Saturday, 28 February 2009

Whither the national interest?

Back in the dim and distant past of the pre-New Labour era we used to hear a lot about the balance of payments and the national interest. They were central to government policy yet they have now both disappeared from view.

The balance of payments was the difference between the value of stuff we exported and the value of stuff we imported. Figures were broadcast every month for tangibles and invisibles. Very often we were in the red in tangibles (actual things like cars and cabbages) but in the black for invisibles (such as banking and insurance). It mattered because we were competing against other countries and needed to know how we were doing. At least we thought we needed to know, that we don't get any figures these days suggests it might not have been necessary at all.

Except that it was necessary. It was necessary so we could judge whether we were getting things right or wrong. Just as a business needs to know whether it is making a profit or a loss in order to be able to judge its performance and make any necessary changes, so the country needs to know the same if it is to address systemic problems in the economy. Of course the figures have been available, they just haven't been published as widely as they used to be.

The national interest was the overriding concern of government, however dismally any individual government protected it. The UK government held a mandate from the people of the UK and felt it necessary to act in what it perceived to be the best interests of the UK. If France or Germany or, if it comes to that, Swaziland proposed something considered detrimental to this country the government would speak against it. Act against it less often, but speak against it every time. The concept of the national interest recognised that we are in competition with other countries. It also recognises that the first priority of the UK government should be to protect the interests of the people of the UK.

We just don't hear about the national interest these days and we don't hear about how well or badly this country is doing in its economic dealing with other countries. Instead we hear all about global this and European that, as though every other country is governed to protect the interests of international organisations and ideals rather than its own people. It's ok, we needn't worry, the EU or the UN will come to our rescue if something goes wrong. All we need to do it strengthen these bodies and we need never worry about anything again. This strikes me as a peculiar way to go about things and to be fundamentally wrong both in fact and in principle.

It is wrong in fact because many governments are assiduous in protection of what they consider their national interest, the USA and France are perhaps the most obvious examples of this but it goes far wider than that. Do you think the former soviet-bloc countries have joined the EU out of a sense of altruism or to further the political strength of the EU Parliament and Commission? Of course they haven't, they have joined because they see it as potentially beneficial for their people. Beneficial in two ways. First by giving them access to markets across Europe without the handicap or import taxes or restrictions on the right to work, and secondly by giving them access to hand-outs from the EU's pot of gold. If they were to become net contributors they wouldn't give a second's thought to joining the EU. They joined because they considered it in their own national interest to do so.

The reason relying on more and more international bodies to provide protection in times of difficulty is wrong in principle is that standards differ about what is a difficulty and what is the right way out of it. It's easy enough with something like NATO, a military alliance, because dealing with a military threat does not (except in the most esoteric way) involve cultural values and different interpretations of what is a threat and what is beneficial. Once diplomacy fails, either you shoot back or you get massacred; having more people with guns on your side is plainly beneficial. But you can't apply the same universal standard to economic or social matters. What areas of the economy should the government be involved in, what part should government play in sports or the arts, how should health care be funded, how should children be educated? There is simply no single answer on which everyone can agree. What is acceptable to the people of one country can be wholly unacceptable to another because of their differing history and culture.

Once decisions are passed to an international body it can become a supra-national body. Instead of being a meeting point for heads of government to see what common ground they can establish (as is still he case with NATO, for example), the body itself starts to form its own agenda and countries are required to fall into line or suffer sanctions. Instead of EU policy being a summary of those things all the member nations agree on, it is now something the member states are required to comply with whether they agree with it or not. This creates both practical and political problems.

On the practical side we have such things as current EU laws and directives on so-called health and safety. Health and safety is a balancing exercise between risk and reward. You can't just say "you must reduce the risk in this way" if that impacts so much on the reward as to make the whole exercise onerous or pointless. Of course people sometimes fall off ladders or chairs when changing a light bulb but the risk is pretty small, to require the erection of a scaffold tower and for all around them to stop work and stand well clear would be disproportionate to the risk. Did you know you cannot lawfully change a light fitting in your kitchen or bathroom without having the work certified by a properly qualified person? That's all very well for Mr Rich who would hire an electrician to do it anyway, but it's onerous for Mr Poor who saved for weeks to buy a nice light fitting and now has to fork out the same amount again for someone to fit it or check how he has carried out the most simple of jobs. There is no single standard of what is appropriate for everyone in all circumstances. Yet the more powers that are passed from national governments to supra-national bodies the more uniformity will be required and the more cases there will be of central edicts being inappropriate or absurd when put into practice.

