafone? Tough, it's 20% of the index (in 2000) so it's a "risk" (regulatory "risk", to the broker, not financial risk to the client) to be out of that stock.

The old school brokers out in the branches revolted, and so I watched a perfectly strong business, which had long served its clients perfectly well for decades, utterly destroyed in a matter of a few years. I jumped ship to Lazard and whole branches left to join partnerships and firms which would leave them alone to get on with servicing their clients.

The FSA, which does not understand Private Client stockbroking, and therefore does not like this is at serious risk of harming clients by hammering the brokers with often inappropriate demands for record-keeping, and fact-finding. The ultimate effect is to deny decent advice to people without serious amounts of money to invest. If it ain't worth my while spending 3 hours or more finding out your inside-leg measurement and medical history (the former is flippant, the latter is not), I will not be able to advise you about the best way to save for your retirement. You're on your own, or at the mercy of cowboys. Maybe you've inherited a pot of money and you'd like to stick it somewhere for a few years, before buying a house. Maybe you've downsized and would like to supplement your pension with a bit of income from the capital. Few brokers will touch you if it's less than £100k.

Most ordinary people are therefore left at the mercy of IFAs and Banks who won't advise you about investments. They will sell you a product. Big finance is almost entirely parasitic in this regard. I typically charge less than 1% for advice. Most funds charge 1.5% or more. You will get no more contact, except when a salesman rings you up to "advise" you to switch into a different fund, using a script. The salesman gets commission, but unlike an old-school broker, he's not responsible for performance, a faceless and distant fund-manager is. There will be no ongoing relationship, because the salesman who will have given you his card when you went into the bank's branch will have been promoted or fired by the time your circumstances change.

Inappropriate over-regulation is killing the old school advisory business, just as it killed old-school relationship banking where long-term relationships have long provided decent advice to people for a reasonable cost. The only people to benefit are the big banks who have access to more captive customers for their fee-larded "products" sold according to a process, and the regulation sausage factory of the FSA.

I am going to get little sympathy. Though I am just a guy earning a crust by helping clients decide which stocks to invest in to achieve their aims, in the popular imagination I may as well be a "banker". But this nonsense is going on in every industry, not just finance. I am not saying all new regulation is wrong. Much of the new regime is merely formalising what a decent broker should be doing anyway. But to imagine this is without cost is naive. And the cost is borne by customers, who lose choice and privacy as well as paying higher fees. Regulation ultimately benefits government, which gains power over people, and big business, which can absorb the cost, pass it on, and put the insurgent or innovative smaller player out of business.

Ultimately the cost is borne by the nation who have to employ a caste of nose-poker-inners in every industry to check "compliance" with regulations. The only businesses who can influence the regulations are the big, powerful, politically connected ones, and you can bet they're gaming the process to their benefit, and against the interests of the entrepreneur, sole-trader and independent small firm. This crony-capitalist cartel is the real beneficiary of over-regulation. The compliance department, or indeed the PAYE administrator, or the H&S officer may be nominally employed in the private sector, but they're every bit as parasitic as the mandarins of Whitehall, as they are not serving the person who's forced to be paying them.

Worse, innovation may well be beneficial to customers, but the compliance risk means much innovation is not allowed or otherwise stifled because regulators who by their nature are conservative and risk-averse don't like that which they don't understand. Ultimately As we're at the technological frontier, without innovation, we've no growth. And what does the UK desperately need now?

Tuesday, 14 February 2012

Moody's, Ed Balls & the Tories' Plan 'A'

Let's be clear how little room for movement the Government has. The deficit is falling but remains at around 8% (down from well over 10%). Debt remains reasonable (by Europe's disastrous standards) at 70% of GDP or so. Just because other countries are worse, doesn't mean the UK can carry on spending however.

