bbtmn

Posts in Category: Politics

Is the minimum wage working, or just stopping work?

Wednesday 12th October 2011

It’s been announced today that unemployment is at a 17-year high, and that 16-24 year olds are being particularly affected. In that group, unemployment is higher than it’s ever been.

Back when the minimum wage was introduced, there was a particularly interesting argument put forward against it. This was that it would have an adverse impact upon people whose labour is not worth the minimum wage. In particular, it was argued that younger people with less training or experience, would simply not be worth hiring any more. Given today’s unemployment figures, this argument seems at least plausible.

The intention of a minimum wage is – presumably – to ensure that people are paid enough money to allow them to have somewhere to live, food to eat, and some sort of good standard of living. And that’s an absolutely good intention. But is pricing people out of the job market really the best way to deliver this? Isn’t it better that people work for whatever wage they’re able to collect (and, of course, are willing to work for) so that they’re at least gaining experience which increases the value of their labour, and allows them ultimately to secure better-paid employment? And if a wage is deemed to be too low, wouldn’t it be better for the government to supplement it, rather than trying to force employers to pay over the odds?

Is it time to scrap the minimum wage and come up with a more intelligent way of dealing with this? Perhaps something like a negative income tax?

Posted In: Politics Tagged: | 4 Comments

The death of capitalism, apparently

Tuesday 27th September 2011

You would imagine that when a column in a newspaper begins with “I might be an economic dunce, but…”, it would serve as a pretty damn good signal to basically ignore much of what follows. Alas, no.

If you’re on Twitter then you may have seen this article by Charlie Brooker being retweeted today, as seems to happen most Mondays. Brooker’s articles are generally fairly popular amongst the Twitterati, and so they should be as they’re usually quite amusing. But with the latest one, I really couldn’t get past the pretty fundamental error.

The title of the article is “If capitalism has failed, how the hell do we pay for our Shreddies?“. And so we can see the issue. It’s a pretty basic error, but sadly it’s one which is commonly repeated in the present climate: the current economic crisis isn’t really a failure of capitalism – in many respects, quite the opposite. So it’s perhaps a little foolish to be pondering its death.

Fundamentally, the credit crunch which precipitated the present economic mess, happened for a number of reasons. Banks lent money to people to buy houses, which caused house prices to rise. Sadly, lots of money was lent to people who couldn’t afford really afford the loan (and it’s very easy to blame greedy bankers for this; no-one seems willing to blame the greedy consumers who took on debt they couldn’t afford. I suppose it’s politically more convenient to blame bankers though). So when those debts went bad, the banks repossessed the property and put them up for sale, to try to recoup their money. This influx of property into the market drove house prices down. Mortgages are loans secured against the value of a property, and so we reached the situation where there were lots of loans which were secured against property which was worth less than the value of the loan (i.e. if the bank sold the house, they wouldn’t get back all of the money they lent in the first place). Calamity ensued*.

Reading the preceding paragraph there are two blatantly obvious questions: why did the banks feel able to lend the money in the first place, and why did lots of people suddenly become unable to afford their debts? The answer is that central banks and governments set interest rates according to whatever agenda they have at the time. In the early 2000s interest rates were set low in an attempt to soften the effects of the dot-com crash and the terrorist attacks in America in 2001. This had the effect of reducing the cost of lending money, which meant that loans became affordable to more people. Because of the low interest rates, banks could now give mortgages to people who previously couldn’t afford them. And correspondingly, consumers presumably felt encouraged to take on this debt because they assumed that they’d always be able to find affordable finance, even if their initial loan became too expensive. After all, house prices were always going up…

Of course, the low interest rates weren’t sustainable, and when they rose in the latter part of the 2000s, the cost of debt rose accordingly. And then the people who could barely afford their loans when the rates were low, suddenly couldn’t afford the debt at a higher interest rate, and had no way to refinance their debt. And so they defaulted.