The political problem arises from the inevitable democratic deficit of these bodies not being answerable directly to the people their decisions affect. This breeds mistrust because people don't remember the things the body got right only the things they got wrong. An ever-growing list of perceived errors combined with no effective means of changing the membership or policies of the body, can result in widespread discontent. Think back to 1979 and 1997. In each of those years a stale government was ousted and the result was that the very people who felt most let-down by the old were invigorated by the new. Yet how much actually changed about overall government policy on the 4th of May 1979 and the 2nd of May 1997? Twenty percent, ten percent, five percent? Maybe not even five percent. What changed was the general emphasis of policy much more than its details and, most importantly, all the failings of the old governors were sent out of the door and the new lot started with a clean slate. Between 1979 and 1997 the Conservative's slate filled with chalk dust, bits of fluff and dried chewing gum, and between 1997 and today Labour's slate has undergone the same transition. The mere fact that we voted to change our governing party gave continuing legitimacy to the whole system. Without the possibility of such change it is inevitable that legitimacy will disappear, thereby negating the only thing any government can rely on as its ultimate authority.

The aftermaths of the 1979 and 1997 general elections also show that there can be a radical change in certain basic aspects of policy to correct systemic problems encountered with the established way of doing things. Mrs Thatcher's central message in 1979 was that the old way of doing things wasn't working. The country was bankrupt and she argued for business and industry to be allowed to show what it could do without some of the centrally-imposed constraints which had become the norm. Not everyone agreed with her. It was essentially a matter of opinion not fact, but enough agreed with her to allow her to be given a chance to put her ideas into practice. Something else was tried because the former consensus no longer held sway. A similar change occurred after the 1997 election. Mr Blair argued that The State was doing too little and could do more to improve peoples lives. Sufficient agreed with him for his ideas to be put into practice. The system allowed new ideas to be put into practice because the old ones were no longer perceived as appropriate to modern life. Today there seems to be a sizeable body of public opinion that a change is needed again and an opportunity to vote for change will arise within the next fourteen months. We learn what works and what does not work by trying new things and seeing what effect they have. Even if 95% of policy remains essentially the same from one government to the next, the other five percent can make a huge difference - perhaps beneficial, perhaps not, that's a matter of opinion; there is always another election coming along for those who make a case against the incumbents.

How do you change the policies of a supra-national organisation when the existing ones do not suit the people of a particular country? The answer, of course, is that you can't. It is inevitably one-size-fits-all, like-it-or-lump-it; uniformity is seen as a benefit in its own right regardless of its practical effects. We often hear government ministers saying they are merely implementing EU policy when something daft or unpopular is brought in, as though that is an excuse. To my mind it shows the great problem with removing powers from Westminster and giving them to Brussels. Not only is there no way of giving EU government new legitimacy when it has lost our confidence but there is no effective way of changing EU policies that don't work.

Through all of this, we little people are concerned with how things affect our lives. Those who live in a village are concerned about how political decisions will affect their village, townsfolk and city dwellers ask the same about their town or city, they all do the same again when county-wide issues arise and we all do it on matters that affect the whole country. The national interest is not a political fiction, it is a reflection of the real concerns of the little people. When a factory closes in Birmingham there is a problem for those who lose their jobs and for those whose businesses and jobs depend on the Birmingham factory (such as shops close to the factory who relied on trade from the workers as they arrived and left each day). It is also a problem for the UK as a whole because increased domestic unemployment reduces UK tax revenue and increases the claims made on UK taxpayers. It has no effect whatsoever in Paris, Frankfurt or Warsaw, and the governments of France, Germany and Poland are too busy trying to protect their own people to worry about it.

Even though we are trapped within the money-sucking vampire known as the EU, we still have a national interest and there are still a few ways in which it can be promoted. Currently, all over Europe, national interests are being asserted afresh from the bottom-up. More of the same centralised power cannot answer these interests because British, French, German, Polish and all other EU manufacturers and other businesses are not playing for the same team, they are in direct competition. Our countries as economic units are also in direct competition.

I hope we hear a lot more about the UK national interest in the run-up to the next election. It is far too important to be left in the hands of the EU or the UN. We are best at deciding what is right for us. We might not be very good at it, but we still do a far better job than any unaccountable body concerned more with its own power than with improving life for us.

Friday, 27 February 2009

A very political pension

It is hard to understand how we reached the current position of Sir Fred Goodwin and his unfeasibly large pension. For anyone who doesn't know the background, Sir Fred was the head of the Royal Bank of Scotland until late last year. Under his stewardship a successful bank was reduced to a pile of steaming debt, posting losses of £24.1billion in the latest financial year. His bank was at risk of folding in 2008 until the government stepped in with vast sums of money and propped up its sagging cadaver. As part of the rescue package it was thought best for Sir Fred to concentrate on mastering crochet and flower-arranging, so his exit from the bank was negotiated. As with all negotiations, his departure came only when both he and the government were satisfied with the terms agreed. He did not insist on being paid in lieu of notice and he gave up certain other entitlements, including his key to the executive lavatory, in return the government thanked him and asked him to close the door on his way out.