The evidence appears to be that any stimulus from deficit financed government spending stops when debt reaches 80% of GDP, and that debt burdens over 120% of GDP kill growth (look at Italy and Japan. So, that's a clear instruction to cut spending as fast as possible, because we will start breaching these limits next year? Well not so fast! There is evidence that cutting spending by more than 2% in real terms in any year tends to have people out on the streets chucking rocks, and this isn't good for wealth or happiness either.

The UK government is cutting spending in real terms (which when inflation is high means the cash spending is growing...) by about 2% across government.

Let's rule out the Labour plan to slow down the cuts. They will simply lead to higher debt in the long-term. At best this will be pointless. At worst, we could end up like Japan, where decades of "stimulus" have failed to produce growth and left the country with a debt burden in excess of 200% of GDP. Ed Balls' wittering on about "plan B" doesn't change the fact that his predecessor, One-eyed lunatic McDoom, wasted all the available "stimulus" ammunition while the going was good, leaving, as former Minister, Liam Byrne said "...No Money Left" for a Keynesian stimulus when the music stopped in 2007. Labour's "plan B" should be seen instead as merely the self-interested wailing of the public sector salariat, who had it good for a decade, and now the music's stopped, they're complaining.

But what about the right, for whom the spending cuts are not nearly fast enough? Well, because I would rather see the Government achieve its fiscal aims without widespread violence, thank you very much, I think 2% a year real-terms cuts are about right.

Does Labour's charge that "cuts kill growth" stack up? Yes it does, but this is a small truth, big error. In the short term, an enormous amount of public sector demand is removed and this is not instantly taken up by the private sector. However, freeing the resources, especially competent labour, will in time lead to faster growth as confidence, investment and hiring picks up. Even in the apocalyptic business environment of the last couple of years, private sector hiring has run at three times the job losses in the public sector. However, despite the observation that slowing "the cuts" might help GDP in the short term, it is not clear that any further stimulus is possible, so it is better that this necessary shift from public sector to private happens now, before it is forced upon us by the markets. It is better to have a few quarters of stagnant growth than the violent catastrophe which about to befall Greece, or the enormous disruption which will be forced on Italy or Spain.

Of course the UK can print its own money. So perhaps a better model is Japan, where Government spending was jacked up in response to a balance-sheet bust caused by over investment in property and other assets. JGB yields remain low, mainly as the country has spent most of the last couple of decades in a deflationary spiral. Stimulus spending has not worked, mainly because the bad debts have not been purged from Banks' balance sheets, and have acted as a mill-stone round the country's economy. Thankfully (yes, thanks in part to Gordon Brown) the Banks in the UK have aggressively written down their bad debts. That's why their losses were so enormous. The purge of bank bad debt has an analogue in the non-financial economy in the form of a recession, as assets and labour are reallocated. Endless "stimulus" is just bailing out the malinvestment rather than purging it.

At present, UK 10-year gilt yields are 1.9% or so. Moody's who've just put the UK on Negative outlook, still gives the UK a 70% chance of retaining its AAA credit rating. When S&P downgraded the USA, the markets ignored it, and pushed US treasuries to their lowest yield on record soon afterwards. On the other hand, the Markets ignored France's downgrade to AA, because the French had long traded as such. A yield in line with Germany's and the USA's is the mark of credit worthiness, not the mere opinion of a rating agency.

Furthermore, Moody's, for what it's worth (not very much...), explicitly supported the UK "austerity" program. Which rather leaves Ed Balls in a quandary. Yes, growth is what is needed, and to some extent, in the short-term, austerity hurts. But the austerity measures, by freeing resources and making them available to the dynamic part of the economy create the conditions necessary for growth in the future, so no serious economist or agency thinks more stimulus is desirable necessary or indeed will work in the UK. The Government deficit is 8% of GDP. That's as much stimulus as the country can take right now.