We can see then that one of the key weaknesses was nothing at all to do with capitalism, or the free-market liberalism which is often assumed to go with it. It was a housing bubble fuelled by low interest rates. A colossal failure of interventionist policy, and a reminder that centrally managing a fundamental part of the economy is not necessarily a wise thing to do. And this lesson is something that those people who are generally in favour of capitalism go to great pains to point out.

Which isn’t to say that there weren’t market failures as well; the existence of banks that were too big to fail, for instance. But without the interventionist policy – the setting of interest rates – it’s highly questionable whether the conditions would’ve existed for the rest of the crisis to follow, or for it to be as profound as it was/is. Far from the death of capitalism, this – along with the troubles we’re now seeing caused by excesses of sovereign debt – should really signal the end (or at least a reduction) of the interventionist state. Probably won’t be though, and we’re all the poorer for it.

Literally.

* I’m afraid I’m simplifying a little here; there are other factors, such as the way that risk was dispersed throughout the financial system, and the rationale behind subprime lending. That’s somewhat beyond the scope of the point I’m trying to make though.

Posted In: Politics Tagged: | 4 Comments

Phone hacking, journalism, and the media

Saturday 16th July 2011

Watching the phone hacking thing play out recently has been fairly interesting. Obviously, what was done was fairly bad (although I would suggest that phone hacking – or other illegal activity – isn’t necessarily always unethical for journalists), and so it’s probably pretty shrewd of News International to have closed the News of the World. What will also be interesting now is to see what other papers are guilty of this; there are suggestions that it may have occurred elsewhere, at non-NI papers.

I remain baffled at the anti-Murdoch bent to the whole thing. I don’t understand why dodgy activity at the News of the World has derailed the BSkyB bid (if indeed it has for more than the short term), aside from the politics of the situation. Because the issue there was about media plurality, about competition in the sector, and not building up businesses with too high a share of the market (although if we really were concerned about such a thing, a good place to start would be the BBC). The argument has been about News Corp and the Murdochs having too much control over the media; yet the bid has actually been derailed because the Murdochs didn’t have control over the News of the World (I think it’s fairly accepted that the management of News Corp didn’t know about the extent of the hacking until relatively recently). Which is an interesting little contradiction.

What’s I find really interesting though is to compare this with another recent media scandal, this time concerning the scribblings of Johann Hari. He was caught out for plagiarism; he took things that people wrote in books, or in interviews to other journalists, and pretended that they’d said that in interview with him. Hari wrote/writes for The Independent (amongst others), which is generally held in pretty high regard. Whereas I think it’s fair to say that the News of the World was generally not held in the same esteem. Yet it’s the “good” journalist in the “quality” paper who got caught out for plagiarism, whereas the journalists from the trashy NOTW were caught out for basically trying to find out the truth. All other factors aside, surely the former is the greater crime against journalism? Plagiarism has to be worse than going to extreme lengths to investigate a story?

Fundamentally none of this changes my opinion of the papers, or the media generally. I’ve long thought that they’re all as bad as each other; that the Grauniad is as bad as the Mail is as bad as the Telegraph. They all have their biases, and all employ journalists (such as Hari) who are willing to misrepresent facts to make an argument. Which is a massive problem, because it leads to a public which is horrendously misinformed about fundamental issues. Such as this staggering finding that 70% of people think that the government is currently reducing the national debt, or the general ignorance towards technical subjects such as nuclear power or climate change (although there are certain parts of academia that are confused about the latter, so I guess we shouldn’t be too hard on the general public). That is the real scandal of the UK media, and the blame lies at the feet at more than just the Murdochs.

Posted In: Politics Tagged: | 2 Comments

The iron must have been hot yesterday…

Friday 1st July 2011

…because there was a lot of striking going on. That, or people are massively, horrendously selfish and blinkered.

I wanted to post this yesterday, but I’ve been working away oop north where my only connection to the internet has been flaky 3G reception on my iPhone. Which basically meant that I couldn’t be bothered to write a blog post.

Anyway, read this post from another blog, which gives a taste of what public and private sector pensions are like. An idea of the massive difference between the two.

The crux of the matter is that public sector pensions are massively generous compared to those offered to the private sector. It’s worth remembering that private sector employees contribute more in tax revenue than public sector ones (there’s more of ’em), and that tax subsidises the public sector pensions.

