Politics and Economics

Healthcare professionals should not tackle obesity and other lifestyle conditions.

fat-man

In a paper published in The Lancet Researchers are calling for a national NHS slimming service after finding that patients could lose up to 21lb (9.5kg) if a family doctor took 30 seconds to book them into Weight Watchers or similar schemes, i.e. non-medical intervention.

When it comes to ensuring individuals make major lifestyle changes to combat conditions such as obesity, hypertension and smoking, it seems the “white coat” of the medical expert can be a hindrance to a successful outcome.

Psychologically the “patient” abdicates responsibility for their condition to the expert, whether it is a doctor, nurse or the healthcare system itself.  For a successful outcome individuals need to maintain responsibility for their own health.  If fact becoming a “patient” is part of this detrimental process.  “Patients” are seen as somebody that is broken and needs fixing.  Somebody who is passive, wounded, subservient and vulnerable. There is a stigma attached to being sick, which can be depressing and demoralising.  This leads to demotivation at a time when motivation is exactly what is required. The medical messages of doom and destruction, unless the “patient” mends their ways, are also counterproductive.  All in all, a downward spiral.

A better solution is to assign a “lifestyle coach” (who could be a medical expert by another name).  This reduces stigma and makes the “individual” (now not a patient) feel more positive.  Which is more palatable?  Having a nurse, with associations of decrepitude and bath chairs, or a coach?  Coaches should return power and authority to the individual and deliver positive lifestyle messages – i.e. do you want to have more energy?  Do you want to be more attractive?  Do you want a better sex life?  Do you want better and more refreshing sleep?

Psychometric testing can help to elucidate the individuals’ strengths and weaknesses and establish their attitudes towards food, exercise, stress, wellness, alcohol, drugs etc.  The coach can then tailor the lifestyle change programme and use an individual’s strengths to help overcome their weaknesses.

Lifestyle is not a medical condition, even if it may lead to one. Responsibility for weight loss, exercise, better diet, sleep and other lifestyle conditions should be taken out of the medical arena and returned to the individual. There will be better results and savings for the over stretched Healthcare budget.

Reference:

GP referral to weight loss program is effective, acceptable and takes 30 seconds

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Genetic Explanations, Politics and Economics

Why did David Cameron’s £1.3 billion Troubled Families Programme Fail?

The £1.3 billion Troubled Families programme was launched after the riots in 2011 to give intensive support to 120,000 of Britain’s most challenging families.  But it has had no measurable impact on cutting crime or changing their lives for the better, an official assessment reveals.

This scheme was also a failure of The Blank Slate Hypothesis.  This is an idea that optimistically believed that our personality and intelligence is solely the result of our interaction with our environment.  This is a comforting belief because Government policy can manipulate the environment (at a cost) and therefore change the outcome for its people.

The Blank Slate Hypothesis became fashionable after World War 2 because of its total rejection of the Nazi pseudo-science of Eugenics and the reassuring belief, for the ravaged post-war society, that everybody would be given equal opportunities to thrive.

The social restrictions in our society were removed through grammar schools, much improved state schools and greater access to universities and polytechnics.  Children with talent and motivation broke free across Britain.  Working class children shot up the social scale with talent in science, engineering, law, sports and the arts.  These talented people did well.  They earned a good living, achieved a higher social status and joined the affluent middle classes. This seemed to prove the Blank Slate Hypothesis worked.  Change the environment and the poor working classes do better.

Then recently this progress came to a screeching halt:

  1. The research highlighted in The Times on 17th June 2013 shows that the 24 largest research universities in the Russell Group admit a lower proportion of undergraduates from state schools and from poor families than ten years ago.
  1. Children from wealthier families were nearly twice as likely to leave school with five good GCSEs, including maths and English, as those from poorer families — 63% against 36%.
  1. It seems poor white children do worse than poor ethnic minorities despite having a similar “poor” upbringing and environment. i.e. poorer outcome, same nurture.
  1. Of the 20 top local authorities in terms of sending pupils to the prestigious Russell Group universities, 19 are in London and the south. Of the 20 worst-performing councils on the same league table, 18 are in the north.
  1. Social mobility is stuck.

So what happened?

We now know that intelligence and personality are largely inherited through our genes from our parents.  Combine this with one of the most passionate and time consuming aspects of human behaviour, i.e. finding a mate, and you have a very powerful natural force. Talented, motivated women generally seek and marry talented, motivated men.  They then generally have talented, motivated children. i.e. they cluster the genes responsible for these talented, motivated characteristics into certain sections of society. As these characteristics generally lead to higher earning potential they are more likely cluster in the affluent parts of society. Also these talented genes will move and cluster to where the best jobs are.  i.e. in London and the South East of England.

Or put another way, intelligent and motivated individuals tend to increase their social and economic status in a relatively socially mobile society. It’s not the posh getting cleverer, but the clever getting posher.

For new immigrants the social factors which have limited their progress until now are relatively recent, so we expect the genes for talent and motivation to be more numerous in poorer parts of their society as they haven’t had time to cluster in the more affluent parts of society.  This explains why poorer students from ethnic minorities out-perform their white peers. i.e. same nurture but better outcome.

We would predict that eventually there would be a more polarised genetic society as the genes for talent and motivation are slowly leached out of the working class areas and into the affluent middle classes.  Eventually social mobility will slow down and humanities educated journalists and politicians will conclude that more must be done to help the talented working class children who used to exist but have now mysteriously disappeared.

They then implement an expensive Troubled Families Programme and scratch their heads and wonder why it didn’t work.

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Politics and Economics

Hierarchy of Argument

Graham's_Hierarchy_of_Disagreement.svg

 

The rise of social media (e.g. Facebook, Twitter and this website) and the ability to respond to online newspaper articles has ensured that we are more able to debate and disagree with the author. Agreeing tends to motivate people less than disagreeing and there’s less to say.

So,  there’s a lot more disagreeing in the modern, connected world. Many debate anonymously using a pseudonym rather than their real identity, which allows people to be abusive and behave differently than they would if they were face-to-face with their opponent. Trolling is the modern equivalent of poison pen letters and easier to execute.

Consequently the quality of disagreement in online debates is poor.

I found this model, Grahams Hierarchy of Disagreement useful in holding people to account on the quality of their argument.

Name-calling.

This is the lowest form of disagreement. We’ve all seen comments such as “you’re stupid / racist / sexist / homophobic”.

But it’s important to realize that more articulate name-calling has just as little weight  e.g. “the author is a self-opinionated dilettante” or “America is the only country that went from barbarism to decadence without civilisation in between” (Oscar Wilde).

Ad Hominem.

Ad hominem is Latin for “to the man” or “to the person”.  It is short for argumentum ad hominem and is a logical fallacy in which an argument is rebutted by attacking the character, motive, or other attribute of the person making the argument (or persons associated with the argument) rather than attacking the substance of the argument itself.  An ad hominem attack is not quite as weak as mere name-calling. It might actually carry some weight. For example, if a doctor wrote an article saying Government health spending should be increased, one could respond: “Of course he would say that.  He’s a doctor.”

This wouldn’t refute the author’s argument, but it may be relevant to the case. But it’s still a very weak form of disagreement.  If there’s something wrong with the doctor’s argument, one should say what it is; and if there isn’t, what difference does it make that he’s a doctor?

Arguing that the author is unqualified or lacks authority on a topic is a variant of ad hominem and is also ineffective.  Good ideas often come from outsiders with a fresh view of the problem.

Responding to Tone.

The next level up we start to see responses to the style of writing, rather than the writer. The lowest form of these is to disagree with the author’s tone  e.g. “I can’t believe the author dismisses the theory of evolution in such a cavalier fashion”.

Though better than attacking the author, this is still a weak form of disagreement. It matters much more whether the author is wrong or right than what is his tone.  The tone is subjective and doesn’t tell us if the author is incorrect in their conclusions.

Contradiction.

In this stage we finally get responses to what was said, rather than how or by whom. The lowest form of response to an argument is simply to state the opposing case, with little or no supporting evidence.

e.g. “I can’t believe the author dismisses evolutionary theory in such a cavalier fashion. Evolution is a proven scientific theory.”

Contradiction can sometimes have some weight. Sometimes seeing the opposing case stated explicitly adds to the argument, but references and evidence carries more weight.

Counterargument.

Here we reach the first form of convincing disagreement. Forms up to this point can usually be ignored as proving nothing. Counterargument might prove something. But it’s hard to say exactly what.

Counterargument is contradiction plus reasoning and/or evidence. When aimed squarely at the original argument, it can be convincing. But unfortunately it’s common for counterarguments to be aimed at something slightly different. More often than not, two people arguing passionately about something are actually arguing about two different things. Sometimes they even agree with one another, but are so caught up in their squabble they don’t realise it.

There could be a legitimate reason for arguing against something slightly different from what the author said.  For example,  when one feels they missed the central point of the argument. But when one does that it should stated explicitly that is what you are doing.

Refutation.

The most convincing form of disagreement is refutation. It’s also the rarest, because it’s the most difficult.  This is why the disagreement hierarchy forms a pyramid – the higher one goes the fewer instances one finds.

To refute someone one should quote them and then explain why the argument is mistaken. If one can’t find an actual quote with which to disagree one can give the impression of refuting an opponent’s argument, while actually refuting an argument that was not advanced by that opponent  i.e. arguing with a straw man.

While refutation generally entails quoting, quoting doesn’t necessarily lead to refutation. Some writers quote parts of things they disagree with to give the appearance of legitimate refutation, then follow with a response from a lower form of argument, such as contradiction or counterargument.

Refuting the Central Point.

The force of a refutation depends on what is refuted. The most powerful form of disagreement is to refute the opponent’s central point.

Even as high as Refutation one can still see deliberate dishonesty, as when someone picks out minor points of an argument and refutes those. Sometimes the spirit in which this is done makes it more of a sophisticated form of ad hominem than actual refutation. For example, correcting minor mistakes in events and statistics. Unless the opposing argument actually depends on such things, the only purpose of correcting them is to discredit one’s opponent.

Truly refuting something requires one to refute its central point. And that means one has to commit explicitly to what is the central point. So a truly effective refutation would look like:

“The author’s main point seems to be <x> as he says <quotation> , but this is wrong for the following reasons….” Preferably with the addition of relevant evidence and authoritative references.

Even this formula can reveal deliberate dishonesty in a debate.  For example, the deliberate citing of poorly conducted or flawed research as evidence that the central point of the argument is wrong.  Examples of poor research are many, but even well conducted research can produce the occasional exceptional result.  It is mischievous to produce these as evidence when the author knows most other examples of well conducted research on the same topic proves a different conclusion.

So what?

So what good is all this? One thing the disagreement hierarchy doesn’t give us is a way of picking the winning argument in a debate. These levels merely describe the form of a statement, not whether it’s correct. A response that refutes the central point could still be completely wrong.

The most obvious advantage of classifying the forms of disagreement is that it will help people to evaluate the quality of what they read and if the responder is being intellectually dishonest.  An eloquent speaker or writer can give the impression of destroying an argument merely by using forceful words or getting amusing and memorable sound bites quoted repeatedly in the media.

But the greatest benefit of disagreeing well is that it will improve the quality of debate.  A debate should be about testing alternative solutions to a problem.  So, a better debate should lead to a better solution.  This benefits everybody.

Thanks to Paul Graham.

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Liberty, Politics and Economics

Brexit – The Movie. A critique.

or stream the video here:  Brexit – the movie

Critique:

This movie revealed an EU that is relatively undemocratic, frustratingly opaque, often unaccountable and hopelessly bureaucratic. The EU’s accounts have not been transparent enough to be signed off by an independent auditor for years, which means it could also be corrupt. I was appalled to discover that democratically elected MEPs cannot suggest or initiate legislation (that can only be done by unelected, unaccountable bureaucrats) and neither can they repeal legislation once it is on the statute books.

On the business side it covered the enemies of a successful economy: lack of competition, restriction of free trade, excessive regulation and (again) bureaucracy. All areas in which the EU excels.  The EU has restrictions on trade with countries outside the EU and this stifles competition.   It is also damaging the economic growth of poor African countries by preventing access to the EU markets for their farming produce.  The examples of it gave of free trade and lack of Government control and regulation unleashing an economic miracle in post-war Germany, whilst the UK economy drowned in Government regulation and bureaucracy (i.e. socialism) was compelling.  As was the example of the huge economic success of Switzerland, which is outside the EU and free of its regulation, bureaucracy and general centrally controlled interference and incompetence.  Switzerland also has some of the lowest levels of social inequality in Europe.

The film also made the excellent point that we don’t need trade agreements with other countries to trade with them. In fact the UK  trades with many countries without a trade agreement. In the same way my company doesn’t need a contract to sell products to our customers. They just buy according to our standard terms and conditions.

However, I thought their emphasis on Tate and Lyle and the decline of the British fishing industry was weak, as these are relatively old and small industries.  Examples of biotechnology and technology industries would have been more compelling.  The huge success of the Swiss pharmaceutical industry, despite being outside the EU, was briefly mentioned and should have got more prominence.  There should also have been some debate on the effect of EU membership on quality and quantity of scientific research in Europe.  And everything said by the editor of The Sun newspaper lowered the tone of the debate.

Mervyn King, the former Governor of the Bank of England thinks the economic impact of Brexit or remaining in the EU will be broadly similar:

All in all, I’m not convinced there will be an economic disaster if the UK left the EU. The CBI, IMF and other so-called economic experts have all been wrong before.  Very recently the IMF and EU said George Osborne’s economic plan for Britain would cause a major recession and mass unemployment. They were wrong.  UK has the strongest growth in the developed world and low unemployment.  The EU economy is a disaster, particularly in Greece, Spain, Portugal and Italy.  Unemployment levels are high and their youth unemployment levels are scandalous.  High European unemployment is predominantly caused by restrictive labour laws i.e. bureaucratic, Government intervention in the employment market.  Perhaps the UK’s economy is doing reasonably well despite, and not because of, EU membership.  Maybe we would do even better without the EU.

In any case there is also the future possibility of rejoining the EU, perhaps even negotiating better terms.

Even if it is proven that the EU gives specific economic benefit it would have to be huge to compensate us for not having a democratic and accountable Government making our laws.

If the Brexit debate is just about the economy why don’t we just sell our freedom and sovereignty to the highest bidder?  China may be prepared to pay us a lot more than the EU for the rights to make British laws.

The one opinion I really value is The Economist newspaper, which I have read religiously for over 25 years. I generally find their views agree with my own.  They are very much in favour of staying in the EU, which is why I am still wavering.

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Liberty, Politics and Economics

Should Muirfield Golf Club be allowed to ban female members?

Muirfield-Open-Championship

Muirfield Golf Club will not stage another Open Championship after maintaining its ban on women members.  The Scottish club said voting in favour of allowing female members had fallen just short of the required two thirds majority required to change its rules.

There are a very small number of single sex golf clubs in the UK and roughly half of them are women’s clubs.

A private club is a place where like-minded people can meet and socialise.  Effectively a private club is free to exclude anyone based upon any criteria, regardless of how bigoted those criteria may be.

Should The State have the right to dictate to its citizens how they socialise and with whom they socialise?  For example, by passing laws banning private clubs or dictating their membership criteria.   i.e. restricting the right of free association.  Certainly not in a free country.

There are many, many people (particularly on the left of politics) who would like nothing more than to restrict the social activities of the rich and privileged. In fact, they would like to control how society behaves and thinks in general.  They justify the consequent legislation, prosecution and bullying of citizens whose views are different to their own by claiming they are eradicating racism, sexism and inequality. This leads to social engineering and the terrifying concept of “The Thought Police” as portrayed in George Orwell’s  1949 novel Nineteen Eighty- Four and Stalin’s real-life Soviet Communist State.

It was in the communist Soviet Union that the phrase “politically correct” was born. i.e. something could be demonstrably true or scientifically correct but politically incorrect because it didn’t support their particular political philosophy.

To maintain a free society we are in the unfortunate position of having to support Muirfield’s right to have a private club and choose their own membership, even if we disagree with their decisions. In the same way we must support a person’s right to free speech even if they use this right to express bigoted views.

If we go too far in criticising the likes of Muirfield there is the danger of populist but well meaning politicians empowering State intervention through legislation, which would be much worse.  And when political correctness goes too far we have the additional danger of a potential counter-movement, which could be even more worrying – i.e. Donald Trump and Marine Le Pen.

So, a free society means giving our citizens the freedom to make bad choices and actively supporting that right.

Further Reading:

Discrimination by private members clubs and associations – overview

Why is it legal for some golf clubs to still be single sex?

How does the Equality Act 2010 affect private clubs and associations?

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Politics and Economics

Is recent extreme populism a reaction to extreme political correctness?

20151212_LDD001_0

Mexicans, Muslims, African-Americans and Chinese have all been insulted by Donald Trump. In August, he accused a popular news presenter of asking questions about his serial misogyny because she was menstruating — and his poll numbers rose.

He enraged much of the British establishment this week by suggesting that Muslim-dominated parts of Britain had become no-go areas for police. Yet the latest poll suggests that 35 per cent of Republican voters, the highest figure yet, want him as their presidential nominee.

There is a misguided campaign to have Mr. Trump banned from the UK because of his populist views. I don’t support his views either, but he has the right to express his opinions and voters have the right to listen to him, make an informed choice and vote for him. And his populism is not alone.   In Europe populists are in power in Poland and Hungary, and in the governing coalition in Switzerland and Finland. In the first round of the French regional elections on 6th December, the far-right National Front (FN) gained the largest share of the national vote. The FN’s leader, Marine Le Pen, and her niece each polled over 40%. 

This far-right populism is perhaps a natural reaction to the con of political correctness gone berserk.  The con is the flawed belief that a human being is born as a malleable lump of clay that can be manipulated and moulded by society into anything that we want.  i.e. social policy can liberate people from their own limitations, flaws, personal inadequacies and insecurities through legislation and indoctrination.

The problem with political correctness  (if there is one) is that it has a strong vision of how the world ought to be.  Inconvenient truths are met with denial followed by shrill personal attacks and screams of “racism” and “sexism”.  Like all idealists (including socialists) there is little debate about how the world actually is and little effort to find pragmatic solutions and compromises.  This can lead to very poor and expensive decision-making, as many real-world facts are not considered before choosing a chain of action. We now experience constant change regarding gender identity, roles in society and social, sexual, racial and religious equality.  We are moving beyond laudable intentions around equality of opportunity to the dangerous premise of equality of outcome – irrespective of possible average natural differences between the classes, races and sexes.