A "balance-sheet" recession always leads to slow growth afterwards as both public and private sector retrench. This sort-of-non-recovery was predicted, not least by me, in this blog. The good news is the Private sector de-leveraging is going well, and may even be complete. Both personal and corporate debt are at historically low levels. UK Banks are well capitalised, and there's a pool of surplus labour, not all of it the unemployable long-term unemployed. When confidence returns, there are all the conditions for a long boom. looking at the evidence and concluding that I can't see how the Government could do things much differently will lead to accusations of being a Coalition shill. Politicians can be right sometimes you know, and I think things will get better surprisingly quickly from here. And that's the most controversial thing a blogger can say. Moody's "negative outlook": whatever Ed Balls says, there's nothing to see there.

Monday, 13 February 2012

Yesterday's Sun

A book called Yesterday's sun by Amanda Brooke turned up in my house for some reason. Having read the first 24 pages, filled with such eruptions of literary onanism as...

"...the tell-tale white buds of of spring sparkled against the night..."
I decided the book was an unreadable, cliche-ridden depiction of dreary people, about whom I felt nothing. The descriptions are flawed:
"...Her bed was a writhing mass of bed-linen.."
..."Writhing"? Is somebody still in it, or are there a lot of bed bugs? The story is melodramatic nonsense: she's been whisked into the future for some reason and seen herself dead, something she described as
...the tentacles of her living nightmare...
It's as if she's thrown a dart into a thesaurus for descriptions. Similes are sprayed onto the page with the care and attention of a man urinating after ten pints. Above all the dialogue is, frankly, unbelievable...
"...I hope you can see me; I hope you can hear me, sweetheart because I don't think I can go on if you'd completely left me." Tom's voice was a crackled whisper, and he closed his eyes tightly, suppressing the tears that had sprung to his eyes.
and later
..."Good morning, my light, my life" Tom chirped. "Good morning, my compass my anchor", replied Holly.
I've left skid marks on the U-bend with more literary merit than this story about the human equivalents of magnolia paint. The good news is I don't have to read it, nor do I have to measure what I say about it. I have read 24 pages so YOU don't have to. Nevertheless for all its faults, the book it raises some profound questions about the human condition: THIS gets published? Why? For whom?

Sunday, 12 February 2012

Idealogical Certainty.

The main problem with political debate is that the tribes are simply not interested in speaking to each other. The left think the right are only interested in the rich, and are basically self-interested. The right think the left are emotional children, assessing the motives behind policies (with cash inputs as a measurable proxy for morality) without being interested in the effects. Of course, most lefties fervently believe that the state can and should provide services and redistribute wealth, because they believe this will make the country happier and better to live in. The right believe that a smaller state, with a dynamic economy is a better way to achieve the same ends.

I suspect this represents a hankering amongst the politically interested for the ideological battles of the past. Tories want Cameron to be more aggressive, provoking a confrontation with the Unions, so that they can re fight the miners' strike. That he isn't picking fights with Europe, the Unions, and so forth leads to suspicions that he's "not a real Conservative". Labour for their part despised Blair for failing to reverse Thatcher's legacy, deriding him as not "real" Labour for essentially the same reasons as some Tories despise Cameron. The two sides are simply not interested in talking to each other.

The fact remains, whatever the rhetoric, Labour presided over a massive (and to my mind) catastrophic growth in the state from 2000 to 2010, and only the most rabid anti-Cameron Tory would suggest that the coalition isn't trying desperately to reverse that.

Frankly, I'm losing interest in debating with people on the Right who use the phrase "blue Labour" and with people on the left who mouth the same tired, tribal dogmas without even making the effort to engage with the ideas. In both cases, there is a refusal to look and be influenced by empirical evidence, with endless appeals to "common sense". On the left this is used to support the idea that cuts are "too far, too fast". On the right, it's in favour of populist authoritarianism and tax-cuts.

What more does a "Real" Tory (which usually, in practice means a UKIP frother) want from Cameron? Free schools not enough, they want compulsory selection at 11-plus and a Grammar in every town. Standing up to Europe by vetoing a treaty isn't enough, because there was a subsequent negotiation; they want withdrawal. Cutting the deficit as quickly as possible isn't enough, they want a tax-cut too, and hang the consequences.