So what the strikers want is for private sector employees (who have worse pensions) to pay more in tax during their working lifetime, so that public sector employees can continue to enjoy more money in retirement than those in the private sector can expect to get. The strikers want other people to pay for them to have a cushy retirement.

It’s not as if the government’s proposals are stingy; as I understand it they’re still way better than what the the majority of people in the private sector receive. So those striking would still get a comparatively brilliant pension, just not as amazingly good as before.  They’re already in a position of privilege, but they still want more.

If anyone wishes to try to justify this, good luck. Personally, I cannot see how there can be any possible justification, because it’s just naked, unadulterated self-interest, with scant regard for equity. I think it’s disgusting and contemptible.

If you need a measure of how unjustified the strikes were, look how eager the Labour leader has been to distance himself from them. He essentially won the position because of the support of the big unions, and here he is condemning their actions. That tells you something (and as a sidenote it’s disappointing that the broken record act overshadowed what he said, because for once he is right. The first glimpse of the opposition doing its job half decently; we should celebrate!)

What amuses me is that most of the people who support this, are also likely to be those who denounce the activities of greedy bankers. But it’s hugely contradictory to support this behaviour from the public sector whilst ragging on bankers. Hell, at least bankers try to make it look like they deserve it, and don’t (usually) force it from other people.

Apologies if this post isn’t as eloquent as it perhaps could be. To be honest this sort of thing makes me properly angry, so it’s all I can do not to fill the screen with a string of expletives.

Posted In: PoliticsRant Tagged: | 2 Comments

How to make everybody richer

Tuesday 31st May 2011

The World Bank have released a report looking at how 100 countries have performed economically in the last 30 years. Which is useful; there are lots of ideas about how to grow economies, so let’s see which ones work best:

“this paper finds new empirical evidence supporting the idea that economic freedom and civil and political liberties are the root causes of why some countries achieve and sustain better economic outcomes… These results tend to support earlier findings that beyond core functions of government responsibility — including the protection of liberty itself — the expansion of the state to provide for various entitlements, including so-called economic, social, and cultural rights, may not make people richer in the long run and may even make them poorer.”

So economically, its free markets, low taxes, and small government which makes us all richer. Good to know, eh?

The bewildering thing is that people have argued this for a century and a half, and this is not the first piece of evidence to support the argument, not by far. And yet lots of people (mostly in the Guardian, it seems…) will still argue against this, will argue against the evidence.

So much for pragmatism, I guess.

Posted In: Politics Tagged: | 5 Comments

Holy crap, the Guardian have published something worth reading!

Wednesday 18th May 2011

About the government’s health reforms. I’ve mentioned in the past that some of the arguments against the proposals seem somewhat blinkered. The Guardian published an article today which looks at those arguments in a similar sort of way:

“The media debate has ignored the most obvious evidence: the fact that almost everywhere where they have been tried, market approaches work better than centrally planned government ways of running the same activity. Not all markets work well, but even the bad ones seem to do better than central planning.

Many arguments against competition in the NHS seem stuck in a 1930s time warp and ignore 80 years of world history that have taught even the Chinese Communist Party that planned economies are a failure – and this is true even when compared to very imperfect market ones.”

I still don’t understand why people think that healthcare should always be provided by the state. As far as I can see it, such strict adherence to state provision is the answer to a question that no-one is asking. The basic desire – that I think most people can agree on – is to have a good service, for the best value for money, which is accessible to everyone. In that case, as long as the government pays for the treatment, does it really matter who provides it? Shutting out providers other than the NHS simply means that we’re excluding providers who might, potentially, be able to do something better, cheaper or quicker than the NHS can. Can anyone explain why this is a desirable thing?

Some people will say “ah, but we don’t want to be like America, do we?!”. No, and the proposals do not mirror the American system. The American private insurance system, which means that some people simply can’t afford care, is not good. And that’s also not what’s being proposed. The market bit of the American system works well, and it’s notable that countries like France – which has private providers and a public insurance scheme – generally have better health systems than our own. The evidence stacks up, and as far as I’m concerned that trumps any ideological misgivings.