The government had two other options. One was to let the bank fold, a course which would have terminated Sir Fred's contract of employment and restricted the amount of money he could get out of the company in the future, but that was thought unacceptable. The other was to sack him and let him sue if he didn't like it. There is only one good reason for not sacking someone who has overseen the total collapse of a previously successful business, and that is that you cannot prove he broke the terms of his contract of employment. Sir Fred was sought out by the bank to be it's big cheese. One consequence of being head-hunted for a major position is that you are very much in the driving seat when it comes to the terms of your employment. It would not be at all surprising if his contract of employment was drafted in terms very favourable to him. Indeed it might well be that his only concrete obligation was to receive his salary and bonuses. Various other obligations would be implied by law even if not expressly included, but each of them would be a difficult basis on which to justify dismissal even for the man responsible for snapping the bank's spine in two.

All this should have been looked into when the government took a majority shareholding in the bank and had to decide what to do about Sir Fred. In fact, even from this most incompetent of governments, it is inconceivable that it was not looked into. A deal was done and that was that. Sir Fred visited the yarn shop and started the crocheted blanket of his dreams. Now news has broken that his pension entitlement is no less than £693,000 a year for life, he is currently fifty years old, and the government is embarrassed. I have to say, I would be embarrassed if I had negotiated the removal from office of someone who had done so much damage and had managed to leave him with a pension pot valued at some £16million. I would ask how I could have been so incompetent.

An exchange of letters has now taken place between Sir Fred Goodwin and Lord Myners, the minister responsible for the negotiation. Sir Fred pointed out that he gave up the equivalent of more than a year's fat salary, that the pension was all recorded on the books and that the minister agreed to him keeping it. In reply the minister said he had believed the pension to be a legal entitlement whereas it now appears it was only discretionary. With the level of skill enjoyed by only this government in the western world, a minister's excuse makes him appear even more incompetent.

When the negotiation was taking place Sir Fred had a legal entitlement to a year's notice yet he agreed to forgo that entitlement, he had a legal entitlement to other benefits and agreed to forgo them, so why would the fact that the minister believed his National Lottery sized pension to be a legal entitlement mean it was not up for negotiation? It makes no sense.

But that's not the worst bit. The worst bit is that the minister did not know the legal status of the pension arrangement. These things are not written in hieroglyphics, they are contracts in pretty standard English legal jargon. They include a chunk setting out the terms on which the pension is payable. If you want to know what it means, the conventional technique is to read it.

None of this is to say that Sir Fred cannot be deprived of his ginormous pension, although it is very unlikely. Poor Gordon, at his most monocular and moronic, has started shouting about seeking ways to prevent at least part of it being paid. Even the grossly over-pensioned John Prescott has weighed-in, calling for Sir Fred to be summarily deprived of the money and putting the onus on him to sue for it. Not for him the rule of law or the law of contract, the idiot Prescott has votes to win so he wants to make the law up as he goes along if he thinks it will result in little crosses against the names of Labour Party candidates come election day.

It's all just political posturing, of course. If the government is to have any chance of undoing the arrangement within the law they face an enormous obstacle in their agreement to the severance package negotiated last year. Obviously we cannot tell exactly what happened. Maybe Sir Fred was given a generous pay-off because of his years of loyal service to the furtherance of poor Gordon's grand economic plan, and this little spat is the price he has to pay for his future income. Maybe he felt he had given up enough by waiving his notice period and other benefits and would never have agreed to cede his pension without a legal battle he felt confident of winning. Maybe the whole negotiation was just conducted utterly incompetently by a government that was in full headless chicken mode at the time. Whatever the true position, one simple fact remains - a deal was done.

And that is where the really important lesson comes from this farce. If it had been Barclays Bank or HSBC that took over RBS rather than the government, there would be no row about Sir Fred's pension arrangements. They would have been part of a the whole takeover package and lost in the small print while the real business of trying to rebuild a once thriving bank would be the only concern. Instead the state of the bank has been relegated to secondary importance behind an issue of no real consequence to anything. That is what happens when governments take over businesses. Headlines and opinion polls are more important to them than the substance of the thing. OK, so his pension pot is worth £16million, a huge amount of money for an individual, but what is it in relation to RBS as a whole? Its losses for the year were £24.1billion and his pension entitlement grew over several years, but let's treat it as a single part of the £24.1billion loss in that single year. £16million is 0.067% of £24.1billion. Heap all the vitriol you want on the man, he had to go, he had presided over ruination, get rid of him. Pay him 0.067% of the losses the bank incurred in his final year and send him on his way, it will be money well spent. Just start running the bloody thing properly.