But for the vast majority human happiness is based on security, familiarity, predictability and conformity.  i.e. understanding your place in the world and knowing how to navigate it.  Fundamentally most people don’t like change.  Change management is an enormous industry in the world of work for this reason.  Trade unions desperately try to stop the world of their members changing because it is considered harmful and stressful.

Small groups of people with a “cause” are highly motivated to change the world to suit their own agenda.   They have energy and intelligence to seize power through the media and government and then change the world to suit their own personal grievances.  But they are often a minority and their constant moving of once-taken-for-granted certainty in our societies causes stress, anxiety, confusion and unhappiness for the majority.

Perhaps Mr. Trump and Ms. Le Pen are speaking for a significant number of voters who believe that political correctness has gone too far.  It is possible to have too much of a good thing.  Political correctness must be reigned back and infused with real world truths or we risk voters supporting these populist extreme counter-measures, which would be much worse.

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Liberty, Politics and Economics

Liberty, Employee Rights and Mental Health

We now live in a world where employee rights trump good business decisions.  Companies are increasingly forced to accept employees based on our social engineers idea of “equality” and “fairness”.  These misconceived philosophies are based on an assumption that we are all equally capable and any difference in ability is down to racism, sexism or some other type of bigoted discrimination.

Pregnant women must be given equal rights, allowed to leave work for extended periods and demand equal pay when returning to the workplace despite missing out on vital experience in the meantime.  This creates a strain on all businesses but particularly small businesses when competing in world markets.  We are now being asked to relieve the work and make allowances for menopausal women who may have problems concentrating or coping with their symptoms.

There are effectively quotas for gender, and disability and race are increasingly mentioned in order to socially engineer a society with equality of outcome.

Fair enough many would say.  Our businesses are at a disadvantage when competing with China, South East Asia, etc. etc., but the social benefits outweigh the economic cost.

However there has recently been a push to extend the concept of disability to mental health.  We understand that a work place must accommodate a person in a wheelchair for example and we should not fire somebody or discriminate against them because of a physical disability.  But we are now asked to do the same for people with mental health issues.  People with physical disabilities can do almost any job so long as there is some physical help.  This is not true with mental illnesses, whose sufferers often cannot even face going to work. They may have problems processing information, communicating effectively with colleagues and they can be unpredictable and occasionally dangerous.

The idea that a person must be able to do the job they have been hired to do seems no longer applicable.  Nowadays the workplace is not about building a successful and efficient business but about creating secure employment for everybody in society.

However, this politically correct policy carries considerable risks.  The driver of a bin lorry that crashed in Glasgow killing six people and injuring 15 others had deliberately misled doctors over his history of mental blackouts that caused the fatal accident.   The pilot of a Germanwings A320  who deliberately crashed his aircraft, killing all 144 people on board, had previously been treated for suicidal tendencies.  We now understand that half of all fatal air accidents involve some sort of pilot error.   This should strengthen the case for closer monitoring of employees and their mental health — and eventually for removing them from jobs where they may kill or injure others.  We already understand that political correctness in employing people with mental health issues creates a huge economic cost but now we find that it also creates a huge human cost.

Companies should not be legally forced or morally pressured to employ anybody or retain them unless they believe they can effectively and safely do the job for which they are hired.

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Education, Politics and Economics, Religion

How can we tackle Islamic terrorism?

Islam came out of the xenophobic and violent Arab / Bedu culture of Saudi Arabia. It was then spread violently by conquest throughout the Middle East, Far East, North Africa and into Southern Europe.   The sword on Saudi Arabia’s flag celebrates this fact.

We used to say that there was nothing more dangerous than a fool with a cause. But a fool with a cause who believes they are carrying out God’s will is literally capable of anything. Any genocide, any atrocity, any sacrifice.

In Britain we have three pillars of the State – The Monarchy, The Church and Parliament and they are all largely independent.  The Church and Monarchy have been suitable neutered and liberal parliamentary democracy rules supreme.

Islam is not just a religion. In Islamic countries it is not part of the state, it is the state. It is also an ideology that seeks total control over its citizens in their personal life, their economic life and their political life.  In Saudi Arabia, Iran, Qatar, Yemen, Sudan, Pakistan Somalia and Afghanistan Sharia is the only source of legal decisions. Stoning to death, beheading and amputation of limbs remain a legal form of punishment for such crimes as apostasy, blasphemy, adultery, theft and homosexuality.

In the West we value rational, evidence-based debate, democracy and the rule of law.  Much of Islam values only irrational religious doctrine written down over 1000 years ago for goat herders living in a different age.

The problems of the Middle East can be summarised into a series of failed nation states.  The only stable Middle East countries have autocratic leaders and they quickly dissolve into chaos if they are deposed (Iraq, Syria, Libya, Egypt…).  The national borders are contrived and their populations have more loyalty to their tribe and their Islamic religious sect (Sunni, Shia, Wahibists, Aliists…) than they do to their nation state.

The same will be true of many Muslims in the UK.  Some would rather fight and die for their fellow religious sects in Syria and Iraq than their own country.  There is also a deafening silence from the many moderate Muslims who will not criticise their religion’s extremists. A few meager conciliatory words from a couple of media contrived Muslim “leaders” but where are the marches and mass participation campaigns on social media – either in the West or the war ravaged Middle East?  Again they have more loyalty to their religion than their community.

Clearly these values are incompatible with liberal Western values and our idea of the Nation State.

Worse still, these poisonous views have now infested our Western cities where they are passionately held by legitimate Western citizens.

So what is our solution?

Western liberal values and the fear of further provoking these evil extremist groups prevents us from isolating Islam for particular attention. We are a society that is comfortable making “The Life of Brian” but would recoil from considering making the Islamic equivalent.

However we have a long history of neutering the power of religion in order to achieve peace and build our Western democracies.  By religion we meant Christianity, but from now on it must mean all religion.  i.e. any form of irrational, unsubstantiated, superstitious belief.

We can criticise and defeat the generic ideas behind Islam without inflaming and offending one particular religious group.

All religions must pay the price for peaceably neutering the power of extremist Islam, because if we accept the philosophy of one religion we must accept them all.

Firstly we must protect our children from this evil.  Any religious indoctrination should be seen as a form of child abuse.

We do not have ”Conservative children” or “Labour children” or “Socialist Workers children”.  We accept that a child does not have the maturity and knowledge to give their consent to a political ideology.  We do not allow political activity in our schools, do not allow children to join a political party and we do not allow them to vote in a general election.

We believe the same is true of sexual activity.  We do not have “gay children” or “heterosexual children”.  Children cannot give consent to sexual activity until 16.

Restrictions on political and sexual activity is intended to protect naïve impressionable minds from the sinister manipulation of predatory adults.

We should have similar policies towards religion.

How can we have a “Jewish child”, a “Muslim child” or a “Christian child”?  Have they made an informed choice? Given their consent?  The sinister power of indoctrination over young and impressionable minds has been known to Catholics for centuries.  Their priests claiming, “if you give me a child, I will give you the man”.

No child should be forced to adopt any form of religious activity in schools until they are old enough to give their informed consent.  This would eliminate faith schools and the form of religious apartheid that exists in Northern Ireland and Glasgow.  It would starve extreme religions of their future brainwashed, indoctrinated disciples.  All Jewish and Muslim schools would be banned and all forms of religious clothing and adornment could not be worn in schools until the child is old enough to give informed consent.

Britain would still have complete religious freedom of expression, exactly the same as we have political freedom of expression and sexual freedom of expression.  But only when the person is old enough to give informed consent.

Secondly all religious activity must be viewed with suspicion and prevented from spreading its ideas using the machinery of State. No State sponsorship or tax breaks for religious activity.No special treatment for religious groups in our democracy (e.g. no automatic right to bishops in the House of Lords). Furthermore religious belief should have no privileges when drafting laws. No automatic right to Halal or Kosher food and no special exemptions from employment law based purely on religious doctrine. No pandering to religious belief when setting our national curriculum. No politesses when teaching our children the realities of evolution. No laws that hinder free speech for fear of causing offence.

Finally there must be more education and open debate about the dangers of irrational, illogical, superstitious belief.  We should be free to criticise these generic religious beliefs and ridicule and hopefully dissuade all those people that follow them.

This is very unfair on the moderate religions. It is also not a perfect solution but the best available solution.  But we let this evil into our societies and extreme measures must now be taken to keep it under control whilst protecting our liberal Western ideals.

Islam cannot be tackled head on without provoking more violence. But its fundamental tenets can be demolished with allegory, analogy, comedy and satire.  This should be further backed up with an insistence on logical, evidence based debate, democracy and the rule of law.

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Politics and Economics

A Greek exit from the Euro is now the best possible outcome for Greece and the Eurozone.

The Eurozone nations would be foolish to bail out the Greek Economy without insisting on the structural reforms necessary to stop a repeat performance in a year or two.

And why should only Greece get special access to no-strings-attached free money?  Why should Germans be forced to retire at 67 so Greeks can retire at 55? A Greek bailout at Germany’s expense would cause a landslide of further left-wing governments in Portugal, Spain, Italy and elsewhere with hands outstretched and beaks wide open. The Greek debt is barely manageable by the Eurozone but an emergency bail out of any of the other larger economies would cause a pan-European economic catastrophe.

Greece’s existing deal with its creditors is very lenient.  Its private debts have already been largely forgiven and the remaining €243 billion of debt is to be repaid with outrageously low interest rates over a very long repayment period.  Its interest payments are currently less than 3% of GDP, which is manageable even for Greece.

The sad irony for the Greek people is that their economic fortunes had finally started to recover when Syriza came to power.  For the first time since the first Greek bail out five years ago the Greek Economy showed modest growth and a small budget surplus (excluding interest payment) in 2014.

Syriza should have used this firmer economic base to confront the pervasive tax evasion, abysmal public administration, inflexible markets and rampant corruption to drive further economic gains for the Greek people.  Instead it has embarked on a shambolic campaign to disprove the laws of arithmetic by insisting on implementing fantasy socialist economics without the cash to fund it.  This includes reversals to labour-market reforms and promises to raise the minimum wage to pre-crisis levels, both of which are madness in country with 50% youth unemployment.  They also plan the restoration of pension increases when they should slash early retirement rights to prevent more people switching from employment to dependency.  Their planned rehiring of thousands of public sector workers and the scrapping of privatisation projects is unaffordable and if they cannot collect income tax there is no choice but to raise more VAT, which they also oppose.   Their proposals would both breach Greece’s agreed bail-out terms and wreck the economy.  Since Syriza came to power the economy started shrinking sharply and the small budget surplus has once again descended to a massive shortfall.   This is despite increasingly desperate measures such as raiding the funds of municipalities and delaying payments to suppliers.

In 2001 Greece used some opaque and creative accounting to fool the EU’s auditors into believing it had a budget deficit of only 1.5% of GDP.  It subsequently emerged that the true deficit at the time was more than 8%, which is well above the 3% limit set out in the Maastricht treaty and would have prevented it joining the Euro.   If the Euro is to endure its rules must be enforceable. Mr. Tsipras is still ignoring those rules and he has torn up the legal agreement made by the previous Greek Government with its creditors .

So Syriza have done nothing to rebuild trust and economic credibility and many doubt that Greece would honour any future promises it makes.  Creditors are likely to demand more onerous terms than before and a rigorous inspection process to ensure the terms are honoured.  This is unlikely to be acceptable to the Greek people let alone Syriza.

Syriza’s adolescently amateurish diplomacy has alienated many of the Eurozone countries previously sympathetic to Greece’s plight. Mr. Tsipras’s courting of the sabre rattling Russian regime currently annexing parts of Ukraine, hysterical allegations of criminality against the IMF and revisiting claims of war crimes and demands of reparations from Germany are hardly going to win sympathy and influence with its allies.

Syriza’s conduct sets a poor precedent and if successful would open the door for other states to behave similarly in order to get access to free money from its partners.

Astoundingly these acrimonious economic and political disputes relate to the relatively trivial issue of how to conclude Greece’s second bail-out. Even if a deal is patched-up the funds will be immediately swallowed up.  Greece will still need to negotiate a third bail-out of about €50 billion. And unless Greece makes the much needed but much hated structural reforms this would still not be the end of it.

Compared to the last Greek economic crisis in 2012 the Eurozone is better prepared to manage a Greek exit. Its banks are well capitalised and have virtually no exposure to Greece; a large bail-out fund is established; quantitative easing is supporting bond and equity markets; and the weak euro is boosting exports.  A Greek exit would also dissuade other vulnerable Eurozone countries from dragging their feet on structural reforms and drain support from their extreme populist political parties.

So Syriza’s almost comical diplomatic and economic ineptitude has precipitated a situation where a Greek exit from the Euro and a re-launch of its own currency (the Drachma) is now the only realistic solution for any sort of independent long-term economic recovery.

By restoring the Drachma, Greece could have the flexibility to continually adjust its value on international currency markets to levels that cushion it from the shocks that are currently devastating its economy.

This is how it works:

Suppose on international money markets 100 Greek Drachmas is worth 1 Euro.  So a product that Greece was producing for 200 Drachmas costs 2 Euro in Germany. During a crisis the Drachma can be revalued to 200 Greek Drachmas to 1 Euro. Now when Greece exports its products to Germany its prices are much lower.  A product that costs 200 Drachmas to make is now selling for only 1 Euro, instead of 2 Euros.  This increases exports of Greek products to Germany, which supports Greek businesses and creates employment.  The Greek government gets more tax from successful domestic businesses and has lower costs because there is less unemployment and associated welfare costs.

Of course this also makes Greek imports more expensive.  Now if Greece wants to buy products and raw materials from Germany it has to pay twice as much.  To import a product from Germany which cost 1 Euro is now costing Greek businesses 200 Drachmas instead of 100 Drachmas.  This has the effect of causing Greek consumers and businesses to buy their products and raw materials from within Greece, which further boosts their economy.  It reduces imports and boosts domestic trade.

Furthermore Greek workers are still on the same salaries, which have the same buying power within Greece.  They will not notice a difference to their living standards unless they go on holiday in Germany where they will find prices very high.  This will encourage them to holiday at home further boosting the Greek Economy.  Also Germans will find being on holiday in Greece very cheap, so they will come in larger numbers, further boosting the Greek tourist trade.

So the ability to devalue a currency helps to smooth the problems of an economic crisis in poorly managed economies.

Now let’s consider the options for the Greeks if they share the same currency as Germany.

The Government cannot afford the interest payments on its loans and cannot borrow more so it must reduce Government spending and pay off some of the loans.  It must pay its public sector workers less salary and reduce government spending.  Greek industries are uncompetitive so they must reduce their costs too.  They must pay lower salaries and find further cost saving in its production.  This is not easy and lower salaries in Greece means lower spending by consumers causing the economy to slow further.  Germany has no incentive to buy Greek products or visit Greece on holiday, because it is just as expensive for them.  Unemployment stays high, which increases the costs to the Greek Government in unemployment benefit.  This means less money for investing in Greek infrastructure and industry that is essential to make them more competitive.

The situation is made worse for Greece if the German economy starts booming.  The value of the Euro will rise causing Greek exports to be even more expensive on international markets, which will cause their economy to slow even more.  This is because exchange rates are set at a level appropriate for the larger German Economy, not the smaller Greek economy.

To ensure that countries like Greece do not continue to mismanage their economies and cause future crisis within the single currency it is essential that their tax and spending policies are aligned with countries like Germany. Greece likes the economic security of the Eurozone and the financial protection it offers, but it seems they also do not want to to have their economic policies influenced by larger states.  They cannot have both.

This bailout is no longer working and a Greek exit from the Euro is now the best possible outcome for the Eurozone and Greece.   It will restore to Greece control of its economic destiny and restrict the consequences of its economic policies mainly to Greece.  It will also restrict an economic catastrophe to a mere disaster.

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Politics and Economics

The Problem with the Greek Government’s Economic Policies.

Mr. Tsipras and his government are socialists. The basic philosophy of socialism is a strong sense of entitlement to other people’s wealth.

His logic will be the same as any other socialist, who has a strong social agenda but rarely a credible economic one:

i.e. “I need a certain amount of income to live a decent life therefore I am entitled to have it.

If I’m unable to earn this much myself then somebody else must make up the difference:

1.   My employer must pay me more for my efforts (minimum wage)….or……

2.…. my next-door neighbour (who earns more than me) must give me some of their income (intra-generational redistribution of wealth)….or

3.…The Government must borrow more money, give some to me and get my children and grandchildren to pay back the debt (inter-generational redistribution of wealth)…..or…..

4.….a combination of 1,2 and 3.”

As a country Greece cannot demand a salary increase from its employer, although this would doubtless appeal to Mr. Tsipras if it could.  So he is resorting to 2. Expecting his rich European neighbours, such as Germany, to give him money by writing off debt and 3. Taking on more Government debt and expecting his country’s current and future children to pay it back.

Socialism is often merely self-interest justified by ideology and in a normal socialist economy the sense of entitlement to other people’s wealth is legitimised by democracy.  i.e. to claim that most people in the country voted for redistribution of wealth so it is legitimate to implement it.  Mr. Tsipras is using democracy as justification for his current stand.  But he has forgotten that whilst Greece has democratically voted itself the right to more free money, that Germany, as a separate country, is equally democratically entitled to refuse to give it.

It reminds me of the worse days of the trade union excesses of the 1970s when they would decisively vote themselves a 40% wage increase and then were scandalised when their “democratic will” was not fulfilled by “management” or the prevailing government. They failed to understand that voting for something didn’t automatically mean it was practical or affordable.  All the Greeks have done in electing Syriza is to vote for an end to austerity. As did the French in 2012.  Look where it got them.

The concept of earning the money you want to spend does not compute in the socialist psyche.  So Greece has now reached the inevitable fatal flaw with socialism:  Eventually you run out of somebody else’s money to spend.

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Politics and Economics

The UK would benefit by leaving the EU

The EU is trying to reconcile the differing social and political aspirations of its diverse 28 member states. The UK has a long, proud and independent history in these areas. It created the model for modern democracy. It initiated and developed common law that protects all and is a model for the rest of the world. It has bravely fought for social justice including establishing trial by jury, abolishing slavery and fighting the Nazis. It is rightly suspicious of delegating these responsibilities to largely unelected and unrepresentative European bureaucracies that do not share its cultural and social heritage.