Labour have got what they want from the Leadership, a combative head-banger ranting economic lunacy as Shadow-Chancellor, and a Union stooge as leader of Her Majesty's Loyal Opposition, and no interest in talking to the country. Unlike Labour, the Tories have people who ARE interested in talking to people other than the tribal base. The last thing we need is for a Conservative party to follow Labour's lead by being interested only in talking to itself, for that is the real route to oblivion.

While 'the cuts' are happening, I'm content this is a Tory government, even if the rhetoric is more conciliatory than the base would like. The 'state as proportion of GDP' is all that matters. For my point, being in broad agreement with a Government is unbelievably debilitating for a blogger.

Saturday, 11 February 2012

The Coalition & Its Dwindling Band of Friends

When even the Spectator (£) turns on a Conservative PM you'd think he's in trouble. Blogger, Prodicus speaks for many when he says he's on the verge of leaving the Conservative party, mainly because of a complete lack of faith in the abilities of David Cameron, whom he believes to be something other than a Conservative. This is because of the Euro-sort-of-veto, right?

No, not because of the vanishingly-few attractions of UKIP. I want us out but I am a realist and it's not the first item on today's agenda.
Clearly not. hose are my sentiments exactly. Why is it then?
I think David Cameron is too cowardly to lead the Conservative Party as a Conservative
I am not sure the problem is cowardice. Indeed the opposite is the problem. Cameron has battles with a deeply entrenched labour establishment, who is deeply hostile to 'the cuts', reform in Schools, the NHS, and the rest of the public sector where the Conservatives have initiated widespread and radical reforms. On Europe, the mandarinate will seek to water down any tough talk from a mere politician when thrashing out the detail in negotiation. The problem isn't cowardice, more a lack of strategic vision. I think of the NHS, Schools, Welfare, 'the Cuts' and Europe where the Government has battles with the establishment, Cameron has bitten of more than he can chew. Of these issues he can pick 2 or 3 and expect to win, otherwise he risks losing all of them.
He does not think like and does not know how to wear the armour of a national leader. He is ill at ease and reluctant and scuttles sideways when facing both domestic and foreign threats to the nation and its way of life.
I think people have forgotten just how dreadful in this regard Brown was. It's true, Cameron does not wear the armour quite as well as Tony Blair, but there have been few politicians more teflon-coated than his Tonyness. Cameron's not embarrassing to the UK in the great councils of the World in a way Brown, with his fawning infatuation with Barry O'Bama was.
He is the heir to the Grocer rather than to Margaret Thatcher.
For many Conservatives, any leader who isn't Saint Margaret of Thatcher will always be Pepsi rather than the real thing. But I am not sure we need a Thatcher right now.

The problem is that coalitions just don't work in Britain's political culture. The Liberal Democrat voters didn't really want power for their party, they just wanted to be able to say "Don't blame me, I voted Liberal" at dinner parties. But in order to differentiate themselves from the Tories, you've got Government ministers popping up saying higher rate pension tax-relief should be abolished and the 50p income tax rate shouldn't be. It's not until you read past the headline that this comes from Danny Alexander, chief Secretary to the Treasury, whereas the Chancellor is against these ideas. The same is true of Cameron's Quotas for women on PLC Boards. This is never going to become law. It's Cameron's attempt to reach out to non-conservative voters, not a serious policy proposal.

The most poisonous legacy of the Blair years was the extent that Government was enacted by headline. The difference between Labour and the Tories is that the latter are much, much worse at the media manipulation and so give the impression of a bunch of ferrets fighting in a sack. When you actually look at the legislation, however, you have radical pieces of legislation on Welfare, Schools or the NHS, which whilst savagely opposed by the establishment and bureaucracy in these industries, seem to me in each case to be broadly along the right lines. Millions will be taken out of income tax by the steady rise in the Threshold. This IS a tax-cut.