Yet they will not run it properly. They will run it for political gain. They think there is political capital - by which I mean potential votes - in shouting about how much the failed former boss of the bank is being paid. They might be right, but it's got nothing to do with anything. If they were really concerned about it as a matter of high principle they could have written clauses into his severance contract ensuring he did not receive that money. The issue has cropped up now as a matter of pure political convenience. Just as poor Gordon is getting flak from national and international figures about the way he bankrupted the country he has found a subject to divert attention. It won't divert it for long and in a few weeks or months there will be another scapegoat put up to receive public fury, anything to prevent the government that bankrupted the country being identified as the cause of our bankruptcy.

We saw earlier in the week how Northern Rock is now to be used to make home-purchase loans for political reasons (here). Today the effective nationalisation of RBS is the excuse for trying to win some votes by bashing a man with money. Tomorrow it will be something else. There are endless ways in which attaching government to business allows politicians to engage in populist rants by picking a random example of how the business works, taking it out of context and flogging it for all it's worth.

Oh, and lest you might believe that I approve of Sir Fred's pension arrangements, I don't. But I would rather see contractual arrangements upheld than arbitrary rule according to the temporary direction of the political wind. Maybe we have laws to hold reckless incompetents like Sir Fred Goodwin to account for the vast damage they do, maybe we don't. Maybe that will never be tested. But I would rather he got away with scamming £16million under a freely negotiated contract than we have rule by populist diktat.

Thursday, 26 February 2009

"All of time is squeeze margin down no profit"

I learn a lot by talking to those who run small businesses. By the way isn't "small businesses" a horrible term? It makes them sound unimportant when they are actually the backbone of the economy. But I digress, and that's not good when it happens in the second sentence of a piece, so I must return to topic double quick.

Yesterday evening was great fun. Being a day ending in Y, there was nothing on the telly so it seemed a good day to eat out and curry seemed just the ticket. It's a good stroll to the closest local curry houses. I say houses because there are two next door to each other. One has been there for as long as anyone can remember, the other started ten or so years ago, and both have always enjoyed excellent reputations. My custom always went to the longer established place for the simple reason that I went there before it's competitor set up in business. When the old couple who ran it decided to retire their restaurant was bought by the people next door. Not because they particularly wanted to expand but to ensure that a new and aggressive competitor would not enter the fray. Now they operate two different restaurants next door to each other but will convert into one large establishment when the time is right.

On the waddle home it was necessary to pop into the greengrocers to top up my stocks of vegetable and fruit based products, on this occasion cigarettes and cider. The owner was bemoaning the presence a few doors away of a new competitor who took over a small failing off-licence and stocked it well with a range of general grocery products (including cheap large tins of fruit in sticky syrup). The newcomer isn't doing a lot of trade, in fact I would be surprised if he lasts a year, but it is a worry nonetheless for the established shopkeeper. To seek to maintain his hold on the local market he has undercut his new competitor with special offers on beer and wines, cutting deep into his own modest profit margin.

Both the owners of the curryhouses and the owner of the greengrocery have seen their takings fall considerably over the last year. They both told me they cannot see enough business for more than one shop of their type in the immediate vicinity. Part of me thinks "they would say that, wouldn't they?" but I think there is actually more to it. These are people who know their market well, they talk to their customers and gauge the mood. When the greengrocers tells me, through his thick Turkish accent, "all of time is squeeze margin down no profit" I am inclined to believe him. When he tells me "1990 business stay good, 1980 business stay good, this time no, this time worst", I am inclined to believe him. When a restaurant proprietor who set up in business next to an established rival and saw both businesses do well tells me he cannot see enough trade for both to make a living in the medium to long term, I am inclined to believe him, particularly because he opened his shop just after the last recession.

This sort of anecdotal evidence doesn't prove anything concrete, but it does give a hint that real businessmen see something different about this recession. They see it as something that will change spending patterns for a long time to come. I suspect they are right and would certainly trust their judgment more than that of any number of academic economists who have never actually put a bank note in a till or paid a member of staff.