The UK joined the Common Market when it was primarily a free trade zone. This was for predominantly economic reasons and at a time when it was “the sick man of Europe”. Undemocratic militant unions, the troubles in Northern Ireland and run-away profligate socialism were devastating its economy. These problems have since been solved and it is Europe that is in an economic malaise. The UK’s recovery from the last great recession has been hampered by the poor economic performance of its European partners.

It is right that the people of the UK should be given a choice on whether to continue membership in a referendum. Since it joined the Common Market in 1973 it has morphed from a trading zone to the EU super state, with ambition to dictate social, political, economic and foreign policy. A new democratic mandate is required for this massive change of circumstance.

Few in the debate believe that Britain cannot manage its political, social and foreign policy at least as well as the EU. Sovereignty of its own Parliament can ensure it can tailor these issues to better match the specific will and needs of its electorate, without interference from unrepresentative politicians from other independent states.

It is the UK’s economic future that is driving many to consider staying in the EU. However the UK is still a large economy and one with which many countries would want to trade. As a newly Independent state the UK could set up a new free trading zones and agreements with its more affluent northern European partners – Germany, Netherlands, Scandinavia, Ireland – and any other countries who were competitive enough to join.

The Common Market was set up in an age when geographical proximity was essential for the trading of goods and services.  In the modern, online, connected world physical borders and geographical proximity are irrelevant for much of the world’s trade. The UK’s free trading agreements could therefore be extended to include countries with which the UK has strong language and cultural links but no geographical proximity: Australia, New Zealand, Canada, South Africa and and India. It could further cement its “special relationship” with the world’s biggest market – the USA.

Many of the services in which the UK excels (financial and legal services for example) can be done largely online. Meetings can be held by videoconference. Ideas can be shared online with collaborative software. As can scientific and industrial research. So we can also add digital technologies into the mix: telecommunications, media; advertising; marketing and market research. The UK has unique world-class skills in the production of films, television programmes and computer games. Professional sport is a very affluent and growing industry. Cultural and language links will allow particular benefits in the free trading of all these industries and services – more than could be achieved within the language and culturally diverse European market. The ease with which physical goods are currently circulating between these countries would naturally ensure they were also included in these free trade agreements.

The UK would be further benefited by not being tied to countries creating an economic drag on the EU and consequently the UK: Greece, Spain, Portugal and Italy.  Their expensive social policies and the strait jacket of the Euro will ensure their economic woes will not be quickly or easily be remedied.  Without the EU the UK would be free to open up better opportunities with more diverse economies such as China and Japan.

These new trading blocks and agreements would be based solely on economic free trade. This would eliminate most of the social and political tensions and the subsequent market distortions and bureaucracy created by the EU super state structure and ambition.

Leaving the EU would be a short-term economic risk but with time and ambition the lost economic benefits could be mitigated and then massively exceeded. Over-and-above the long-term economic benefits the UK would also regain the freedom to follow its own unique democratic, political, cultural and social destiny.

 

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Politics and Economics

The Labour Party has missed the real trend acting against them – the colossal rise of Individualism

Labour has missed the real trend which is acting against them.  It is not the anti-austerity yearning of Scotland, or the anti-immigrant sentiments of the working classes in the North of England.  It is not even the rising aspiration in the Midlands and South of England.  What Labour has failed to see through their statist, collectivist eyes is the colossal rise of individualism.

Society has moved on from Henry Ford’s “you can have any colour you like so long as it’s black” philosophy   We are the internet generation and do not need to identify with mass movements in order to express ourselves.  We can define ourselves very precisely on social media and advertise and revel in our many similarities and differences with people across the globe.  We believe that what we buy is a reflection of who we are and there is a mesmerising diversity on the market.  Just look at the car market.  Choose your colours, body styles, interior designs, mood lighting, car audio, Sat Navs, engine size and type, gear box…define it on the web and the manufacturer will make it – just for you.  No need to buy an LP record anymore, create your own playlist on iTunes from a whole world of music.  No need to buy your clothes from the store on the high street but go online and find exactly what you think projects precisely who you are and how you feel.  We are less likely than our elders to consider ourselves part of any particular religion and less likely to join a political party or a trade union.  We can tailor our world to exactly fit who and what we believe we are.  A highly individual, tailored personality.

Part of this tailored identity resides in where we are from.  There is now more identity with local geography i.e. North and South, Yorkshire, Welsh, Cornish, English and Scottish, rather than British. The rise of nationalism in Scotland should not be a surprise.  Many Scots don’t identify with the English and Labour’s campaigning with The Tories (“The English Party”) against Scottish Independence lost many voters.  After all, 45% of Scots wanted independence.   The English, London based, Middle Class personalities running the Labour Party alienated even more Scots. This was not an argument about austerity and extent of left-leaning political positioning. It was an argument about the desire for a tailored personal identity expressed as a localised, geographical belonging.  The UK’s disaffection with the EU is following a similar trend.

Work has also become less collectivist.  The mass employment coal, steel and car industries are long dead.  Automation has taken manufacturing jobs.  We are more likely to start our own business than our forbears.  Starting a business online is easier than ever before.  We make our living designing web sites, apps and computer games.  Online we sell our marketing skills, our ability to write, entertain and solve problems.  We can advertise our spare room for B&B and our car as a part time taxi.  Our local bespoke businesses can now reach a global audience, be it in IT, local food and beverage or art and craft.  We make a living from millions of small industries.  We now get our employment protection through employment law and the EU, not from our politicians and trade unions.  Politicians are only important in creating an environment where these businesses can flourish.  They cannot control business as they did in the 20th Century. They cannot control the internet, let alone nationalise it.

So we are not collectivist.  There is no more tribal belonging.  Our individualism can be expressed in so many ways through commerce, in social social media and fashion.  We believe we have a right to express ourselves by what we consume and how we choose to live.

Organised Labour and Trade Unions don’t connect with this new reality.  The Labour Party are arguing there is no point offering “Tory Light” politics and that they should go back to their core vote and historic beliefs.  i.e. the traditional left position by offering classic statist, collectivist, trade union supported, high tax, high spend, nanny-knows-best politics.  The Tories, however inadvertently, stand for individualism and personal freedom.  They believe individuals should have the economic freedom to spend more of their own money themselves and they are increasingly advocating more social freedom with the passing of laws around gay marriage for example.  They believe in a small state that doesn’t interfere with our personal lives and doesn’t tell us how to think, what to buy and how to live.  They are the party of free enterprise, individualism and free expression.

In the modern, highly individualistic, personality tailored world who do you think will win?

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Politics and Economics

Despite the scale of Labour’s electoral defeat its supporters are still in denial.

Labour’s denial of why they lost the 2015 General Election is symptomatic of a chronic mental condition called “idiopathic socialist ideology”. It seems that its sufferers have such an overwhelming delusion that their beliefs, logic and thought processes are right (and that everybody else is wrong) that they fail to detect, interpret and internalise opposing points of view.

Involuntary motor-neurone symptoms include inappropriately enthusiastic clapping on Question Time every time a left wing politician so much as farts and knee jerk reactions to perceived social and economic inequality. In extreme cases small groups of those afflicted can be seen shuffling along public streets holding placards and robotically shouting inane slogans.  Sufferers can also have paranoid delusions that the media is deliberately disseminating toxic opposing views and that non-sufferers are particularly stupid for believing them. Their delusions are further manifested by a ludicrous belief that they are the only ones immune to the media’s propaganda because they are intellectually and morally superior.

This condition further exhibits itself with impaired social interaction whereby its sufferers speak very loudly to people expressing contrary opinion (often even shouting) and hurling Tourette-like ad hominem insults in debates, on social media and in the press. Sometimes they are even deliberately offensive to people who don’t share their delusions.  This aggressive and anti-social behaviour is very cathartic for the sufferers but unfortunately it creates a downward spiral in their symptoms, as they are subsequently further angered when they inevitably fail to change the opinions of the people around them.  Sufferers are further deluded by thinking that this behaviour enhances their self-image as a virtuous individual.

Currently there is no cure for this serious mental condition. Fortunately, however, it is self-limiting.  The recommended treatment is a repeat subscription to The Guardian and to quarantine the sufferers into the Labour Party, where they will not interact with society at large.  Consequently their symptoms can be contained by only interacting with a shrinking number of sufferers with similar delusions.

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Politics and Economics

Is Syriza the solution to Greece’s economic problems?

The root of the Greek economic crisis is that they have been living beyond their means.  They paid themselves too much for producing too little and made up the gap with excessive borrowing.

Greece is an extreme example of a problem that left-leaning economies in the West have failed to address for more than a generation.  There is a significant disparity in global labour costs.  The average worker in the West earns $135 per day; the average worker in urban China earns $12 per day.

What entitles the rich world’s 500 million workers to salaries ten times greater than the 1.1 billion workers in urban bits of the developing world?

(Full, brilliant article is here:    $135 – $12 = the pay gap the West can’t bridge.)

Greece has bigger problems because this issue is compounded by massive tax evasion, out-of-control corruption and a culture of taking Government hand-outs and public-sector salaries without giving anything in return.  Greeks can retire at 58 and some professions retire even earlier.  Clearly this has to end and the previous government was working hard to achieve this.

So now that Greece cannot borrow any more it must stop overpaying itself.

There are three ways to do this:

1. Devalue your currency.

Advantage:  A tried and trusted mechanism that would have lowered their wages on international markets.  This lowers domestic costs of production, which boosts exports and reduces imports whilst maintaining domestic living standards – so long as Greeks buy home grown goods and services.

Disadvantage:  Doesn’t address the main structural problems of the Greek economy.  It is just delaying much needed economic and structural reform required to address low productivity, tax evasion, corruption and a “something-for-nothing” culture.  Also devaluation only works if a few countries use it.

Greece cannot devalue its currency as it is in the Euro.  So it must choose from the other two options:

2. Cut Wages.

Advantage:  This quickly addresses the problem allowing Greece to regain competitiveness in international markets, boosting exports, attracting internal investment  and creating economic growth.

Disadvantage:  Causes an instant reduction in living standards, which creates hardship, which reduces consumer spending, which slows down the internal economy further.  i.e. the economy gets worse before it gets better.

This is painful solution but it is a shortcut to growth.  Ireland used this method and quickly returned to growth after initial hardship.  It concentrates the pain over a shorter time period than the only other alternative which is…..

3. Freeze Wages

This is a slower way to achieve a wage cut because it relies on inflation slowly eroding the wages compared to living costs –  i.e. eventually causing an effective pay cut.  The UK government has adopted this approach along with devaluation.

Advantage:  Less painful way of cutting wages but…

Disadvantage:  …delays the time it takes to regain competitiveness on international markets.

This is effectively the same solution as 2 but stretched over a longer time period.

The Greeks have suffered over the last few years but they required significant restructuring in order to develop a strong, sustainable economy.  The medicine was working as Greece has slowly returned to growth and even has a small budget surplus.

Now Syriza want to adopt the usual socialist solution to a budget deficit – that is to get somebody else to pay for it.  In this case they want Germany to write off their debt.

Many reference the 1953 London Debt Agreement that reduced Germany’s war debts by 50% and stretched the repayment of the remaining debt over a longer period.  This led to German economic growth so surely this could also work for Greece?  This may well be true, but at the time it was only Germany’s debt that was being written off.  Poor old Britain repaid all its war debts, with the last payment being made to the USA on 29th December 2006.  But this time we have France, Italy, Spain and Portugal waiting in the wings with beaks wide open and palms out-stretched.  Any hint of weakness towards the Greeks will cause a landslide of similar political extremism and a similar expectation that their debts will also be forgiven. Why should Greece have special treatment?

In any case the Greeks have already been given voluntary debt forgiveness by private creditors.  Banks have slashed billions from their debt.  Their remaining official debt has a 16-year maturity and an average coupon of 2.4%. So despite Greece’s extraordinarily high public debt (175% of GDP last year) successive concessions have already eased its debt-servicing charges so that annual cash interest payments are now only 3% of GDP.

And yet Syriza has pledged to go on yet another spending spree. They have promised to launch a welfare package worth €2 billion; to rehire 12,000 sacked civil servants; to give a massive increase in the minimum wage and to freeze privatisations. They have agreed to tackle tax-avoidance and cronyism but these are unlikely to do enough to pay for their profligate promises.  They will quickly return Greece to the mire from which it is slowly extricating itself.

The best compromise is for Syriza to jettison their ludicrous socialist economic policies and negotiate some further debt relief, perhaps by further pushing back the payment schedule (as did Britain in the 1950s), in return for further political and structural reforms.  Greek wages must be linked to productivity, they must retire later, reduce their public sector costs to an affordable level and clamp down on corruption and tax evasion.

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Politics and Economics

The Greeks vote for Syriza. Is this the end of austerity or fantasy economics?

The Greeks voted emphatically for the radical left wing Syriza party who claim they will reject austerity.  The UK Labour party might look wistfully for inspiration from Syriza, reassured by Ipsos Mori polling that shows half of voters in the UK think no more cuts are needed.

This coincides with some 15 Labour MPs led by Michael Meacher and Diane Abbott leaping on the success of Syriza in the Greek elections by demanding that Ed Miliband reject austerity. They released a signed statement aimed at persuading the Labour leader to pledge significant state investment in the economy and jobs, instead of backing swingeing public cuts.

It’s difficult to know if these Labour politicians and voters are being economically illiterate or populist or both.

It reminds me of the worse days of the trade union excesses of the 1970s when they would decisively vote themselves a 40% wage increase and then were scandalised when their “democratic will” was not fulfilled by “management” or the prevailing government. They failed to understand that voting for something didn’t automatically mean it was practical or affordable.

All the Greeks have done in electing Syriza is to vote for an end to austerity. As did the French in 2012. Look where it got them.

These statements avoid the obvious question of how they will pay for the public services and welfare they want and this in turn highlights two of the many problems with socialist economics.

Firstly they believe money comes from taxation, an impersonal and limitless ATM in the sky, rather than the hard earned income of taxpayers. Extra taxation can always come from the “rich” – a vague, nebulous, undefined collection of immoral capitalists who are just queuing up to hand their money over to the exchequer. Somehow they always overestimate their numbers and under-estimate their global mobility. Something the French have learned very quickly.

Secondly they have not grasped the simple fact that if you want to borrow money somebody has to be prepared to lend it to you. The more you owe, the higher the risk of default so the more the lenders charge to cover the extra risk. Eventually the risk becomes so great, because the interest is so high, that lenders will stop lending. The UK’s interest rates are only low because the lenders see a plan to bring spending under control.

Have you noticed that left-wing politicians love applying fancy labels? The group of 15 leftist MPs were given a boost by Peter Hain, the veteran Labour MP and party grandee, who made a separate intervention yesterday that echoed their sentiments. He said “capitalism that dominates today requires far more radical responses than the neoliberal, right-wing orthodoxy of the post banking crisis era could ever provide”. This sounds very grand. Giving contrived labels to things is a trick used by many academics to make a simple subject sound intellectual. Pompous language helps left-wing politicians fool naïve voters that they are thoughtful and clever and know what they are talking about. This is because the simple language “we hope to spend our way out of our catastrophic debt ” is not as convincing.

These statements by Labour’s back benchers is the reason why Labour cannot be trusted with the economy. Labour must now convince the country that they can manage the country’s massively reduced public spending capacity for the foreseeable future. The Labour front bench may believe they can do this, but it is clear that their political paymasters (Unite and the GMB trade unions) and their socialist Labour backbenchers will not let them.

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Politics and Economics

What is Quantitative Easing (QE) and why is Europe trying it now?

Europe’s QE (quantitative easing) initiative, planned for an initial 18 months, involves buying bonds to a value of as much as €1.1 trillion, or about 10% of Eurozone GDP. That is still well below the 25% of American GDP reached when the US Federal Reserve printed money to help revive the country’s economy after the 2007-9 financial crisis. The ECB is leaving the door open to expand its programme further.

What does Europe hope to gain from this initiative? And why are they doing it now?

Base rates are low (the rate the central bank lends to other banks) but the banks are not lending cash to its customers (businesses and individuals).  This may be because there is not enough “lendable” cash in the banking system because banks are trying to repair their balance sheets after the financial crash. They must also now comply with  the new international capital holding requirements to prevent another banking meltdown similar to the one we saw in 2008-9.  To a bank a “loan” is the same as an “asset” because they make their money by lending out money.   So the banks want to increase the proportion of low risk assets that they own. Government bonds (loans to governments) are seen as low risk because the chance of default (not paying back the loan) is low compared to say a loan to a business or an individual. When they do lend to businesses and individuals the banks are reserving their loans for ultra-safe investments and charging higher interest rates.

This lack of credit causes an economic slowdown as businesses cannot borrow money to fuel their investment for future growth.

Quantitative easing (QE) is a mechanism where the central bank “prints” new money and uses this to buy the Government Bonds (Government debt) held by the banks.  The idea is that banks take the new money and buy other assets to replace the ones they have sold to the central bank. These assets could be new loans or company shares. This raises stock prices and lowers interest rates, which in turn boosts investment. Interest rates initially may come down because QE injects new money into the banking system, which will encourage banks to lend more.  As other banks also have more cash through selling Government Bonds to the central bank the extra competition should ensure that their interest rates fall.  After all, banks make money by lending money rather than paying interest to depositors.

Some of this extra money will find its way to businesses and households because banks are more likely to lend due to the extra cash they have.  This extra credit is expected to stimulate economic growth in Europe.

What other benefits to economists believe Europe will get from QE?

Economists like inflation to be around 2% – the “goldilocks” theory. This ensures economic growth is sustainable i.e. not too hot and not too cold.   Economists use changes in interest rates to deliver this 2% inflation target. If the economy overheats, causing high inflation, they increase interest rates, which reduces the amount of money in the economy to slow it down and reduce inflation.  If the economy slows down they can boost it by lowering interest rates, which injects more cash into the system, which increases growth and inflation.

Economists are terrified of deflation (negative inflation) because there is a limit to how far they can reduce interest rates to boost the economy.  That limit is obviously zero.  Deflation causes a spiral of economic malaise because consumers will delay buying goods and services if they think they will be cheaper at a later date because they anticipate further price decreases.  This causes a further economic slowdown, which further depresses prices, which causes consumers to further delay purchases…….. Economists hate this because if there is low growth and zero interest rates they cannot use their main tool (interest rates) to further stimulate the economy because they cannot reduce interest rates below zero.

Japan had a decade of lost growth due to deflation.

QE is seen as the answer to deflation because the extra money in the system causes inflation irrespective of interest rates.