Above all, this Government inherited a poisonous legacy of criminally incompetent overspend and mismanagement from the last Government. Since they took power, despite chaos in Europe and an unlooked-for war in Libya, the British deficit has fallen from over 10% to around 8%, so the debt burden is still rising. However contrary to warnings, job creation in the Private sector has more than offset job losses in the public, since 2010 by a factor of around 3 times. It is true, it's unlikely that the deficit will be eliminated "within this parliament", and employment growth is not yet enough to reduce unemployment but does anyone, really, think Ed Balls' plan to spend until we're Italy and call it "neo-endogenous growth theory" was going to work better? 'The cuts' were always going to be disruptive at first. Economic chaos in Europe has seen the UK, thanks to the Governments commitment to deficit reduction (and 3 rounds of QE) the markets have kept the faith, seeing 10-year gilt yields fall to 1.8%.

I would like to see more supply-side reforms. I would like to see the end of the 50p rate. I would like to see less 'banker bashing'. I would have liked Cameron's veto to mean the EU did things differently. But while the disagreements between and within the parties of Government give the impression of chaos, the actual legislation affecting how we live appears to be vastly, infinitely better than the legislative diarrhoea of the last administration. I rather like the fact that we see disagreements in Government. It reassures me we live in democracy, compared to robotic non-entities mouthing identical soundbites which characterised the last Government.

Cameron is no Thatcher. Thatcher removed warships, which some saw as a green light to an Argentine invasion. Cameron's hinted about nuclear subs and sent the world's most capable air defence destroyer. Which is better? I think too many Tories (& Labour...) hanker for ideological certainties of the 1980's and forget just how ghastly Gordon Brown was.

I still think this could be a great government, and history will be kinder than the news if they're successful in any more than half of their agenda. I think Prodicus should keep the faith for a while longer.

Wednesday, 8 February 2012

"Out of Touch"?

One of the common arguments thrown at me is that I am out of touch with "reality" and that all my economics comes "from a textbook" (which is odd, since all my economics has been learned on the job). Specifically, I can't know what the effect of unemployment means to the people to whom it happens. This is especially true when I argue against Labour protection. Of course to a leftie, all Tories are only in it for the benefit of "the rich" and the poor are simply a source of sustenance (as we eat their babies). This is an example of brute prejudice of the lefty, but it needs dealing with.

First up. Left wing "economics" usually puts motivation above effects. So you get a minimum wage which I believe destroys the life chances of the most vulnerable and traps people on benefits. Lefites, by supporting this policy hurt the poor, whom they claim to be helping. Then the left argues that anyone opposing this policy is "in league with fat-cat bosses " or "wanting to recreate the workhouse" or some such arrant nonsense. This crap usually comes from highly privileged lefties, often who've got significant private wealth, and a secure, professional job. They are almost always university educated, and wouldn't know a hard days labour if it smacked them in the face.

I am not of the working class. I am a public-school educated stockbroker. I would be the last to deny my privileged upbringing. My parents made enormous sacrifices for my education. But I did not take internships in offices when at university, I worked on Building sites as a hod-carrier (go on. Find me a harder job...), I mowed lawns for the council, I worked as a Courier and rickshaw driver in Edinburgh and I have worked in a factory. Lest I give the impression that I am a horny-handed son of Toil, the factory in question was owned by my father. This does not mean I got an easy ride, quite the opposite. It means the Foreman delighted in giving me the shittiest jobs, then telling dad about it, and if I didn't work harder than others, it reflected badly on him. Something to pick up at Chettles, a meat rendering plant where the air is thick and emetic? Guess who's going to be driving there, scraping the rotting residue of carcass off a motor, then doing the preparation when it gets back to the factory? I once spent 3 days inside a Boiler scraping soot off the inside before it could be serviced. I sweated black for a week. I know working people do this every day. But this means I do know the honest satisfaction in standing your round after a hard day's work. I am also a currently a non-commissioned Officer in the British Army. The Idea I have no idea about what the working class thinks, or that I exist in some "ivory tower", is ridiculous.