Posted In: Politics Tagged: | 5 Comments

Proportionality

Friday 6th May 2011

Looking at the results in the AV referendum so far, something occurs to me.

At the moment, it’s running at 32% in favour of AV, 68% against. The regional results are somewhat interesting though: 7 for, 314 against.

In this case, the regional results are not important. The winning side will be whoever has over 50% of the vote, which is as it should be. If, though, this was for representatives, the picture would be different, because the votes of 32% of people would amount to 2% of the representatives.

Nothing new, and I have no idea whether the regional boundaries used here are the same as those used for normal elections. But it’s yet another illustration that electoral reform is desperately needed.

AV wouldn’t have solved this issue, but it would’ve been an improvement on FPTP. The fact that so much of the population has rejected it – and therefore bought into the propaganda from the No campaign – is somewhat concerning actually.

People moan about politics and politicians, yet rejected a system which would’ve made them more accountable. Very odd.

As an aside, I’m even more amazed at the general backlash against the Liberal Democrats, but not against the Tories – or Labour, whose actions in government have fundamentally caused much of the mess that the Coalition Government are trying to fix. Do people really have such a superficial grasp of politics? How depressing.

Posted In: Politics Tagged: | 1 Comment

This is worth a listen

Monday 4th April 2011

This is a BBC radio programme from last January, called “Are environmentalists bad for the planet?“. I heard it quite a while ago and meant to put the link up here, but forgot. Luckily it’s still online, so I thought I’d do so now. The argument is that green movements are trying to use climate change and other sustainability issues, in order to push their own political motives. Which perhaps explains the reasoning behind some of their solutions.

It’s only 30 minutes long, so worth listening to if you have time.

Posted In: EngineeringPolitics Tagged: | No Comments

It’s Almost As If One of Them Had a Rich and Powerful Lobby Pressing for its Introduction…

Friday 18th March 2011

A couple of years ago, an independent review of the regulation of the water industry – the Cave Review – was published. This review was done for DEFRA, and looked at ways of altering the current regulatory mechanisms in order to improve the way the industry works. To promote innovation and efficiency, and to change the cost of abstraction and discharge licensing to reflect real environmental costs. As an example of thinking through sustainability, it’s exemplary.

Last year, the Labour government passed the Flood and Water Management Act. Reading some of the responses to the review, you repeatedly see it noted that: “These reforms will need legislative change. For this, the Flood and Water Management Bill, currently in draft, represents a very important opportunity” (from the Ofwat response). Great. So did they do it?

Well, the FWMA was passed last year. In the wash-up period. So no, of course, none of the Cave Review got put into legislation (instead FWMA covers stuff from the Pitt Review, which looked at the 2007 flooding. Not read it, but I probably will at some point). Despite there being the opportunity to do so, and despite the government paying for the bloody thing to be done in the first place… nothing.

Sigh.

For contrast, the Cave Review was published in April 2009. The Digital Britain report – which forms the basis of the Digital Economy Act, also passed in the washup last year – published June 2009. Pardon me if I think water resources are more important than screwy copyright legislation and the role of Channel 4.

Sigh sigh sigh.

I suppose we can only hope that this bunch do something positive. From the quick look over some of the stuff there, doesn’t look like it.

Sigh ad infinitum…

Posted In: EngineeringPolitics Tagged: | 1 Comment

UK Uncut Revisited

Friday 18th March 2011

In a previous post, I mentioned UK Uncut, the activist group that campaigns against tax avoidance. It was mostly a rant, because of a particular protest that seemed idiotic to me.

Today, a report has been published which looks at the 4 main victims of UK Uncut, and what the actual situation is. In each case, UK Uncut’s argument is incorrect, and often contradictory. The report also briefly looks at the economics of taxation, and suggests some ways to reform the tax system.

I think it’s well worth reading, to understand a little bit of the nuance that’s been so crassly ignored by the protests.

Posted In: Politics Tagged: | 17 Comments