Whilst the initial effect of QE may be to reduce interest rates eventually all this new money in the economy will drive consumption and increase prices, ultimately increasing inflation and therefore requiring an upward adjustment of interest rates.  This will then signal the need to end QE, which was implemented to head off deflation.

So QE is seen as the solution for Europe because it has no growth and low or negative inflation.  As QE causes inflation it can only be safely used when deflation is a serious risk.

There are further perceived benefits for QE. The extra “printed” Euros in the system will reduce their value on currency markets, which makes European products cheaper for the rest of the world to buy (driving exports) and imports become more expensive (causing European consumers to buy home grown products).  Both of these further help to boost the economy of Europe.

Finally, the eurozone’s national central banks will be buying their own government bonds from pension funds, banks and other financial institutions.  As central banks are part of government machinery this effectively reduces government debt by using printed money to buy it back.  This should reduce these Governments’ future interest payments to the financial markets.

This is the theory of QE anyway.  But economists have been wrong before……

This type of monetary easing has already been tried in Japan, America and Britain, with mixed results.

Japan first began printing cash in 2001 after interest rate cuts failed to create growth.   Arguably despite QE they have still not recovered.

America followed, creating $4.5 trillion of new money, while Britain issued £375bn.

There are questions over how and if QE works, although in America and Britain growth has returned and unemployment is continuing to fall.   Inflation unexpectedly fell in the UK despite QE but the theory is it would have fallen even more without QE.

Germany has resisted QE until now because the Euro is already relatively cheap for their economy (although perhaps still too expensive for Greece, Italy and Spain) and they historically worry about inflation after they experienced catastrophic inflation after the world wars.

As QE prints “new money” many worry that some of this “cheaper” money will be borrowed at a low rate and used to buy other assets such as property and shares – pushing those prices even higher. This could create another asset price bubble with shares and property becoming overvalued and causing another future economic crash.

Many also worry that QE will stop the other Governments in the Eurozone making the structural changes they need to implement to be more competitive.  QE could cause the weaker economies in the Eurozone to become complacent in reducing their spending, reducing their deficits and loosening up their restrictive labour markets.

Germany has reluctantly agreed to QE because the serious threat of deflation is now a real risk.

So QE is a desperate measure to breath some life back into the Eurozone economies as they cannot reduce base rates further.  It is a last resort.

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Liberty, Politics and Economics

Women’s rights and gay rights are the result of a free society, not the cause if it.

A “free society” is one where the creative talent, energy and ambition of the people is free to fuel enterprise, innovation and achievement.  A society where self-expression, individualism and self-determination is not stymied by the tyranny of the masses, bossy politicians and nannying State interference into our personal lives – both social and economic. Or as John Stuart Mill would have it – the individual should be free to do as (s)he wishes unless (s)he harms others.

Such a society would have gay people publicly living their lives with complete freedom to express themselves in ways that feel natural to them.  Especially as this behaviour is not hurting others.  Women would be free to follow their dreams whether it is family, professional or both.  But this gay and female friendliness is an outcome and not a cause of a free society.

So in achieving this type of freedom we must be careful not to put cause and effect the wrong way round.  This type of freedom is won by creating a society where tolerance and equality are valued in their own right – not because they have been legislated for.

Any legislation is a restriction of freedom and it should be used sparingly to prevent people doing harm to others.

Many people pre-suppose that legislation drives the changes in society that we want.  i.e. politicians drive change.

It is similar to the view that marketing and advertising changes people’s buying behaviour.

In both cases the marketeers and the politicians are merely reflecting what society already wants.  Politicians win votes by advocating policies in which society already believes.  Marketeers are more successful when they create and promote products that their target market already desires.

So successful politicians merely grub for votes – reflecting back to the electorate what they already know they want.  This is why they spend so much money on focus groups and opinion polls.

In a democratic society it is not easy to get legislation enacted and kept on the statute books if it is expressly against the wishes of the people.  Think of the UK poll tax.  And sometimes in opinion polls people express views that are not particularly strong. So successful legislation can appear to be against public opinion but only if the public has no strong views on the subject.

A free society allows freedom of speech and campaigns to educate, inform, debate and influence society regarding social change. These are far more effective in changing social attitudes than legislation that forces behaviour without necessarily changing opinions.

So it is not the legislation that drives change, it is the change that drives legislation.  We could do without much of the legislation (which inhibits freedom and often has other unexpected and detrimental consequences) because society is already changing.

Fewer politicians, less state power and less legislation will only have the effect of creating a freer, less bureaucratic and therefore less expensive society.  Social change will continue its own course regardless.

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Politics and Economics

Lack of military action created the extremist chaos in Iraq and Syria.

Middle East politics reminds us that sometimes we have a bleak choice – the choice between a disaster and a catastrophe. Idealists and bleeding hearts will often eschew the disaster in the forlorn hope of finding a perfect solution, whereas a disaster would have been the best possible outcome.

As always with political decisions, we don’t have the luxury of a controlled scientific experiment whereby we can see what happens if we do something and compare it with what happens if we don’t. We can only look at the available evidence, blend historical outcomes and make a judgment. Often that judgment is finely balanced and the law of unintended consequences applies to both action and inaction.

Due to the disastrous military intervention by George Bush and Tony Blair in Iraq in 2003 the West was very reluctant to get militarily involved early in the current Syrian civil war.  This was a mistake.

Now any western military intervention in Iraq and Syria is too late and would still have been too late 12 months ago.

When the Syrian civil war started in 2011 the Government opposition was mainly moderate and President Assad’s government forces were caught unprepared, even if they were better equipped. There was a small window of opportunity to support moderate opposition groups in Syria and bring the conflict to an early conclusion, whilst at the same time getting rid of an unpleasant Syrian dictatorship.

Sunnis account for 60% of the Syrian population, while 13% are Shia (Alawite, Twelvers, and Ismailis combined) and 10% are Christian.  Assad and his henchmen are part of the tiny Alawite minority.  The moderate Sunnis were therefore unlikely to be loyal to Assad so their struggle for independence from a minority dictatorship was legitimate.

International inaction and appeasement allowed the war to escalate. This inaction allowed extreme Sunni islamists loyal to Saudi Arabia and al-Qaeda to come to fight against Assad.  At the same time extreme Shia islamists loyal to Iran and Hezbollah came to fight for Assad. Russia and Iran had time to rearm Assad’s forces allowing them to regain lost territory.  The chaos of the civil war left large tracts of Syria ungovernable allowing extremists of all flavours to strengthen their hold.

Out of this festering vacuum extremist islamist groups have morphed into ISIS (Islamic State in Iraq and Syria).  They have carried out acts of barbarism and genocide with impunity –  mass executions, public beheadings, crucifixions and floggings. These atrocities are committed without restraint, due process or rule of law. They have taken large tracts of Syria, invaded Iraq and now hold territory very close to the Turkish border.  It will take years to eradicate them.  From these territories they now encourage and plot terrorists attacks on Western cities.

Now, whoever wins this brutal civil war will be a victory for extremism.

International inaction has allowed this deplorable state of affairs to develop. And as usual innocent civilians pay the price. Over 200,000 people have died, schools have been bombed and chemical weapons have killed innocent children.   Millions more have had their livelihood destroyed and have been displaced creating a humanitarian crisis affecting Syria, Iraq, Jordan and Turkey.

If we are to allocate blame for our shameful inaction I believe Russia should shoulder most of the blame. It deliberately neutered the legitimate international voice early on in this conflict – The United Nations Security Council. This would have been the most effective way to send a clear and unequivocal message from the international community to the Assad regime and force him to find a political, negotiated solution. A Russian aversion to any Western political actions, a desire to have a Mediterranean naval base and lucrative weapons sales seem to be their primary motivation. Not a moment’s thought for the innocent victims now or in the future.

We must also recall that the current problems with Afghanistan started with the Soviet invasion in December 1979.  This aggressive action destabilized a large and unruly country, gave rise to the Mujahedeen, which morphed into al-Qaeda (admittedly with US funding) and the Taliban.  Resulting attacks on the World Trade Centre in New York and numerous other terrorist atrocities is the final legacy.  Russia also gave political and military support to Saddam Hussein and his Ba’ath Party in Iraq as well as to Assad’s Syria.  Both countries have disintegrated into dangerous chaos as a result.

So Russia must take much of the blame for its contribution to Middle Eastern (and consequently world-wide) insecurity.

But President Obama also deserves some of the blame for his prevarication. He commands the only military power with sufficient clout to have got the early attention of President Assad. Obama could have done much more to put pressure on other Gulf States, the UN and Russia to intervene sooner. Failing that he could have made direct threat of military action to Assad before he became emboldened and the war escalated with extremists entering the conflict on both sides.   Obama also missed a window of opportunity to militarily intervene when Assad was caught using chemical weapons.  Instead he hesitated and allowed Russia to make a diplomatic coup and play for time by negotiating a long drawn out eradication of chemical weapons.  This gave even more time for extremists on all sides to consolidate their gains.

So thanks primarily to Russian intransigence and American prevarication the international community has missed its chance to make an early difference in Syria.  Extremism has taken hold of the country and has now spread into Iraq. All sides of this conflict continue to act with impunity. As usual nobody will win – there will only be degrees of losing, with the innocent losing the most.

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Politics and Economics

Labour’s Mansion Tax – too good to be true?

The left-leaning UK Labour party plans to raise a tax on all UK properties valued at over £2 million if it wins the next election.  This is socialist economics at its best.  A promise of  “free money” from the old mythical sources – closing tax loopholes, reducing tax evasion and increasing tax on somebody else.

In the Labour mind this somebody else is the “rich”, a vague, nebulous collection of immoral capitalists who are just sitting around waiting for Labour to increase their taxes.  A group that can always find more money whenever a bill is presented. The ultimate, infinite ATM.

Unfortunately, the “rich” are very few in numbers and highly mobile. They can live wherever they want.  And pay tax wherever they want. Consequently Labour’s numbers never add up. Perhaps they should ask Francois Hollande why not?  He has recent practical experience.

According to Labour the mansion tax will only hit those that can afford it and will raise £1.2 billion of somebody else’s money.

There are just over 108,000 homes in the UK valued at more than £2m. Of these, 85,461 are in London (88% of the total), and a further 14,261 are in the south-east. In Wales there are just 87 homes that would be liable for the tax. One London borough, Kensington and Chelsea, would pay about 35% of the tax in total.  As this policy is half-baked Labour has not revealed the precise rate it would charge.  But if the party reckons it will raise £1.2bn, then that sum spread equally over 108,000 homes suggests an average of around £12,000 per household.   Labour also promises to reintroduce the 50p tax rate, so a top-rate taxpayer would have to earn an additional £22,917 gross to cover the mansion tax.

My parents taught me that if something is too good to be true then it probably is.  The mansion tax is too good to be true and a dangerous distraction.

Here’s why:

In the UK we have an annual £100,000,000,000 deficit which is bloating our £1,400,000,000,000 + debt.

The current interest payments are greater than the defence budget.

This type of policy can only be considered as “tinkering” by a government with much bigger problems.  The maximum revenue would be a  £1.2 billion without accounting for the law of unintended consequences.

For example, the UK is desperate to attract high net worth individuals to the UK who will spend their money in our high streets, in our art galleries, in our car show rooms, on our housing market and in our private schools.  They employ builders, plumbers, decorators, teachers and domestic staff.  These purchases provide income, employment and in many cases VAT at 20%.

The type of people who would be caught by this mansion tax are exactly the people who are rich enough to live anywhere they like.  Dubai, Switzerland and numerous other countries world-wide will accept these people with open arms if we are clumsy in our attempts to unilaterally implement a mansion tax in a global market.  The only alternative is to convince the vast majority of the world’s countries to adopt a similar policy.  A global State with a global tax regime.  Good luck with that.

Those that can’t leave will be mostly forced to sell their property if Labour wins power next May.  These people are generally asset rich but cash poor and won’t be able to afford the £12,000 per year additional tax. The Institute for Fiscal Studies (IFS) estimates that one in four of those affected by a mansion tax are pensioners.  But who will buy a property at between £2 to £3 million if there is a huge hike in tax?  Better to buy something slightly cheaper.  In my case I’d buy a small comfortable flat in London and spend the rest on a nice cosy cottage in the country.  I’d have the best of both worlds and Labour wouldn’t raise any additional tax.  There would be a huge distortion in the housing market with nobody wanting certain properties because of the extra costs.

Labour is spending time and energy on a policy with very little financial upside and vast potential financial downside.  They should be racking their brains on how to pay down our £100,000,000,000 annual deficit so we can eventually start paying down our £1,400,000,000,000 + debt.

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Politics and Economics

The Scottish Referendum should not become a Scottish “Neverendum”.

Alex_Salmond

So Alex Salmond got nearly everything he wanted.

He got to choose the exact date of the Scottish referendum.

He chose it just after the 700th Anniversary of the Battle of Bannockburn.

He chose it just after the successful Commonwealth Games held in Glasgow.

He chose it in the middle of one of the worst economic recessions in the UK history.

He chose it during unparalleled economic austerity.

He chose it at a time when confidence in Westminster politicians is at an all-time low.

He chose the exact wording of the referendum question.

He chose who could vote by enfranchising idealistic 16 and 17 year olds.

But he still lost decisively.

He should keep his promise of no more referendums on Scottish Independence for at least a generation.

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Politics and Economics

Scotland will get more tax raising powers – prepare for a low tax, low spend UK.

Prepare for low tax, low spend economics in all 4 nations of the UK.

Scotland voted decisively to stay part of the UK and has been promised more powers to raise its own tax as well as to decide how it is spent. Consequently England has also been promised similar powers over its own fiscal policy. The case for English MPs with power to set English income tax, corporation tax and spend is now overwhelmingly compelling.

This would make the election of an Old Labour style tax and spend Government in England all but impossible.  In 2010 Labour won 41 Scottish seats to the Tories 1.  Wales returned 26 Labour MPs to the Tories 8.  Also the Scottish and Welsh Labour MPs tend to be more socialist Old Labour style politicians than we find in England.  Tony Blair would still have achieved overall majorities in the elections of 1997, 2001 and (possibly) 2005 even if all Scottish and Welsh votes had been declared invalid, but his politics were hardly the Socialist Nirvana dreamed of by the Old Labour and the SNP.  Tony Blair’s top rate of income tax was lower than that of the current Tory led coalition.

In England the Tories would have had an absolute majority of 63 in the 2010 General Election rather than having to share power with the Liberal Democrats.

This would suggest a long series of Conservative or Centrist English Governments committed to lower public spending, lower top rates of income tax and downward pressure on business rates.

Where would that leave the Scottish, Welsh and Northern Irish Governments with England making up 85% of the GDP of the four nations?

If taxes rise in the Socialist Scottish and Welsh territories in order to pay for higher benefits how will they stop their high earning, affluent citizens and businesses moving across the border to seek a more favourable tax regime?  How will the other nations stop English benefit seekers moving to their territory to maximise their income from the State?  There are few geographical, language and cultural barriers to abate a massive movement of people and capital.  With such a large economy on their doorstep the other nations ability to manage their own tax and spend would be much diminished unless they were prepared to put up a Berlin style wall to stop the affluent leaving and the poor arriving.  There would be a race to the bottom in terms of taxation to attract affluent capable citizens and business investment.

It would reproduce the scenario of the mass emigration we saw from the Republic of Ireland, a flight that did not abate until the Irish abandoned the worst of their country’s ultra-nationalist business cronyism and implemented some of the most attractive low-tax packages in the western world.

Currently the other nations’ MPs are able to influence the economic policy of the UK, which they would not be able to do if they were managed solely in their devolved parliaments.

So a vote for more independence would most likely result in a series of more right wing, low tax, low spend governments in England, which would then severely limit the other nation’s ability to mange their own tax and spend as they would wish.  They would have to fall in line to manage their Government finances and maintain their competitiveness.

Under a centralised UK Government the other nations had an opportunity to influence English economic policy, which is 85% of the UK GDP. Under a fully devolved Government they will not. Counter-intuitively Scotland and the other home nations would have more independence as part of a centralised UK Government than they would as devolved nations within the UK.

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Politics and Economics

How Independent Would an Independent Scotland be?

The Scottish Nationalist Party (SNP) dream of an independent Socialist Republic of Scotland where they believe they can better create a more equal, fairer society.   A sort of socially-just Xanadu where the wealth of the nation is more equally spread.  A society with generous housing and pension benefits, free childcare, free prescriptions, free health service, free tuition…..free everything.

This has to be paid for and Scottish North Sea oil reserves would be asked to cover much of the costs.  But can it?  Ignoring North Sea oil and gas, Scottish tax revenues per head are almost the same as the UK average but public spending per head is about £1,200 a year higher in Scotland than in the UK as a whole.  Oil revenue would have to cover the existing higher level of public spending as well as the SNP’s planned increases.

North Sea Oil_graphic_767622a

Scotland’s oil reserves are running out at a time when large shale oil reserves have been found in England.  Additionally the international norms for determining territorial waters would also mean Scotland will get a smaller share of North Sea oil than the SNP are claiming.  Some of these reserves will actually belong to England.  Also, most of Scotland’s oil belongs to the Orkney and Shetland Islands, who have clearly stated their reluctance to be subservient to Edinburgh and would prefer an allegiance to London.  They don’t feel particularly Scottish and their history proves it.  If you ask a Shetlander “who are you?” They will say “Shetlander”, not “Scottish”.  In the event of a Yes vote for independence expect Shetland to ask for their own referendum or at least more autonomy over “their” oil.  Scotland will need Shetland more than Shetland will need Scotland so their negotiating position will be strong.

In any case oil revenue is highly volatile.  North Sea oil and gas revenues would have accounted for over 15% of Scottish revenues in 2010-11 compared with 1.6% for the UK as a whole. They were more than 20% of Scottish revenue in 2008-09 but just 12% in 2009-10. Looking back further they accounted for nearly half of all revenue in the mid 1980s, falling to just 3% in 1991-92.

But the cost of running a socialist state is not volatile.  It is high, constant and addictive. The ups and downs of Scottish oil revenue would need supplementing with borrowing in order to pay the social bill every year.

Borrowing costs are likely to rise in an independent Scotland as the financial markets would worry about Scotland paying back the debt without the reassurance of the Bank of England as bank of last resort. Rating agencies have already indicated that Scotland would have a lower credit rating than the UK, requiring a higher yield and therefore higher interest rates. The assets of Scottish banks are an alarming 12 times the country’s GDP adding markedly to the perceived risk of Scottish debt.  This is much higher than the multiple in Iceland before their economic crash.  The equivalent multiple for the rest of Britain is below five and for Ireland on the eve of the financial crisis it was about seven. In another economic meltdown Scotland would struggle to rescue its banks.