If there is one thing about what the working class thinks, it isn't what lefties think they should think. The contempt the actual working class is held in by the average Hampstead leftie is proportional only to the degree with which they romanticise the workers' struggle, of which they know nothing save that which comes from books written by other Hampstead lefties. The people who have the most extreme opinions of those living off the benefits system, for example are the benefits recipients' neighbours. The working class are almost universally economically protectionist, anti-immigration and socially extremely conservative. Lefties don't like this. They don't like this at all. The working class have never been forgiven for failing to rise up and destroy "capitalism".

So. My belief is that a booming economy is the best protection for a worker. That high taxes and high government spending slow growth and reduce the surplus which can be spent on working conditions. Minimum wages hurt the poorest most. Job protection reduces the number of jobs.

I don't hold these opinions because I am unaware of the suffering of unemployment or hard industrial working conditions. I know both from personal experience. I've been made redundant more times (3) than any of the lefites who accuse me of being "out of touch". I just got on with it, and always found another job. And this leads to an important thing to know about unemployment. It isn't a lump of people, out of work permanently. 10% of unemployed people find work every month, even in a recession. The unemployment number is rather the pool between two fast-flowing streams: people losing jobs, and people gaining them. People lose jobs at a relatively constant rate over the business cycle, it's job CREATION which fluctuates wildly. So, broadly, while the left focuses on protecting jobs, they ignore that policies to achieve this reduce job creation by making people riskier and more expensive to hire. I think this focus wrong.

I hold these opinions because I believe them to be the best way of delivering the results - full employment and high wages - we all want. There are no answers in economics, only trade-offs. So you want high minimum wages? You must accept unemployment. You want job protection? Then you must accept lower job creation. Is that a "price worth paying"? You can have high debt-financed public spending, but this tends to slow growth, reducing the pie to be shared, to the detriment of all. Suggesting that a recession has positive effects on productivity doesn't mean I think unemployment is a "price worth paying", merely a short-term inevitability. Generous, means tested benefits damage the incentive to work & save. So much left-wing rhetoric denies the existence of these trade-offs, believing passionately in a free economic lunch courtesy of high taxes on "the rich".

I wish lefties could stop using the ad-hominem argument of questioning the motives of the "right wing" and focus instead on the effects of policies and debating where the trade-offs should be. The problem for the left is that to acknowledge the existence of trade-offs would destroy the rhetorical defences they've built. Economics isn't a dry subject, only of interest "in theory". It is the study of the use of scarce resources, the effects of incentives in the real world. Denying economics exists, and denying the existence of trade-offs it studies makes debate very difficult.

Update: QED 1 QED 2

Bad Science

Bad Science
Created by: Clinical Psychology

Sunday, 5 February 2012

The Welfare Reform Bill

The most acrimonious debates on Twitter are between myself, and a few like-minded libertarians, and a purple-twibbon army of disabled people, about the Welfare reform bill.

When asked what was his greatest political fear, Tony Blair once answered "the disabled". Sure enough when his administration attempted a similar set of reforms to those proposed at the moment by the Coalition, a passive-aggressive disabled mob chained themselves to railings all over the place and the reforms were defeated. Labour ran scared from an issue at which the leadership was at variance with the activist base, for whom "benefits cuts" are an anathema. The problem is that the Welfare system has become too cumbersome, too bureaucratic and as a result too generous to many, replete with perverse incentives preventing a class of permanent benefits recipients ever getting work, with marginal withdrawal rates in some cases over 100%.

At present the system doesn't do any of the things a decent benefits system should do. Any redistribution is effectively between the poor, as the low-waged are taxed to pay the benefits of their non-working neighbours. Their income is then topped up from the benefits system in a bizarre and bureaucratic abortion of tax-credits. This bureaucratic leviathan doesn't protect incentives to work, the very complexity of the system creating a fear, preventing people taking the low-paid, insecure jobs which are a necessary first step on the employment ladder. The poorest are trapped in a bureaucratic nightmare, and those with jobs are forced to pay through the nose for it.