Scotland would also have to take its fair share of UK debt after independence, which would amount to perhaps £100 billion ($161 billion)— a lot for a small country to issue at once.  Scotland’s likely high debt, fiscal deficit, weak economic growth, lack of institutional frameworks and low foreign exchange reserves suggest it would pay a higher interest rate than the British government.  Brokers estimate an extra 1-1.5 percentage points a year.

In any case this still leaves somewhere between 80% and 97% of Scottish Government income coming from sources other than North Sea oil. How easily can the SNP and Scottish Labour party raise taxes and benefit spending in an independent Scotland with an economy on their doorstep that is 10 times larger?

The rest of the UK (rUK) stripped of Scotland would be more likely to produce Conservative governments. The chance of an old Labour socialist style Government would be much diminished.  Labour has had the majority of seats in Scotland in all but two General Elections: 1951 and 1955.  The Conservative share of seats has been 2% or less since 1997.  Also the Scottish Labour MPs tend to be more socialist Old Labour style politicians than we find in England.  Tony Blair’s New Labour would still have achieved overall majorities in the elections of 1997, 2001 and 2005 even if all Scottish votes had been declared invalid, but his politics were hardly the Socialist Nirvana dreamed of by the SNP.  Tony Blair’s top rate of income tax was lower than that of the current Tory led coalition.

Without Labour’s 41 Scottish seats the Tories would have had an absolute majority in the current Westminster parliament rather than having to share power with the Liberal Democrats. This would suggest a long series of Conservative or Centrist rUK governments committed to lower public spending, no increases in the higher rates of income tax and downward pressure on business rates. Where would that leave the Scottish Government?

If Scottish taxes rise to pay for more benefits how will the SNP stop high earning, affluent Scots and Scottish businesses moving across the border to seek a more favourable tax regime?  How will the SNP stop English benefit seekers moving north to maximize their income from the State?  There are few geographical, language and cultural barriers to quell a massive movement of people and capital.  With such a large economy on their doorstep the Scots’ ability to manage their own tax and spend would be much diminished unless they were prepared to put up a Berlin style wall to stop the affluent leaving and the poor arriving. It would reproduce the mass emigration we saw from the Republic of Ireland, a flight that did not abate until the Irish abandoned the worst of their country’s ultra-nationalist business cronyism and implemented some of the most attractive low tax packages in the western world.

Currently SNP and Scottish Labour MPs are able to influence the economic policy of the UK, which they would not be able to do if they were independent. Despite the Tories being wiped out in Scotland in terms of Westminster Government seats their style of politics is not as unpopular there as many pre-suppose.  They still accumulated 413,000 votes in the 2010 general election — hardly a different order-of-magniude from the 491,000 votes won by the SNP.  An independent Scotland voting for its Government using proportional representation would have to take these political views into account.

So a vote for independence would most likely result in a series of more right wing, low tax, low spend governments in England, which would then severely limit an independent Scotland’s ability to mange its own tax and spend as it would wish.  They would have to fall in line to manage their government finances and maintain their competitiveness.

This mirage of independence would also be further diminished if they entered a currency union with the rUK. Counter-intuitively Scotland will have more independence as part of the UK than they would as an independent nation. England is likely to do well despite a breakaway from Scotland. It would be free to have a more friendly tax policy to attract businesses and talented, motivated individuals.  As North Sea oil dwindles the English taxpayer will not have to fund the higher public spending and faster aging population of Scotland.

The main Scottish banks and pension funds are likely to relocate much of their assets and many of their jobs to England, boosting English GDP and creating more high value employment.

English depositors will be unhappy to hold their money in a foreign bank (the Icelandic banking meltdown is a sobering example).  They will worry about the future of their pension and life-assurance policies held with the likes of Standard Life, Scottish Widows (owned by Lloyds) and Aegon (formerly Scottish Equitable). All are Edinburgh-based and among the largest pension funds in Britain. English investors will want to know whether they would still be paid in pounds and will also worry that they would no longer have any influence through the ballot box over the tax regime governing their pensions.

If Scotland votes to leave the UK the flow of pension money into the Scottish-based insurance companies from outside Scotland may well dry up and there would be transfers out, to English-based companies.  The main Scottish financial institutions have already announced they will move much of their business to England in the event of independence to reassure their depositors and prevent this from happening.  Edinburgh’s financial sector will be weaker and London’s stronger after a split. This is significant because finance is a highly lucrative business and already pays 12% of all UK taxes.

Quebec_investment_graphic_767622a

In fact, business investment and employment in general will probably increase in England at the expense of Scotland. Look at what happened in Quebec after it tried to break away from Canada in 1995. Investment as a share of GDP before the referendum roughly matched the rest of Canada. Afterwards, even though Quebec voted against independence, a big gap opened up as investors decided the political risk was too great. They took their money elsewhere in Canada.

Many companies serving Scottish markets may be tempted to base themselves in Newcastle or York, boosting jobs and investment in the North of England. This will be in addition to the expected migration of talent from north of the border to seek better opportunities and lower taxes in England.

The loss of British influence in the United Nations, NATO, G7, Security Council and European Union will be a major blow to both Scotland and the rUK, but England will suffer less.  It will cope well without Scotland and may well flourish at Scotland’s expense.

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Politics and Economics

What do 2014 local elections predict about the General Election Result in 2015?

From previous elections it seems that the opposition party needs at least a 15% lead in the opinion polls one-year before the election before they stand a chance of forming the next Government.  The Tories enjoyed such a lead in 2009 and were still not able to form a majority Government a year later.  Previous 8% poll leads by the Tories in opposition still saw Tony Blair returned to Government with a majority the following year.

The current 2% lead enjoyed by Labour is, by historical standards, not enough.

There is a simple reason for this.  Being in Government is much harder than being in opposition.  Running the Government often means making tough, unpopular decisions.  This is particularly true of the current coalition Government, which has had to implement unpopular austerity measures in order to get the budget deficit under control.  At the beginning of the current Government some Labour politicians gloated that they would have to make such unpopular decisions that they would subsequently be out-of-office for a generation.  Opposition parties are able to merely talk about what they would do or claim that they wouldn’t have implemented unpopular policies in the first place.  The Labour opposition has been voting against the all coalition’s Government cuts for example.

The electorate use opinion polls, bye-elections and local elections to register a protest to the Government and to keep them on their toes.  They can do this with the safe knowledge that there will be no change in the national Government.  However the British electorate is very sophisticated and understands that being in Government is difficult.  They are more forgiving in ballots that will choose the next Government and Prime Minister.  Also protest votes that go to the third party (historically the Lib Dems) tend to be soft when it comes to a real election.  This is because the British “first-past-the-post” electoral system makes the electorate more reluctant to “waste” their vote on a party that has no chance of winning a particular seat or forming a Government.  They vote tactically to keep out the party they like the least.

Taking into account these historical trends Stephen Fisher at the Department of Sociology at the University of Oxford has come up with an election forecast based on current opinion polls:

Approximate probabilities of key outcomes

(Con largest party) = 60%

(Lab largest party) = 40%

(Con majority) = 34%

(Lab majority) = 18%

(Hung parliament) = 48%

(Hung parliament with Con largest party) = 26%

(Hung parliament with Lab largest party) = 22%

To add to Labour’s woes no opposition party has been elected to Government at a General Election unless they have a majority of seats in local Government.  The Tories currently hold the majority of local Government seats.  And Ed Miliband is even less popular than his own party.  This is important because in a general election the electorate also believe they are voting for the next Prime Minister. Labour also has low poll rating for their economic competence, which has historically acted disproportionately against parties when it comes to an election.  Additionally the fact that the UK economy is likely to recover significantly in the next year will benefit the current Government at the expense of Labour.

But what is different this time is the possibility of UKIP adding an unknown dimension compared to historical trends.

The Conservatives may worry that some of their votes will go to UKIP in 2015 causing a split in the right and centre-right.  This could give Ed Miliband a further advantage on top of his in-built 30 seat electoral advantage caused by the unequal constituency boundaries.  But the local election results yesterday suggest that UKIP can also take votes away from Labour, even in the north of England.  The Tories do seem to disproportionately lose votes to UKIP compared to Labour however.

In previous parliaments some protest votes went to the Lib Dems.  As they are now in Government they have clearly suffered in the polls so they too may expect their core support to trickle back in line with historical values as the election approaches.

But as the official opposition Labour have not been collecting the protest votes that previously went to the opposition and the Lib Dems.  They have instead have gone to UKIP. Labour should worry that they cannot even be trusted with a protest vote.

As the official protest party we should see UKIP’s poll rating decline towards the next election to favour the Tories.  Labour’s poll rating would be expected to decline as the election approaches in favour of the incumbent Government.  This may be partly negated by winning back some of the UKIP protest votes, so it is likely their poll rating will decline only slightly.

All this probably means that David Cameron will be back in Downing Street next year as leader of a coalition with the Lib Dems, as predicted by Stephen Fisher.

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Politics and Economics

Should the UK Government try to block the Pfizer bid for Astra Zeneca?

Many in the UK worry that a successful bid by Pfizer to aggressively acquire one its biggest pharmaceutical companies, Astra Zeneca, will result in large UK job losses in R&D and manufacturing.  They seek to get the UK government to block this deal in order to protect British industry and jobs.  What should the UK government do?

Astra Zeneca employed 51,600 people world-wide in 2013 but only 7,200 of these were in the UK.  This is down from 59,800 employees word-wide in 2011 of which 8,700 were in the UK.

This significant loss of jobs is due to the fact Astra Zeneca has been relatively unsuccessful in recent years: global revenue was $33.6 billion in 2011, $27.9 billion in 2012 and $25.7 billion in 2013.

In order to create and retain jobs we must have successful businesses.  We must also have a successful business to invest in new drug development.  It is in patients’ long term interest to have a thriving pharmaceutical industry.  To see how this works ask yourself how many successful medical technologies came out of the Soviet Union and communist Eastern Europe.  Or China for that matter.

A certain amount of drug development is serendipity and Astra Zeneca have been unlucky with their recent research pipeline.  Industry insiders would say that it is a better managed company than Pfizer.  It’s just not as big.

But the real question is whether the newly merged company will be better than the two independent companies and whether they want to invest in UK manufacturing and research expertise.

Few Astra Zeneca jobs are in the UK so the fact that it is considered as a UK company (with a French CEO and a Swedish Chairman) does not necessarily help.

Astra Zeneca does not plan to have the bulk of its research efforts in Cambridge because of some misplaced patriotism.  It plans to have its research in Cambridge to benefit from the life-sciences expertise in the Cambridge technology cluster, partly driven by science coming out of Cambridge University.

Pfizer will also dispassionately look at where is best to place its researchers in order to maximize the quality of drugs in its development pipeline.  It will want to spread its research to a few technology clusters, to get a broader range of excellence and expertise, but only if those technology clusters are truly world class and cost effective.  This is where the UK government can add the most value.

The UK owns very few car companies.  However the UK is now making and exporting more cars than at any time in its history.  The world’s motor racing research is almost entirely done in the UK, attracting the majority of the Formula 1 racing teams in a broad technology cluster based loosely around Oxfordshire.  This employs, trains and retains exceptional British automotive engineering expertise and much of the profits are reinvested back in the UK.  Much of this research and knowledge ultimately ends up in consumer cars, which encourages the world’s volume car manufacturers to maintain a presence here.  The same can be true of other technologies such as biotechnology, nanotechnology and robotics.  The government can implement policies to encourage the development of these technology clusters by investing in research, development and education.

The USA is much more aggressive in defending its businesses than the UK.  I don’t always like the way the USA uses its colossal economic power, but the great thing about not being socialist is that we have the luxury of living in the real world.  The real world states that the USA is the biggest and most lucrative market in the world.  As such they can get away with much more than the UK.  Companies will put up with a lot to have access to their market, and do.  Companies will put up with a lot less from the UK government because the potential gains are so much smaller.  Sad, but true.  Consequently we must work harder to attract businesses to invest in the UK.  In any case the idea of national ownership is ludicrous.  Pfizer is seen as an American company (with a Scottish born CEO) but its shareholders are global.  I own some Pfizer shares so at least a small percentage of its ownership is British.

The nominal ownership of a company is less important than whether it invests in UK technology and industry.  Whether they do that depends on whether they see the UK as a good place to do business.  A strong reputation for low taxes, low government interference and government investment in research, development and education will make far more difference in the long run than short-term protectionist political policies.

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Politics and Economics

World-wide wealth inequality is growing – is there a realistic solution?

Thomas Piketty’s bestseller Capital in the Twenty-First Century has been hailed by the political left, in America and now in Britain, as a closely argued vindication of what they have been proclaiming for decades.  That inequality is the great injustice of modern politics.

The gap between the rich and the poor is rising again, after a hiatus marked by the gap between the two world wars. The wars eroded inherited, dynastic wealth and brought forth progressive policy through the State i.e. Socialism.  These changes now look like a mere hiccup as capitalism, Piketty says, has resumed its usual inexorable path towards greater and greater inequality.  In Europe, the wealthiest 10 per cent take about 35 per cent of the income but 70 per cent of the wealth.  The richest 1 per cent of Americans took a scandalous 60 per cent of the growth in national income.  The wealth of the richest 85 people in the world is greater than that of the 3.5 billion people who make up the bottom half of the world’s population.

The Financial Times has suggested that Piketty’s work contains a series of errors that fatally undermine large parts of his proposition. This prestigious and respected newspaper claims that some of the data Piketty uses to support his arguments about dramatic and growing wealth inequality in Britain and Europe are dubious or inexplicable.  Piketty cited a figure showing the top 10 per cent of British people held 71 per cent of total national wealth. The Office for National Statistics (ONS) latest Wealth and Assets Survey put the figure at only 44 per cent. Some of this, the paper suggests, may be down to straightforward transcription errors. More damningly, the FT claims, “some numbers appear simply to be constructed out of thin air”.

Piketty responded to the FT: “I have no doubt that my historical data series can be improved and will be improved in the future … but I would be very surprised if any of the substantive conclusion about the long-run evolution of wealth distributions was much affected by these improvements.” Piketty made the data freely available so that others could check his work and influential publications and think tanks have given him their backing.

The Economist newspaper has concluded: “analysis does not seem to support many of the allegations made by the FT, or the conclusion that the book’s argument is wrong”.

Yet even Piketty’s figures show that British wealth inequality is only back to where it was in the mid-1960s, when the top 10 per cent of people held about 70 per cent of the wealth. The figure dipped to about 60 per cent in 1980, having peaked at 90 per cent in 1910. So it is not true that we are back to Edwardian levels of wealth inequality. In Britain wealth inequality probably did increase between 1980 and 2010, but not by as much as Piketty has claimed.

This is not surprising as during these three decades the government encouraged asset bubbles in house prices; lightly taxed wealthy non-domiciles; gave tax breaks to pensions; poured money into farm subsidies; and severely restricted the supply of land for housing, pushing up the premium earned by those who already owned a house and those involved in property development.   Consequently property and land owners saw their relative wealth increase.   So much of the increase in wealth concentration since 1980 has been driven by government policy, which has systematically redirected earning opportunities to the rich rather than the poor.  A good example is energy policy. The left-of-centre UK energy secretaries Ed Miliband and Ed Davey were prepared to pay double or treble the going rate for land-hungry projects such as wind, wood and solar energy, in the name of “carbon friendly policies”, all of which results in rewards going to the owners of property.  This also extended to subsidised “payback” on wood-chip boilers, solar panels or mini-hydroelectric power if you had the correct resources on your land. This amounts to subsiding landowners.

So there is some truth in Piketty’s assertions and many socialist political commentators believe this book vindicates their position and proves that Capitalists are in denial in justifying their system.  They urge their local governments to adopt “progressive” policies to tackle these issues of inequality. They say the gap is widening between the political Right and reality.

The use of the word “reality” in this context is interesting. Many would claim the Left has lost reality in believing there is a solution.  History shows us that the remedies are worse than the disease and Piketty’s solutions exist in the realm of theoretical political fantasy.  He wants a global wealth tax and a levy of 80 per cent on incomes above half a million dollars.

Why would anybody believe that a future UK Government led by the left-leaning Labour party, for example, could have even the tiniest influence on worldwide wealth inequality?  Anyone who believes they can has lost touch with reality. It seems that even its leader, Mr. Miliband, is not that stupid, as he has made no comment regarding Mr. Piketty’s remedy.

As a future leader of less than 1% of the world’s population Mr. Miliband could address this disgusting inequality in wealth by heavily taxing and redistributing it.   The few UK based super-rich would soon leave and take their wealth with them.  Others would not come to the UK.  They would flee and spend their wealth in Dubai, Switzerland, Monaco, the USA or the Caribbean. The only alternative is to convince the vast majority of the world’s countries to adopt a similar policy.  A global State with a global tax regime.  Good luck with that.

The issue of inequality is hardly new.  Since the beginning of history man has sought to exert and maintain an advantage over his fellow man in terms of power and wealth.  But in historical terms we are now in a sweet spot as far as human rights and access to health, education and opportunity are concerned.  This is particularly so in the Western world, but life is also much better for the vast majority of the developing world, where obesity is now a bigger health risk than starvation.

Whilst wealth inequality in the UK has increased, income inequality has significantly reduced. The government has systematically redistributed money from the rich to the poor by taxing the rich at higher rates and by providing benefits to the poor. In the UK the gap between the well paid and the poorly paid has been going down in terms of disposable income. When you take into account tax and benefits, the ONS confirms that the Gini coefficient (an income distribution index) shows inequality in the UK is actually lower now than it was 25 years ago. The recent ONS bulletin entitled The Effects of Taxes and Benefits on Household Income, 2011/12 finds that the highest-earning 20 per cent of British households earned 14 times as much as the lowest earning 20 per cent before tax and benefits — but just four times as much after tax and benefits. These measures cut the average income of the top 20 per cent from £78,300 to £57,300, while they raise the average income of the bottom 20 per cent from £5,400 to £15,800. Thus, even though government may enact policies that help the wealthy to increase their wealth, it also redresses the balance through the tax system. As it should.