Surely no-one denies that the system needs reform?

I have seen two mutually contradictory positions. First that these are the wrong reforms because they won't save the Government money. All reforms save less than they are supposed to. The other is that these are treasury-led reforms designed to take money from the neediest in society. Of course some people will lose out, most widely publicised being those Households of housing benefits recipients mainly in London who are in receipt of a total amount in excess of a benefits cap of £26,000. That's the point.

These people should do what cash-constrained working people have to do and move to a grottier part of town. No-one has a right to a £1m pad in St. Johns wood. Exempt from this benefits cap are, of course, the disabled. So far, so reasonable.

Next up seems to be the demise of Disability Living Allowance, a payment designed to help the disabled with increased living expenses. A wheelchair user's car is likely to be more expensive, everything else being equal. They may need a home expensively modified and so forth. The DWP estimated that this benefit is not subject to fraud, but this is questionable. Overpayment was equivalent to over 9% of expenditure, mainly because "customers'" conditions change over time. DLA's replacement with Personal Independence Payments or PIPs mainly changes the frequency of assessments, so "customers'" who get better, lose benefits more promptly. Yes, people will lose benefits they've come to rely on, but working people lose jobs from time to time. Again. I struggle to see how the changes are throwing disabled people under a bus.

The problem is that being signed off sick has become for some an income in perpetuity, absolving a person of ever seeking any work. It shouldn't always be. Some people who have become used to generous welfare payments may well have to do without. Again, that's the point.

Finally the Universal Credit aims to replace Housing benefit, tax credits and various income related benefits. A simpler system is necessary to remove the obscene marginal withdrawal/tax rates faced by many people moving from benefits and into work. Many people will face lower benefits receipts, but as they will also face lower tax rates thanks to a higher personal allowance, this increases the incentive to work, which is the ONLY way out of "poverty". (The scare "quotes" are to indicate relative measures of poverty, rather than absolute, which simply doesn't exist in the UK, except by choice). Some form of universal credit represented one of the two main reasons for supporting the Tories (along with the education reforms) at the last election.

Of course a number of people are going to face cuts to income, and are going to have to make choices. But these choices are not materially different from those faced by working people on low wages, who faced (and still face) over a decade of tax-rises. They are not going to see people "on the street, starving" as many of the more hyperbolic purple twibbon army regularly claim. Given the broad thrust of the reforms strike me as being in the right direction, unless anyone can point to people suffering more than a few more assessments or losing a bit of money and facing hard choices, I will continue to confront the hyperbole.

Disagreement isn't "bullying". Just because someone's in a wheelchair, doesn't mean they occupy the moral high ground.

Saturday, 4 February 2012

Manufacturing Jobs Wibble.

I was talking to a Farmer recently (until about 1750, any job which wasn't involved in agricultural production wasn't "real"). He was telling me about how his new Tractor (he had one of the four-tracked Leviathans that Richard Hammond chose in that episode of Top Gear) could plough. Basically, the GPS could be set to have the furrows overlap within a few inches. The productivity gains mean that he can plough an extra field or two a day just from not ploughing the same bits twice by eliminating overlap. The Tractor is then hired out at profitable rates to other, smaller farmers. The same is true for Combine harvesters and the like. The relentless focus on efficiency drives productivity improvements, and has done since the industrial revolution.

A small cadre of highly skilled professionals do the jobs with enormous machines once done by vast armies of peasant labourers; which is what's happening to manufacturing. British industrial production is rising barring recessionary glitches, UK industrial production has kept rising for most of the last 100 years. We are still producing lots of things that can be dropped on a foot. It's just it's no longer done by the descendants of those peasants who left the land during the industrial revolution to seek work in factories. Those factories still exist, but they employ a small number of highly paid people to operate machines which do the riveting, welding, assembling and polishing. Each machine takes does the job of hundreds of people.