Global income inequality is also declining rapidly even before taking into account tax and benefits. For 25 years people in poor countries have been getting rich faster than people in rich countries have been getting richer. Thanks to the recent recession in rich countries and continuing rapid growth in poor ones that discrepancy has accelerated. Mozambique’s economy is 60 per cent larger than it was in 2007 whilst Italy’s is 6 per cent smaller.   The UK economy has only just rebounded to where it was in 2009.  And nowhere in the world, with the possible exception of North Korea and Somalia, are the poor getting poorer. The percentage of the world’s population living on $2 a day (corrected for inflation) has halved since 1990 — a welcome and unprecedented change. Any increase in wealth inequality or pre-tax income inequality in Britain or America is caused by the rich getting disproportionately richer, not by the poor getting poorer. The gaps that are opening up in the West are mostly in the ability to afford luxuries, not necessities. The Left genuinely seem to care about the unfairness of unequal income as much as or more than they care about poverty. But they think in terms of relative wealth, not absolute wealth, which is why they seem to believe inequality reduction is an end in itself. They would rather that the poor were poorer, provided that the rich were less rich.

The fact that some people are ludicrously and immorally wealthy has to be balanced with the improvement in the standard of living of everybody.  I’m sure the Right see the dangers of the inequality of wealth distribution, but perhaps are even more concerned about naïve, well meaning schemes that seek to address it and put these universal economic gains at risk.  This is not even exploring the potential risks to personal freedom and economic liberty.  Remember Communism was seen as a solution to inequality.  And it too may have worked if the whole world had adopted it.

The real lack of reality is amongst those on the Left who believe that a few “progressive policies” in their own tiny little fiefdoms will make a difference to the rest of the world.

So the real “reality” is that we must live in the real world.  When Mr. Piketty and Mr. Miliband have got all the world’s major economies on their side they may be able to implement these remedies without merely unilaterally disadvantaging one country.

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Politics and Economics

A Democratic Monarchy is the Least Bad Way of Running a Country

A Democratic Monarchy is the worst possible way of running a country, apart from all the alternatives that have been tried.

Presidents are “elected”.  To do this requires political backing, financial muscle and (in many cases) military support.  This opens them up to corruption and political influence.  Even the democratic one’s are not supported by all those that voted for the other candidates, making them partisan and difficult for the whole country to unite behind.

The list of the most free and open countries in the world is full of Democratic Monarchies (Australia, New Zealand, Canada, Sweden, Norway,  Denmark, The Netherlands……. ).   The list of unfree and closed countries includes many Republics (Iran, Syria and North Korea).

The best thing we can say about a democratic monarchy is that the head of state is not a politician.  And because they are born into wealth and privilege, they are incorruptible.  Unlike our politicians.

To have a head off state, with no executive power, which is impossible to corrupt, around whom the whole country can unite and towards whom our politicians must show humility and deference is genius.  

After all,  quis custodiet ipsos custodes? 

Those who seek power are the last people we want to have absolute power.  Somebody must keep these arrogant, self-opinioned windbags in check.

A Democratic Monarchy is a ludicrous way to run a country.  If anybody comes up with a better alternative, please let me know.

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Politics and Economics

The 2008 Financial Crisis was Primarily a Failure of Socialism.

I’ll argue that the 2008 financial crisis was primarily caused by a failure of a socialist policy and exacerbated by socialist economics.

Mr. Miliband and Mr. Balls of the UK Labour Party believe that the 2008 financial crisis was primarily caused by a failure of capitalism.  To an extent this is true, but then few of us believed that capitalism is a perfect system, just the best system currently available.

But it was not Labour’s lack of regulation of the “casino banks” in the UK that started the economic crisis, although they may have accelerated its effects.  The initial spark was provided by the policy of “sub-prime” lending in the USA.  A policy of which Mr. Miliband and his socialist colleagues would have been proud.

In 1999 President Clinton effectively reversed the Glass-Steagall Act opening the way for the credit unworthy to engage in the property market.   For the Democrats it was positive discrimination; social engineering.   The left had long complained that the property market was allowing the already wealthy and Middle Class to profit from the property market boom.  By allowing the poor and economically unreliable to borrow money and buy their house was considered another blow for equality.  A huge amount of debt built up in a part of the economy that couldn’t afford the interest payments.  When asset prices started to fall many people defaulted on their loans leaving the banks with properties that were worth less than the value of the mortgage debt.

So Sub-prime lending was the spark.  It caused a brief economic downturn in many countries.  However in many left-leaning economies, which borrowed billions to spend on social engineering experiments, it went on to cause a crash.

Let’s be clear about the economic legacy left by the last Labour Government.  The deficit was a whopping £155,000,000,000 in one year!  Whilst I have heard many Labour politicians responsible for this eye-watering number blame it on extra spending required to avert an “world-wide financial crisis” created by bankers, the facts do not support this defence.

It was not a “world-wide” crisis as it affected only countries that ran up huge Government deficits (Greece and the UK being prime examples) or massive private deficits (Ireland).  This includes the US who refused to raise very low tax levels to meet spending obligations, and the EuroZone who cannot put taxes up any higher to match their totally out-of-control spending plans.  Many countries, including Canada, Australia, Saudi Arabia, China, Sweden Germany and much of South East Asia all avoided the worst of the crisis because their spending was more-or-less in line with their tax revenues.  Labour must take its share of the blame with the bankers, as it was them that ran up Government debt.

Also, Labour turned on the spending tap long before the 2008 – 09 financial crisis.

http://www.ifs.org.uk/bns/bn99.pdf (see Fig. 4.1 on page 10)

Labour spending went from 36% of GDP in 1999-2000 to 42% in 2005 -2006 whilst revenue was broadly flat at 37% of GDP over the same period.  Increasing Government deficits is not new and the size of this early deficit was not unusual by historical standards.  But the key difference here is that Labour increased spending and debt during the boom which started at the end of John Major’s government.  We expect Governments to increase spending and deficits during a recession.  This is essential to cover increased unemployment benefits and lower tax revenues and smooth out the economic shocks that inevitably hit the most vulnerable citizens.  However, prudent Governments will then pay down debt during the boom times to allow more future borrowing when the economic cycle inevitable takes a turn for the worse.

Remember that the deficit is given as a percentage of GDP, which is much higher during a boom therefore the deficit is proportionally bigger.  Also, the last boom lasted for a long time, an unprecedented 16 years, allowing massive debt to build up if you were foolish enough to continue to borrow during this time.

The reason that Labour felt they could borrow with impunity, even during a boom, was it believed it had banished “boom and bust” economics.  Gordon Brown famously made this statement in the House of Commons. The world’s finances were linked for the first time by technology and Labour believed the massive global market could spread financial risks. Labour bet the country’s financial health on a belief that asset values would continue to rise, allowing borrowing against those assets.  Finally, Labour selfishly expected our disenfranchised children and grandchildren to pay back the debt sometime in the future, believing this was acceptable because it assumed the economy would be much bigger by then and they could afford it.  This is undemocratic and immoral. The consequence of all this is that Labour foolishly and arrogantly believed there would never be another downturn so could continue to spend above tax receipts.

Labour was wrong on all counts.  The connected global markets did not spread the risk, it spread the contagion, asset prices fell and the economy shrank increasing the debt to income burden.

So because Labour arrogantly believed there would be no more downturns they increased their profligate spending rather than pay down debt.  Consequently, when the financial crisis hit in 2008 there was no more credit available, which left the UK economy unusually exposed.

So, a socialist policy started an economic downturn, which socialist economics turned it into a crash.

Thanks to Labour the incoming coalition government had the unique problems of solving a massive economic slowdown with no ability to borrow more to smooth the worst effects.  They had to reduce spending when there was more need for the extra money.  An impossible task without causing major hardship.

Whether the coalition policies produced the best possible outcome given the disastrous economic hand they were dealt by Labour is difficult to judge.  This remains to be seen and history will be the judge.

Labour’s election prospects do not lie in trying to talk down the coalition economic performance or in justifying its recent economic mismanagement.  To win the next election they must address one key question:  Which party will best manage our new economic reality?

We have over a trillion pounds of debt, which is still rising due to an annual deficit of over 100 billion pounds.  All this must be paid down.  Combining this with an older population (with their large pension and healthcare needs) means we will have no more spare money for at least a generation. We must earn what we want to spend.  We cannot continue to borrow what we spend. Increased taxation can get nowhere near lowering the deficit, let alone the debt.

Massive public spending cuts are inevitable.

Labour must now convince the country that they can move from a party which financially supports in-work welfare benefit and uncontrolled public spending to one which puts financial prudence ahead of its social engineering experiments i.e. manage the country’s massively reduced public spending capacity for the foreseeable future.

The Labour front bench may believe they can do this, but I doubt that their political paymasters (Unite and the GMB unions) or the socialist Labour backbenchers will let them.  They have a social agenda not an economic one. The country may feel that there are other political parties with a longer history and proven innate instincts of supporting a smaller State and lower public spending.

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Politics and Economics

Answer these 5 questions before voting on Scottish Independence

First let’s look at some numbers to get this debate in perspective:

UK GDP – £2,435 Billion

Scottish GDP – £216 billion (8.87% of UK GDP)

London GDP – £452 billion (18.5% of UK GDP)

Edinburgh GDP – £12 billion (0.49% of UK GDP)

UK Debt – £1,377 Billion

Consider these 5 questions before voting in the Scottish referendum:

  1. The main driver of the UK economy is London and its knock on effect in the surrounding South East of England.  This is one of the few parts of UK that earns more income than it spends.   The current and future world income generators are the big international cities – London, New York, Shanghai, Hong Kong, Singapore etc. etc. They are clusters of high value added service industries supporting the regional management of large multinationals with such things as financial services, legal services, management consulting, marketing, advertising and recruitment.   They attract massive international investment and provide talented and educated people with highly paid jobs. This creates wealth which trickles down to workers in the supporting industries and services.  Edinburgh is not a major international city, nor a major European city. Neither is Glasgow.  There can only be one regional hub and currently that crown belongs to London, making the creation of a second hub nearby very difficult.  Do the Scottish Nationalists have a detailed plan as to how they will elevate Edinburgh or Glasgow to the status of other major international cities?
  2. A currency union between an Independent Scotland and the UK could be a bad idea for both parties.  The UK wouldn’t want an independent Scotland to mismanage its economy to the detriment of the English, Welsh and N. Irish.  The three main UK political parties have said they would not allow an independent Scotland to use the pound.  Mark Carney, The Governor of the Bank of England, has said that “a durable currency union requires some ceding of national sovereignty” which would negate the notion of Scottish independence if it used the pound.  Also, the reasons that Scotland doesn’t want to join the Euro should also apply to a currency union with the UK.  The recent catastrophic economic collapse of Greece trying to operate within a currency zone shared with Germany is a sobering and relevant example as to why an independent Scotland should not share the Pound.   Do the Scottish Nationalists have detailed contingency plan as to how an independent Scotland could operate without the pound?
  3. Scotland’s two biggest banks, Royal Bank of Scotland (RBS) and Lloyds have bank assets twelve times the size of its GDP. The equivalent multiple for the rest of Britain is below five; for Ireland on the eve of the financial crisis it was about seven. In another economic meltdown Scotland would struggle to rescue its banks. Do the Scottish Nationalists have detailed plan as to how they will manage their new banking system to avoid the recent problems of other small countries such as Iceland, Cyprus and Ireland?
  4. Scotland would find it difficult to get all 27 of the other member countries to agree admit them into the European Union.  Spain for one would not want to admit Scotland, as it would set a precedent for Catalan independence.  Spain has already blocked Kosovo’s membership bid because it broke away from Serbia.  There are other separatist movements within Europe which could cause some other countries to veto Scottish membership.  Do the Scottish Nationalists have a plan B for the possibility of independence outside the European Union?
  5. Scotland is seeking independence at the time their North Sea oil reserves are running out and at a time when large shale oil reserves are being discovered in England.  Do the Scottish Nationalists have a detailed plan as to how they will manage their future economy without North Sea oil?
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Politics and Economics

Why an independent Scotland should not share the Pound

Should an independent Scotland use the pound?  To see if this is a good idea for Scotland let’s take the recent real life example of Greece:

  1. Greek Government spending went out of control and they borrowed so much money they could not afford to pay the interest on the debt.
  2. Unions and left-of-centre politicians had pushed up salaries and labour costs to a point where its industries and businesses were becoming too expensive and were losing sales to cheaper more efficient competitors in international markets.
  3.  Unemployment was rising due to the failure of these businesses, which further pushed up Government costs with the increased welfare and unemployment benefits.

How does the Government get out of this seemingly intractable downward spiral? Before Greece joined the Euro, it had its own currency – the Greek Drachma.  What it would have done is devalued its currency.  This is how it works: Suppose on international money markets 100 Greek Drachmas is worth 1 Euro.  So a product which Greece was producing for 200 Drachmas costs 2 Euro in Germany. During the crisis the Drachma is revalued to 200 Greek Drachmas to 1 Euro. Now when Greece exports its products to Germany its prices are much lower.  A product which costs 200 Drachmas to make is now selling for only 1 Euro, whereas before it was 2 Euros.  This increases exports of Greek products to Germany which supports Greek businesses and creates employment.  The Greek government gets more tax from successful domestic businesses and has lower costs because there is less unemployment and associated welfare costs. Of course this also makes Greek imports more expensive.  Now if Greece wants to buy products and raw materials from Germany it has to pay twice as much.  To import a product from Germany which cost 1 Euro is now costing Greek businesses 200 Drachmas instead of 100 Drachmas.  This has the effect of causing Greek consumers and businesses to buy their products and raw materials from within Greece, which further boosts their economy.  It reduces imports and boosts domestic trade. Furthermore Greek workers are still on the same salaries, which have the same buying power within Greece.  They will not notice a difference to their living standards unless they go on holiday in Germany where they will find prices very high.  This will encourage them to holiday at home further boosting the Greek Economy.  Also Germans will find being on holiday in Greece very cheap, so they will come in larger numbers, further boosting the Greek tourist trade. So the ability to devalue a currency helps to smooth the problems of an economic crisis in poorly managed economies. Now let’s consider the options for the Greeks if they share the same currency as Germany. The Government cannot afford the interest payments on its loans and cannot borrow more so it must reduce Government spending and pay off some of the loans.  It must pay its workers less salary and reduce government spending.  Greek industries are uncompetitive so they must reduce their costs too.  They must also pay lower salaries and find further cost saving in its production.  This is not easy and lower salaries in Greece means lower spending by consumers causing the economy to slow further.  Germany has no incentive to buy Greek products or visit Greece on holiday, because it is just as expensive for them.  Unemployment stays high which increases the costs of the Greek Government in unemployment benefit.  This means less money for investing in Greek infrastructure and industry in order to make them more efficient. The situation is made worse for Greece if the German economy starts booming.  The value of the Euro will rise causing Greek exports to be even more expensive on international markets, which will cause their economy to slow even more.  This is because exchange rates are set at a level appropriate for the German Economy, not the Greek economy. Actually, the Eurozone crisis has helped German exports because it has made the Euro exchange rate lower than it would have been which makes German exports cheaper.  But the exchange rate is still too high to help Greek businesses.  Both economies have to be aligned otherwise the exchange rate will work in one country’s favour (Germany) and to the detriment of another country (Greece). To ensure that countries like Greece do not mismanage their economies to cause a crisis in the first place it is important that their taxation and spending policies are aligned with countries like Germany. This is what happens in the USA, which has a single currency and each state has broadly similar tax and spending policies (at least compared to Europe).  The exchange rate tends to be more appropriate for all states.  Also unemployed workers in a poor States like Michigan can easily move to a richer state like California.  This is good for Michigan because it reduces its unemployment levels and the associated welfare costs and provides much needed labour in California. However Greeks will find it harder to move to Germany because of language and cultural barriers. So what actually happened in Greece has been an economic disaster because they cannot devalue their currency.  They have had to cut costs, which means cutting salaries and axing jobs, which has increased unemployment benefits.  To prevent an economic meltdown the other Eurozone countries have had to give billions of Euros to Greece to prevent mass starvation and rioting.  Unless Greece was given this money it would have not been able to pay its massive debts which would have caused a major banking crisis.  Global banks would go bankrupt; savers, investors and businesses would lose all their money and the cost to the German economy would be much more than the cost of the bailout.  So they had no choice but to bail Greece out.  However, the Germans still resent having to give up their hard earned cash to make up for the economic mismanagement of another country.  To remedy this problem the Eurozone is now trying to align the tax and spend policies of its member states, which means individual countries are losing their independence.  i.e. their ability to set their own tax and spending levels. For this reason the UK would be very unwise to let an independent Scotland use its currency unless their economies were aligned in their tax and spend policies.  The UK would not want to have to bail out Scotland in order to save its own economy.  This effectively would mean that Scotland would need to have its budgets approved by the UK parliament, making a mockery of their notion of independence.  Likewise, Scotland would be unwise to use the pound because it wouldn’t be able to devalue in the event of a crisis.  Of course Scotland would have similar problems if it joined the Euro.  This is the very reason it doesn’t want to join the Euro!  Having its own new currency would also carry large risks as they would not have a large economy to protect it from wild fluctuations in the currency markets and it may have much higher borrowing costs. For a single currency to work there has to be similar tax and spend polices across the whole currency zone and there must be similar language and culture to allow workers to easily move to where the jobs are. Answer these 5 Questions before voting on Scottish Independence

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Politics and Economics

Men are the main victims of violence and violent death

Many women in the media seem to feel that men don’t know what it’s like to be a victim.  This is something from which women suffer at the mercy of men.  Intuitively we believe this.  We feel protective towards women.  I have two teenage children and worry much more for my daughter when she goes out at night.

However it is my son who is immensely more at risk from an early, violent death.

In the UK men are the victims of 62% of violent crime.  They are also much more likely to die early and violently though accident and trauma. They account for 95% of work related deaths, 92% of motorcycle deaths and have three times the overall road traffic mortality rate as women.  Men account for 75% of suicides and are 68% of all murder victims.

And just to remind ourselves that as a society we are happy to put our young men in harm’s way, the statistics for UK military deaths in Iraq and Afghanistan to May 2012 reports 582 male deaths and 8 female.

All the statistics seem to indicate that the world is a much more dangerous place for men than for women.

They have different and more fatal dangers than those that affect women.  However they are dangers nevertheless.

Men very much know what it’s like to be a victim.

References:

Accidental and Violent Deaths:

Men are considerably more likely than women to have an accident or to die at work. Almost four out of every five (79.5 %) serious accidents at work and nineteen out of every twenty (94.9 %) fatal accidents at work in the EU-27 in 2009 involved men.

(Ref: Health and safety at work statistics)

There is also a significant and notable disparity between the deaths caused by road traffic accidents between men and women, with men being over three times as likely to die from a road accident. 

(Ref: RAC Foundation 2009)

Obviously men take many more casualties in war than women because we are more prepared to put them in harm’s way.  The UK fatalities in Afghanistan and Iraq to May 2012 were 582 men and 8 women.

(Ref: UK Fatalities in Afghanistan and Iraq)

Violent Crime:

Men are more often the victim of violent crime than women: “The CSEW (Crime Survey of England and Wales), which measures the experiences of a representative sample of the population resident in households, provides a good measure of the volume of violent crime offences. It shows 2.1 million offences occurring, based on the 2011/12 survey, mostly against men (62%), mostly not reported to the police (56%), and with a relatively high proportion being repeat victimisations (24%).”

This is statistics from the Crime Survey of England and Wales is based on a survey of peoples’ experience of crime and includes crimes which were not reported to the police.

(Ref:  Office of National Statistics  page 3 and 6)

Suicide:

There were 4,552 male suicides in 2011 (a rate of 18.2 suicides per 100,000 population) and 1,493 female suicides (5.6 per 100,000 population).  i.e. 75% of all suicides are male.

(Ref: Suicides in the United Kingdom, 2011)

Murder:

In the UK 2011/12:  367 murder victims were male and 172 were female. This means that more than two-thirds of homicide victims (68%) were male.

In 2010/11, 435 homicide victims were male and 201 were female.

(Ref: Ministry of Justice Update 2012

Homicides, Firearm Offences and Intimate Violence 2010/11)

 

Other References:

Why do men commit most of the crimes?

Moral Chivalry

Men and Crime

Why Crime Rates Have Fallen Over The Last 30 Years (hint: it’s not prison)

Focus on: Violent Crime and Sexual Offences, 2011/12

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Liberty, Politics and Economics

Real Democracy Lies in Purchasing Power not Committee Meetings.

In Ed Miliband’s Hugo Young Lecture this week he outlined his solution to unresponsive and unaccountable state services.  He proposes to give more power to the people. He wants to provide the public with more information.  He wants local people to be consulted about local decisions and he wants local government to take back more power from the centre.  Laudable aims, but how will this be implemented?

Labour will give power to the people so long as their decisions are constrained within their preconceived framework of socialist thinking. So the services would still be state run and monopolistic but the public would be allowed to influence the flavour or hue.  This is not power or freedom. It’s being imprisoned in a series of endless bureaucratic meetings, which will be dominated by a few activists who have the time and energy to expend on a narrow cause. This will inevitably include the type of full time agitators, anarchists and protestors we see objecting to fracking and busily occupying London.

Oscar Wilde’s remark that Socialism would never work because there aren’t enough evenings in the week seems to be accurate. Mr Miliband’s pledge that local people will be consulted on decisions is typical of Labour’s illusion that ordinary people are desperately clamoring to give up their free evenings to sit on the local committee for refuse collection or to influence the local clinical commissioning panel. The voice of the silent majority will remain just that because they have better ways to spend their time than arguing with a few highly motivated extremists. So it would not be very democratic either.

Real power lies with whoever holds the purse strings.    So instead we should introduce a voucher system, which we can all use to procure the type of local services we want.  For example, we would have the power to use our Medical Voucher to choose our own doctor, our Education Voucher to choose our child’s school and our Refuse Collection Voucher  to choose who empties our rubbish bin.   We would all get an equal opportunity to influence these services and providers will be kept on their toes because revenue would flow to those providing the best service.

However the public sector Unions and left-leaning politicians would become impotent under such a scenario. They only have power if we have no choice but to use their monopolistic services.   For this reason neither would allow it.  In reality they will constrain the decision making to the Henry Ford solution. You can have any colour you like so long as it’s black – or in this case, red.

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Genetic Explanations, Politics and Economics

Social Mobility in the UK has Declined because Society is more Equal.

The irony is breath taking.  Increased household income inequality and slowing levels of social mobility are the result of society becoming more equal.

Household income inequality is a hot topic in left-leaning political circles because it has relentlessly increased in recent decades, despite the last Labour Government spending billions of tax pounds trying to reduce it.

There is one obvious explanation being studiously avoided: Income inequality has increased in part because University-educated men and women are more likely to marry each other, rather than marrying partners with divergent education. Economists and biologists call the tendency of people with similar characteristics to marry “assortative mating.”

As a consequence, household income inequality has increased because education is strongly correlated with income—the better your education the more money you will typically earn.

The increased educational opportunities for women since World War 2 has led to many more of them to earning high salaries.  However there is a strong tendency for these women to marry men with similar education levels and earning potential, polarising them into a small number of high dual-income households.

Also the increased numbers of 18-year olds attending higher education and more equality in the workplace has allowed talented and motivated men and women from all parts of society to get on the professional job ladder.

Intuitively we should believe that more equality for men and women would increase social mobility, as men and women from all backgrounds have opportunities for higher education, to succeed in their careers and become more economically successful.

As predicted, social mobility surged after the 1940s but this has now mysteriously come to a screeching halt, despite society being more equal then ever.  Why?

First we must acknowledge that talent and motivation are largely heritable (i.e. we receive them through our genes).  The massive data from identical twin / adoption studies have shown that the “environment” of pupils before World War 2 accounted for some of the differences in a person’s eventual social and economic status by age 35. After these social based advantages were largely dismantled we saw a high degree of social mobility as talented and motivated individuals from all parts of society started to meet at Grammar Schools and Universities.

The advantages of upbringing have now largely disappeared. Similar studies since World War 2 (in the developed world) shows upbringing makes little difference to our eventual social and economic status, peer groups makes some difference but the largest driver is the genes for talent and motivation we inherit from our parents.  Our upbringing, education and experiences are transient, so the influence of different “nurture” experience on our lives will be diminished over time.  Our genes exert their influence consistently throughout our whole life.

Combine the fact that talent and motivation is largely inherited through our genes with one of the most passionate and time consuming aspects of human behaviour, i.e. finding a mate, and you have a very powerful natural force. Talented, motivated women generally seek and marry talented, motivated men.  They then generally have talented, motivated children. i.e. they cluster the genes responsible for these talented, motivated characteristics into certain sections of society. As these characteristics generally lead to higher earning potential they are more likely cluster in the affluent parts of society. Consequently talented, motivated children are not equally spread in our society. This is unfair, but I’m explaining the is not the ought. This biological process is called assortative mating.

This explains what we have seen in recent history. A strong genetic determinant of talent and motivation combined with a sudden dismantling of unfairness in society will lead to an initial surge in social mobility. However this social mobility will then fade as beneficial genes cluster into the affluent parts of society by the process of assortative mating.

This explains why private schools and affluent families provide a disproportionate number of students to top universities, and why they are providing slightly more now than 10 years ago.  As assortative mating continues its influence this trend is likely to continue, unless our politicians want to start choosing with whom we mate?

Top universities may be becoming less socially representative, but they are representing where the talent has clustered because in a relatively socially mobile environment, talented genes will cluster in affluent parts of society.

For new immigrants the social factors which have limited their progress until now are relatively recent, so we expect the genes for talent and motivation to be more numerous in poorer parts of their society as they haven’t had time to cluster in the more affluent parts of society.

This explains why poorer students for ethnic minorities out-perform their white peers.

Remember is not ought.

Our future is not entirely genetically determined and I have no doubt that good schools with quality teachers make a difference.  We should continue do everything we can to ensure that individuals from all parts of society have access to an excellent education and quality careers with equal opportunity to succeed on merit alone.

But the reason we see a slowing of social mobility and a polarisation of high income individuals into high dual-income households is because society is more equal, particularly for women.   If we are to have a serious debate on helping the “disadvantaged” we need to look at all causes of “inequality” and move away from the discredited 1960’s assumptions that it is explained by “nurture” and “class”, which is what most press articles on the subject imply. We should learn a little about evolutionary biology and genetics before making these wild assumptions.

It is in our interest as a society that we have the best people in the right jobs. We all benefit from a genuine meritocracy.  There should be no discrimination based on colour, class or sex.  But this includes “positive” discrimination too. We should not be giving people a leg up because of a perceived injustice unless we can prove beyond doubt that they really have been disadvantaged.

Governments should set their expectations correctly before spending billions more tax pounds trying to save all pupils from a “perceived” injustice. They should instead target Government spending on developing each child’s individual and innate talents and motivations.

References:

Twins early development studies

Differences in students’ GCSE results owe more to genetics than environment:

IQ is in the Genes

We can’t ignore the evidence: genes affect social mobility

One Cause of Inequality: More Rich Marrying One Another

Marry Your Like: Assortative Mating and Income Inequality

Women, Men and the New Economics of Marriage

How Much Difference Does a Good School Make to Your Child’s Academic Achievement?

Getting ’em young (The Economist looks at the impact of early years education)

Further  Listening:

Intelligence: Born Smart, Born Equal, Born Different (three BBC radio programmes on the genetics of intelligence)

What makes some children smarter than others?  Professor Robert Plomin talks to Jim Al-Khalili about what makes some people smarter than others and why he’s fed up with the genetics of intelligence being ignored.

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Politics and Economics

There are clear limits to Socialist Economics – and the UK has passed them

In 2012-13 the UK Government is spent  £100,000,000,000 more than it raised in tax.  This is called the Government deficit.  This is less than the £155,000,000,000 deficit in 2009-10  (the last year of the Labour Government) but still unsustainable.  The difference in spending and tax revenue is made up by Government borrowing, which is bloating our £1,400,000,000,000 debt.  Can socialist economics eliminate the deficit, then start to pay down the debt whilst maintaining living standards?

Socialist economic logic:

Socialist economics has a predominantly social agenda not an economic agenda.  Its logic goes something like this:

“I need a certain amount of income to live a decent life therefore I am entitled to have it.

If I’m unable to earn this much myself then somebody else must make up the difference:

1.  My employer must pay me more for my efforts (minimum wage)….or

2.…. my next-door neighbour (who earns more than me) must give me some of their income (intra-generational redistribution of wealth)….or

3.…The Government must borrow more money, give some to me and get my children and grandchildren to pay back the debt (inter-generational redistribution of wealth)…..or

4.   ….a combination of 1,2 and 3.”

How far can we push these policies before they become detrimental to those they are designed to help?

Solution 1.  Minimum wage.

Setting a legal minimum wage can be a good way to ensure that workers have a fairer remuneration for their labour from their employer.  The trick is to put minimum wages at a level that benefits workers but not so high it puts the employer out of business or drives jobs to countries with cheaper labour.  Minimum wages put up the costs to businesses, which must be passed on as increased prices (causing inflation), which must be paid by workers.  Increased prices causes the businesses to be less competitive in global markets (causing unemployment).  There are two significant numbers regarding labour costs: $135 and $12. The first is what the average worker in the West earns per day; the second what the average worker in urban China earns.

What entitles the rich world’s 500 million workers to salaries ten times greater than the 1.1 billion workers in urban bits of the developing world?

(Full, brilliant article is here:    $135 – $12 = the pay gap the West can’t bridge.)

Solution 2.  Intra-generational redistribution of wealth – Taxation.

Western democracies accept that a certain level of wealth redistribution is healthy.  By reducing inequality we can ensure the whole country benefits from the talents of all its people and we enjoy a more peaceful, more harmonious, meritocratic society.  However, we are now paying much more for the increased number of elderly people in our society with their higher pension and healthcare costs.  This leaves less for working age benefits.

Remember in Britain more than half the adult population receive more in benefits than they pay in tax and the top 1% of taxpayers provide 30% of income-tax revenue.  So, the majority are supported by a minority of tax payers – i.e. the “rich” are already contributing.

Let’s try a thought experiment.  If we taxed everybody at 100% of his or her income we would collect very little tax.  Few people would work for no money.  If we set income tax at 0% we would collect no money. Therefore (logically) there is an optimum top tax rate whereby we collect the most tax.  Labour believed this was 40% for all but one month of their 13-year rule.  The current administration thinks it is 45%.  However all agree that taxing too much collects less tax.  We are just arguing about the correct percentage.

So can we squeeze the rich some more? A simple calculation:  Suppose we ask all people earning over £100,000 to pay an additional £30,000 tax per year on top of the tax they currently pay?  Totally ludicrous of course, as most earn little more than £100,000 and couldn’t find it, and those that earn significantly more (the one’s we all really want to tax) can easily move country and pay us no tax at all.  High taxes will also act as a disincentive for rich and talented individuals to come to the country in the first place.  So the constraints on incentives and resulting talent drain would make this whole concept fanciful as a way of raising revenue……but just for the sake of illustration let’s suppose it was possible…..

We have 500,000 people in the UK who earn more than £100,000 so (best case scenario) we’ve raised £15,000,000,000.  We’ve reduced the deficit from £100,000,000,000 per year to £85,000,000,000 per year.  Now what?

Solution 3. Inter-generational redistribution of wealth – Borrowing.

In the UK we have an annual £100,000,000,000 + deficit which is bloating our £1,400,000,000,000 debt.   The current interest payments are greater than the defence budget.   Money paid in interest is money not available for welfare, education, healthcare and investment.   Interest rates charged to countries are based on the risk of not getting back the money you lent.  Highly indebted countries pay higher interest rates to compensate for the extra risk.  This puts up the costs of borrowing even higher.  When the debt gets so big that a country cannot afford the interest payments nobody will lend it more money and its economy collapses – such as happened in Greece.  The UK is close to this debt limit so increased borrowing is no longer an option.

The current economic problems caused by our massive debt are obvious.  Moreover, effectively taxing our children and grandchildren so that we can have a better life now at their future expense is undemocratic and immoral. Taxation should be by consent and they have not voted for it.

There is a limit to how far we can push minimum wages, taxation and borrowing.  We have reached that limit.  We must now live within our means.

Perhaps Socialist economic logic is flawed?

How about:

“I need a certain amount of income to live a decent life therefore I must earn it.”

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Genetic Explanations, Liberty, Politics and Economics, Religion

Why homosexuality is natural – an evolutionary explanation

Since Aristotle, we have philosophised a scientific and moral order to the world.  A “natural order” or “utopia” to creation.  A way things were meant to be.  If we acted against this order then nature would be disrupted and chaos would ensue.  This pre-supposition was incorporated into the major religions where it is assumed that God had a plan for creation and that His plan was “designed” to be harmonious.  If we could only understand what God intended for the world then we would know how to behave. But only religion knew how we ought to behave according to God’s design, because only religion knew God’s mind. Religion therefore got involved with “moral teaching”, which was a code of behaviour that God had intended and endorsed.

So religion expropriated moral behaviour based on a belief in a “purpose” or “design” of nature.  Men were men, and women were women, and they were meant to marry and have children.

However, unlike Aristotle’s assertion and accepted religious doctrine, evolution does not provide an “ought” for nature.   There is no intention in evolution.  Genes have no intelligence or sentience.  They are inert, self-replicating, complex molecules that have evolved over 3,500,000,000 years to build intricate life-support machines around them (living organisms) that help them replicate themselves.  We humans are a disposable container to further the interest of our genes.  We die, they don’t.

Evolution works by natural selection.  Each generation of genes has small random variations and mutations (some beneficial, most harmful) from which nature chooses the best characteristics using natural selection.  The beneficial behaviours survive and are amplified in future generations and the unbeneficial behaviours dwindle or die out.

Genes merely cover their options by providing random variation to ensure that whatever the future environment may be, some of them will be adapted to take advantage of it.

Without this evolution could not occur and we would still be living primordial slime.

So massive climate change, asteroid attacks, disease and any number of previous natural disasters has not wiped out life on our planet.  It just changes which genes (and therefore which species) are best adapted for the new environment.

So there is no “ought” in evolution.  There is no “intent” or a way things were meant to be.

So nature naturally provides variation in human characteristics and behaviour.  We have variations in skin colour, variations in hair colour, variations in aggressive behaviour and variations in intelligence.  And yes, variations in sexuality.  Some people are gay, some are heterosexual, and some can be anywhere on the spectrum in between.  So homosexuality is as natural as red hair or black skin or blue eyes.

Studies have shown that homosexuality runs in families, leading most researchers to presume a genetic underpinning of sexual preference. However, no major gene for homosexuality has yet been found.   But whilst much variation is directly caused by genes, we know that some variation is only indirectly caused by genes.  Recent studies in epigenetics have found a plausible mechanism for human homosexuality.  Epi-marks constitute an extra layer of information attached to our genes’ backbones that regulates their expression. While genes hold the instructions, epi-marks direct how those instructions are carried out – when, where and how much a gene is expressed during development.

Sex-specific epi-marks produced in early fetal development protect each sex from the substantial natural variation in testosterone that occurs during later fetal development. Sex-specific epi-marks stop girl fetuses from being masculinised when they experience atypically high testosterone and vice versa for boy fetuses. Different epi-marks protect different sex-specific traits from being masculinised or feminised – some affect the genitals, others sexual identity, and yet others affect sexual partner preference.

Epi-marks are usually erased and produced anew each generation, but recent evidence demonstrates that they sometimes carry over between generations and thus can contribute to similarity among relatives, resembling the effect of shared genes.  When sex-specific epi-marks are transmitted across generations from fathers to daughters or mothers to sons, they may cause reversed effects, such as the feminisation of some traits in sons and similarly a partial masculinisation of daughters.

So this mechanism can affect a developing foetus’ response to hormones in the womb which may affect brain development and sexuality.  But how can a genetic trait that causes sexual preferences which will not result in pregnancy and children survive generation after generation?   The reason that many people think homosexuality is “unnatural” is because it denotes behaviour which does not result in any future generations.  Natural selection should ensure that genes for homosexuality will die out.  Many believe the fear of persecution caused many homosexuals to marry and have children in order to fit into society, thus propagating these genes into future generations.  However,  mathematical modeling demonstrates that genes coding for these epi-marks can easily spread in the population because they only rarely escape erasure causing homosexuality in the offspring.  Genetic transmission of epi-marks between generations is the most plausible evolutionary mechanism of the phenomenon of human homosexuality.

So our knowledge that homosexuality has a genetic basis, which is subject to evolution by natural selection, would lead us to predict that homosexuality would be rare.  This is verified by the  results of the third National Survey of Sexual Attitudes and Lifestyles recently published in The Lancet.   It shows that 7% of men have had some sort of same-sex “sexual experience” and only 4% had physical sex with a man.  The percentage of females who say they have had a sexual “experience”, including kissing, with another woman was 16% and the number admitting to having sex with another woman was 8%.  However there are good evolutionary reasons why we would predict that homosexual behaviour in women would be greater than in men.  (See blog:  Is there a bit of lesbianism in all women? )

Now that homosexuality is accepted in modern societies there is less pressure on homosexuals to marry and have children in order to “fit in” and avoid persecution.  This could mean that there will be less homosexuality in the future because if there are genes which code for homosexual behaviour they would become even less common.  However the recent research into epi-marks suggests that homosexuality will never disappear.  It will just remain rare.