That's what happened in Agriculture, and is happening in Manufacturing. And THIS IS A GOOD THING. Because all those people not employed in riveting in Tyneside shipyards or Scything Lincolnshire corn fields are employed doing something else for someone else. All that productive labour has been freed, but we're still getting the food produced, in abundance the Lincolnshire harvestman would have thought impossible.

The majority of Western economies are now services. Even the Germans, who've a niche in Machine tools and Automobiles have only 21% of their economy in making things they can drop on their feet.

And this reflects another point. Manufactured products are getting cheaper, so to have material wealth unimaginable to our Lincolnshire harvestman requires far fewer hours of Labour to achieve. Thus cars, the most expensive manufactured products most of us buy, are getting cheaper relative to average earnings, decade by decade. A reliable runaround would have been beyond the means of a WW2 factory worker, but is available to a cleaning lady now. So the same car forms a smaller part of the economy. Having spent less on the car, we can spend more on clothes, shoes, music, computers, kitchen appliances etc, and in so doing provide jobs to people supplying those things. Above all we can pay for people do do things for us - cut our hair, serve us food in restaurants, mediate for us legally, invest our surplus production into other productive activities, heal our illnesses and so on.

And because more of our money goes into buying services than it does in buying manufactures, it stands to reason most of us will specialise in providing services.

The ultimate logic of Adam Smiths division of Labour is that people will, over time, supply our needs with fewer and fewer inputs as we get better at doing it. Thus an activity, agriculture, which occupied the lives and productive energy of 90% of the population 400 years ago, now only occupies 2%. 100 years ago, people made things. Now we make more, but use fewer people to do it, and instead provide services which so far can't be done by machine. This list is shrinking.

In time, just as in agriculture, high paying jobs will come from managing machines which produce with extreme efficiency, or by exploiting a niche where people pay an excess for a craft built object. So you can either have a farmer managing an expensive machine, or running an organic farm and charging a premium to people who want to know the name of the cow they're eating. You can get your clothes mass produced relatively cheaply, or you can pay through the nose for a Tailor on UK wages. You can have your car put together by machines in Nissan's famous Sunderland plant, or you can buy an Aston Martin, hand-built in Warwickshire.

So the next time you see someone opining of dear old blightly that "we don't make anything anymore", remind yourself that we do, it's just it takes fewer of us to do it. Then ignore everything else that person says, because they clearly know nothing.

Western unemployment is at a high, following a series of financial crises, but to blame this on the death of manufacturing is idiotic. There are structural, cultural and political reasons for excess unemployment, but trying to hold back the tide which has seen manufacturing shrink as a proportion of the economy is wrong, because the very process which sees people replaced by machines is the process by which we all get richer. We're simply falling down Maslow's hierarchy of needs. 400 years ago we banished famine, 100 years ago we banished material want. The developing nations, by simple dint of abandoning anti-market orthodoxies, followed us and are achieving in 10 years what took us 100. They are copying us. Chinese growth will slow when they have to innovate to grow. There's nothing remarkable about their growth, it's just what happens when you lose the dogmatic Marxist idiocy, take the choke hold off and let people get rich.

Globalisation, the search for efficiencies in production, and international trade has led to countless millions of people dragging themselves out of poverty by embracing the opportunities of trade. Korea and Japan joined the west on the technological frontier. China is catching up. As a result the 70m population of a small, damp, foggy Island of the North coast of Europe had a GDP in the same ball-park as a nation 14 times as populous just a few short years ago, but is now dwarfed by the Asian giant. This isn't a threat, nor is it evidence of Britain's "decline".

The next challenge is to banish stress and misery from our lives. I suspect this will be harder. The only caveat is that I have a great deal more faith in Adam Smith's "invisible hand" (a much maligned and misunderstood idea) than the idiotic ideas of politicians. Politicians still seem to think manufacturing jobs are special, which suggests they don't understand why we're rich. The only limitless resource is man's ingenuity. Markets aren't an ideology, they're simply what works in the absence of one, by deploying that one limitless resource to everyone's benefit.

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