Gay Marriage and Liberty

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Politics and Economics

Why are Living Standards Dropping in the UK?

Let’s take a toy model analogy.

I earn £30,000 per year and spend £25,000 on consumption and £5,000 investing in the future.

I entrust my financial affairs to a Labour Chancellor who assures me I can spend £30,000 per year on consumption and £5,000 on investing in the future because “I’m worth it”.   So I borrow £5,000 a year for 10 years.

For 10 years I feel like I’m earning £35,000 per year.  I consume £30,000, invest £5,000 and life feels pretty good.

What I’ve not spotted, until it is too late, is that after 10 years I owe £50,000 and the interest is costing me 10% or £5,000 per year.

The financial crisis hits me, causing my income to drop to £28,000 (drop in GDP) and my consumption has increased to £32,000 per year (to pay increased unemployment benefits).  I am now also paying £5,000 in interest.

My consumption (£32,000) + interest (£5,000) is £37,000 without paying off any debt. My costs are now £9,000 more than my income (£28,000). And I have no money for investment.

Because I feel like an incompetent fool I hand over all my finances to a Coalition Minister.

He painfully cuts my consumption to £25,000 (what it should have been) but I still have to pay £5,000 interest on the debt and therefore need to borrow £2,000.  I have no money for investment.  Debt rises from £50,000 to £52,000.

Immediate effect:  I now have £5,000 less per year to spend on consumption and prices have risen – so I feel much worse off  (“cost-of-living crisis”) – and my debt has still gone up by £2,000 therefore my interest payments rise by another £200.  I still have no money for investment.

In the Autumn statement my income goes back to £30,000 (GDP growth) giving me an extra £2,000 to spend.  £200 goes on interest and £1,800 on investments.

Compared to 10 years of Labour Government this is how I feel:

1. My consumption has gone from £30,000 to £25,000 despite inflationary price increases, so my standard of living has fallen and I worry about paying fuel bills.

Of course my living standard is falling!  I’m comparing my current standard of living to a period when it was held artificially high by borrowing!

2.  My investments have gone down from £5,000 to £1,800 which will slow the pace of future economic growth.

3.  Interest is now £5,200 and rising

4. Deficit is down from £5,000 to £2,000 but…..

5……my debt is still going up.

Can anybody spot where the problem started?

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Genetic Explanations, Liberty, Politics and Economics

Why do we vote for a particular political party? Geography and genetics can play a role.

Screen Shot 2017-09-17 at 12.30.57

 

Geography is more likely to dictate voting patterns in modern Britain than “class” or even income. Well-off people in the north are more likely to vote Labour and poor people in Kent are more likely to vote Conservative:

Leader Article

“The north has wealthy suburbs, like South Wirral, west of Liverpool. They vote Labour. The south has impoverished pockets, like north-east Kent. They vote Conservative.”

Reference

As well as geography dictating political behaviour there is good evidence that genetics may play a role as well.  Twin studies unequivocally demonstrate the heritability of politically related behaviour.  A collection of a dozen genes might be responsible for inclining people towards liberalism or conservatism. There are no genes for socialism or conservatism, or for prejudice or tolerance, any more than there are genes for Christianity or Islam. But a person’s genes can sometimes propel them more easily in one direction than another. Free will is a little freer to turn right than left, or vice versa.  Of course genes are inherited and tend to cluster in particular regions, even in today’s highly connected world.

Genetics and politics

It seems that reason, logic and informed debate play a smaller role in forming our voting patters than we might hope.  This means the electorate has less flexibility and “free will” to change the Government according to the prevailing needs of the nation. 

This is a particular concern at present as the overwhelming need is to reduce the cataclysmic UK budget deficit and national debt.  Each year we borrow more than 100 billion pounds that is swelling a debt that is already over a trillion pounds.  Tax increases will not get near reducing the deficit, let alone the debt, so massive spending cuts are inevitable.  We need to understand from each political party how they will manage our country’s new financial reality.

Even if the Labour leaders understood the need for reducing our colossal debt, their Union paymasters and back-benchers would not let them reduce public spending. The country should feel that there are other political parties that have more currently relevant instincts towards wealth creation, rather than wealth spending, and a strong, historically proven philosophical belief in a smaller State supported by lower public spending.

Even for entrenched Labour supporters there should be an understanding that there is a time and a place for Labour policies.  And that time is not now.  For the good of the nation many traditional Labour supporters must be persuaded to hold their nose and vote for somebody else. Unfortunately it seems they have less free will to change their vote according to circumstance than we might hope.

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Liberty, Politics and Economics

The 2008 Financial Crisis was Primarily a Failure of Socialist Economics

Mr. Miliband and the UK Labour Party believe that the 2008 financial crisis was caused by a failure of capitalism.  To an extent this is true, but then few of us believed that capitalism is a perfect system, just the best system currently available.  Mr. Miliband and his colleagues are very vocal at pointing out the failures of capitalism, but silent on the many everyday failures of The State, negating a credible socialist solution to our problems.

I’ll argue that the 2008 financial crisis was primarily caused by a failure of socialist economics.

Let’s be clear about the economic legacy left by the last Labour Government.  The deficit was a whopping £155,000,000,000 in one year!  Whilst I have heard many Labour politicians responsible for this eye-watering number blame it on extra spending required to avert an “international financial crisis” created by bankers, the facts do not support this defence.

It was not a “world-wide” crisis as it affected only countries that ran up huge Government deficits (Greece and the UK being prime examples) or massive private deficits (Ireland).  This includes the US who refused to raise very low tax levels to meet spending obligations, and the EuroZone who cannot put taxes up any higher to match their totally out-of-control spending plans.  Many countries, including Canada, Australia, Saudi Arabia, China, Sweden Germany and much of South East Asia all avoided the worst of the crisis because their spending was more-or-less in line with their tax revenues.  Labour must take its share of the blame with the bankers, as it was them that ran up Government debt.

Also, Labour turned on the spending tap long before the 2008 – 09 financial crisis.

http://www.ifs.org.uk/bns/bn99.pdf (see Fig. 4.1 on page 10)

Labour spending went from 36% of GDP in 1999-2000 to 42% in 2005 -2006 whilst revenue was broadly flat at 37% of GDP over the same period.  Increasing Government deficits is not new and the size of this early deficit was not unusual by historical standards.  But the key difference here is that Labour increased spending and debt during the boom which started at the end of John Major’s government.  We expect Governments to increase spending and deficits during a recession.  This is essential to cover increased unemployment benefits and lower tax revenues and smooth out the economic shocks that inevitably hit the most vulnerable citizens.  However, prudent Governments will then pay down debt during the boom times to allow more future borrowing when the economic cycle inevitable takes a turn for the worse.

Remember that the deficit is given as a percentage of GDP, which is much higher during a boom therefore the deficit is proportionally bigger.  Also, the last boom lasted for a long time, an unprecedented 16 years, allowing massive debt to build up if you were foolish enough to continue to borrow during this time.

The reason that Labour felt they could borrow with impunity, even during a boom, was it believed it had banished “boom and bust” economics.  Gordon Brown famously made this statement in the House of Commons. The world’s finances were linked for the first time by technology and Labour believed the massive global market could spread financial risks. Labour bet the country’s financial health on a belief that asset values would continue to rise, allowing borrowing against those assets.  Finally, Labour selfishly expected our disenfranchised children and grandchildren to pay back the debt sometime in the future, believing this was acceptable because it assumed the economy would be much bigger by then and they could afford it.  This is undemocratic and immoral. The consequence of all this is that Labour foolishly and arrogantly believed there would never be another downturn so could continue to spend above tax receipts.

Labour was wrong on all counts.  The connected global markets did not spread the risk, it spread the contagion, asset prices fell and the economy shrank increasing the debt to income burden.

So because Labour arrogantly believed there would be no more downturns they increased their profligate spending rather than pay down debt.  Consequently, when the financial crisis hit in 2008 there was no more credit available, which left the UK economy unusually exposed.

Thanks to Labour the incoming coalition government had the unique problems of solving a massive economic slowdown with no ability to borrow more to smooth the worst effects.  They had to reduce spending when there was more need for the extra money.  An impossible task without causing major hardship.

Whether the coalition policies produced the best possible outcome given the disastrous economic hand they were dealt by Labour is difficult to judge.  This remains to be seen and history will be the judge.

Labour’s election prospects do not lie in trying to talk down the coalition economic performance or in justifying its recent economic mismanagement.  To win the next election they must address one key question:  Which party will best manage our new economic reality?

We have over a trillion pounds of debt, which is still rising due to an annual deficit of over 100 billion pounds.  All this must be paid down.  Combining this with an older population (with their large pension and healthcare needs) means we will have no more spare money for at least a generation. We must earn what we want to spend.  We cannot continue to borrow what we spend. Increased taxation can get nowhere near lowering the deficit, let alone the debt.

Massive public spending cuts are inevitable.

Labour must now convince the country that they can move from a party which financially supports in-work welfare benefit and uncontrolled public spending to one which puts financial prudence ahead of its social engineering experiments i.e. manage the country’s massively reduced public spending capacity for the foreseeable future.

The Labour front bench may believe they can do this, but I doubt that their political paymasters (Unite and the GMB unions) or the socialist Labour backbenchers will let them.  They have a social agenda not an economic one. The country may feel that there are other political parties with a longer history and proven innate instincts of supporting a smaller State and lower public spending.

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Liberty, Politics and Economics

Why Management Targets Become Ineffective

The use of targets usually has a desirable effect on the behaviour of managers for a year or two at most. After that the effects of overusing numerical targets can be detrimental for the following reasons:

1.Targets are only effective if the manager is largely in control of the parameters being measured.  In many organisations the management performance is affected by many factors beyond the control of any individuals, or even the whole organisation.  Prevailing economic factors and general market conditions, demographics, fashion, Government legislation, behaviour of competitors, competence of colleagues and peers etc. etc. can have a profound effect on individual performances. In particular it may not be appropriate to overuse numerical targets for public bodies such police forces and healthcare providers when so much crime and illness is caused by influences beyond their control  – changes in demographics, immigration, relative affluence and socio-economic factors to name but a few.

2. Targets can only be set against aspects of the job, which can be accurately measured. This can cause a bias towards “hard” numerical targets at the expense of more important “soft skill” aspects of the work. For example nurses can be set targets around number of patients treated, but cannot easily be measured and rewarded against the important “soft” skills of a caring bedside manner and patient empathy which lead to better patient care.

This type of “measurement” culture has caused a proliferation of Speed Cameras on our roads. In fact, driving over the posted speed limit accounts for less than 10% of road traffic accidents, whereas “driving without due care and attention” accounts for 40%. Measuring speed is easier than measuring attention levels or driving skills, so that’s where we put our resources. We take policemen of the road and concentrate on what can be easily measured rather than improving driving skills. This is lazy and ineffective.

3.      Soon after the targets are set the incumbent usually finds “short cut” ways to hit the targets required, making them ineffective. The problem here is that managers waste a lot of time and energy “gaming” the target setting system to their advantage, rather than actually doing their job. This will be particularly true if a large part of their remuneration is based on hitting certain “hard” targets. There are numerous examples of this, including those given in the article above. The classic example is the reporting of “profit” made in a business. A good accountant can quite legally adjust the books to show a wide range of profit levels allowing senior managers to choose the scenario which best suits their needs at the time.  Another good example was reducing waiting lists in hospitals. This was easily done my phoning all those on the waiting list and crossing off those which has got better, moved house or died whilst on the list. Hey presto! – the list is shorter.  New managers generally restate previous performance levels to a lower standard and blame previous incumbents for the short fall, so they can show better performance against a lower base. They can also redefine parameters being measured, use legitimate but misleading statistical analysis to show better performance and change the way the data is collected or collated. They can also just lie.

4.Having set targets an enormous amount of time, energy and money must now be spent in collecting endless amounts of data to see if targets are being made. Additional resources are used in collating the data, creating reports, reading and interpreting the reports and constantly adjusting targets and measurement criteria to keep up with the managers who are spending their time and energy finding ways of gaming the system. Endless, expensive debates then ensue as to whether the data has been correctly interpreted.

Eventually we find we are spending all our time and money collecting data and trying to catch each other out using statistics, rather than managing whatever it is we are supposed to be managing. Remember all this work and energy is only focused on aspects of the job which are numerically measurable.  Integrity, professionalism, judgement, interpersonal skills, empathy, care etc. etc. are difficult criteria to measure.

We cannot eliminate all target setting but perhaps we can allow more performance measurement based on soft, observable skills as interpreted by an experienced hands-on manager.  The “art”, rather than the “science” of management.

We should concentrate on getting the right people, in the right job with the passion and motivation to make a positive difference.  And then let them get on with it.  This should take precedent over arbitrary numerical targets.

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Politics and Economics

Could Global Warming be Beneficial to Mankind?

Greenpeace logic:

1. Is the world’s climate warming?  Yes

2. Is the climate warming man-made? Yes

3. Is it caused by higher atmospheric carbon dioxide levels? Yes

4. Conclusion: Divert a fortune away from education, healthcare and welfare to combat global warming by reducing carbon dioxide levels.

Better logic:

1. Is the world’s climate warming?  Yes

2. Is the climate warming man-made? Yes

3. Is it caused by higher atmospheric carbon dioxide levels? Yes

4. Is the consequence of global warming good, bad or neutral overall?  Don’t know

5. If the overall consequence is bad, how much will it cost us to adapt to the new climate? Don’t know

6. How much will preventing global warming cost? Don’t know

7. Do we know how to prevent carbon dioxide emissions without increasing other greenhouses gases and pollutants or having the lights go out?  Not yet.

8. Will any political system anywhere in the world spend a fortune today to prevent something which may happen in 100 years? Unlikely

9. Conclusion.  Answer 4,5 and 6.  If 6 is less than 5 and we can answer 7 we should act bearing in mind the difficulties of 8.

There is an opportunity cost here.  Money diverted from education, healthcare and welfare is also detrimental to the well-being of mankind.

Is preventing global warming worth it?

The debate has become sadly polarised.

On one side is the “environmental” lobby composed of self promoting eco-warriors / eco-terrorists who often have a hidden political agenda of anti-capitalism, anti-globalisation and Ludditeism, which is finding “environmentalism” a convenient Trojan horse.  Joining them is a strong lobby group that has a financial interest in the emerging “green” technology industries.  They insist that global warming is real, all its consequences are catastrophic and unless we act immediately we will experience a quick and conclusive Armageddon.

On the other side are the climate change deniers, who dispute a large body of peer reviewed scientific data that supports a model of global warming, caused by an increase in man-made greenhouse gases.  A large, well resourced lobby supports them with extensive financial interests of the fossil fuel industry.

Neither of these two groups can be trusted in a rational, evidence based debate because they have too many vested interests.

But the world is not just divided into those who believe in catastrophic manmade climate change and those that don’t.

There are many who accept that global warming is happening, and it is largely man made, but are still waiting for proof that it will be detrimental overall. 
 After all, the costs of preventing climate change are astronomical and this diverts funds from education, healthcare and welfare. 
 We need to know the money is going to be wisely spent.  I’m not a climate change sceptic, but I am a government-spending sceptic.

I’m wondering if the overall costs of preventing climate change could be more than the overall benefits of preventing it?  Or indeed, if there are actually overall benefits of global warming? 
There will be winners and losers, as ever.  Get ready for the debate to be biased by self-interest!

For example:

The vast majority of the world’s land mass is in the higher latitudes (Canada and Russia) where it is currently too cold to live. A few degrees of warming could transform these baron areas into habitable land capable of supporting human populations and vast food crops. As the climate warms the forests in these northern latitudes will have a longer growing season and will prosper further north, consuming carbon dioxide.  Forests and plants all over the planet will benefit from more carbon dioxide and warmth helping them flourish.  The worst projections predict warming over a hundred years or so, not next decade.  Mankind will migrate, as it has always done. There is time.

Global warming is creating milder winters rather than hotter summers.   In previous eras, when the climate was significantly warmer than now, the whole planet was tropical with a year round growing season and no winter.  Farmers in the warmer, wetter tropical Philippines can get three rice crops per year but only bother with two. Compare that to the single wheat crop in cooler climates.

What are now deserts once teemed with life, with rich forests and diverse wildlife. Until the world cooled and got drier. This cooling and drying devastated much of the life on the planet – look what happened in central Australia where there were once forests and a diverse ecosystem in its interior.  Global warming will mean a warmer, wetter planet and fewer deserts.

We can use our human ingenuity to adapt to other changes.  We won’t need glaciers if it rains every day.  The rain will make rivers, which can be dammed and controlled.  Dykes can protect low-lying land from the gradual increase in sea levels.   The Netherlands is already largely below sea level and their engineers have adapted commendably.  Human ingenuity can move plants and animals around the world that are already adapted to the new climate.  We don’t need the slow process of extinction and evolution by natural selection to take its slow and meandering course.

We must also do more work to prove that the proposed expensive climate change prevention schemes will actually work.  By rushing at this problem before we know the facts we could make things worse.  For example, many of the reservoirs which were built to create “clean” hydroelectric energy actually produce large amounts of methane which makes global warming worse than an equivalent efficient carbon fuelled power station.

The final question is whether we can, realistically, change the world’s climate.  Getting political consensus between the USA, China, India and Russia looks unlikely.  Australia and Canada are reversing their previous green policies.  The will and ability under any political system to spend a fortune now to prevent something that may happen in 100 years will be fragile at best.  We could end up with the worst case scenario.  i.e. spending a fortune on green polices to not prevent climate change.

Climate change inevitably means we must change and adapt, and as a species we have done this very well up until now. We’ve survived ice ages and deserts.

Manmade global warming is a fact with potentially detrimental and beneficial consequences.  We need to assess where the balance lies.  If the overall effect of climate change is detrimental we still need to assess the costs of preventing climate change and balance them with the benefits of preventing climate change.  Rather than spending the money on a futile attempt to change the world’s climate we may get better value by allowing a certain amount of climate change and spending the money on a combination of adapting to the new climate and education, healthcare and welfare instead.

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