Tuesday, 24 February 2009

Mr Darling hits Rock bottom

Yesterday the government decided to abandon all sense and enter the home mortgage market through its puppet bank, Northern Rock. As you will probably know, Northern Rock got itself into difficulties through a pincer movement of spectacular irresponsibility. It made huge numbers of advances without making proper enquiries into the borrowers' ability to service the loans and advanced a very high proportion of the perceived value of the properties given as security; in many instances it advanced far more than the perceived value of the property. That was the first line - bad loans. In order to fund these loans it had to get its hands on money, much of which it borrowed from other financial institutions over short periods of time. When wholesale credit became harder to find, it still had to repay existing borrowing despite not being able to lay its hands on replacement funds at an affordable price. That was the second line - over-reliance on temperamental sources of funds. The difficulty in securing new funds was made worse by the fact that its mortgage book was stuffed full of dodgy loans, thereby giving rise to doubt whether it would be able to repay any new funding. We covered all of that a few months ago.

Northern Rock borrowed £27billion from the Treasury in 2007. That's an awful lot of money. After being nationalised the bank effectively stopped making new loans and concentrated on turning existing loans into cash to repay the £27billion. To its credit, so far it has repaid around £18billion. This money has come from two main sources. Existing borrowers have continued to make repayments (albeit with high levels of default), giving a cash flow that has not been re-lent; and many have been encouraged to remorgage with other banks so that their borrowings from Northern Rock were repaid. In effect, it was losing the chance of future profits but securing repayment of the capital sums advanced. It has also taken quite an aggressive position with accounts that have gone into arrears and have repossessed and sold properties quickly to prevent losses on those accounts getting even worse. All fairly standard stuff when you are winding-down a business.

I'm no genius, but I reckon repayment of £18billion out of £27billion leaves £9billion plus interest still to be paid back to the Treasury. Some might think the government's first priority would be to get this money so as to make a small dent in its own unaffordable debt. But no, now Mr Darling thinks Northern Rock should start lending money again and is suspending further repayments to allow the bank to make new loans. We wait to see the lending criteria applied, but the indication is that they will be more generous to borrowers than most other banks.

The other banks have reverted to the historically stable formula of limiting loans to 75% or 80% of the perceived value of the property offered as security and advancing only limited multiples of the borrower's income. They have done so for three reasons. The first is that they need to know they are writing sound business because these new loans will be a substantial part of their income stream from which to cover losses which are still waiting in the system but have not yet attached their mandibles to the pin-striped posterior. The second is because they don't have as much cash to lend as they used to, so they can be more selective and advance it on only the soundest deals. The third is that there is no longer a race to the bottom in which they all think they must lend hither-and-yon because their competitors will do so and make profits if they don't. There simply aren't the borrowers out there willing to buy in a falling market.

What is happening now is an interesting example of the extent to which house prices were previously inflated not by genuine demand but by the availability of unsustainable loans. Classic supply-and-demand theory states that where supply is greater than demand prices fall because the buyer is in the driving seat, he knows he can buy elsewhere if one seller doesn't give him the right price; and where demand is greater than supply prices rise because the supplier dictates the price, either the buyer pays it or he misses out because another buyer will pay it. Of course it is far more complex than that because there are numerous factors at play other than a simple numerical comparison between the number of things available and the number of people wanting to buy them. For example, people might be willing to pay more in a local shop than they would at the supermarket three miles away because it is more convenient, and some wouldn't be seen dead in Tesco so they shop at Waitrose instead even though it is more expensive.

One of the major factors affecting house prices is the amount of money potential purchasers have available. Even where numerical demand far exceeds supply, buyers can only pay what they can pay. That five people might each offer £200,000 for a particular property does not necessarily mean the seller can get another £5,000 out of any of them, if they only have £200,000 then £200,000 is the ceiling. It goes without saying that the ceiling will rise if potential buyers can borrow more. Say you have Mr Ordinary on a salary of £30,000. When lending is limited to three times his salary the most he can borrow is £90,000. Applying a laxer standard and allowing him to borrow five times salary means he can lay his hands on £150,000. Not surprisingly, the more he can borrow the more he can afford to offer but that does not mean he can afford a larger property because every potential purchaser is in the same position. Those looking for a one-bedroomed flat can afford more, as can those seeking a two-up-two-down, as can the three-bed semi crowd and those desirous of a five-bed detached with low-level suite in duck-egg blue. Prices all along the chain get pushed-up a few notches simply because banks are prepared to lend more.

Over the last year or so relatively few new house purchase loans were made while the banks reassessed their lending criteria. No doubt part of the slow rate of business was caused by many purchasers deciding to wait and see what will happen to prices over the next year or more, but a part was, nonetheless, due to the banks being extremely cautious. That caution has now translated into the new standard of lending criteria, requiring substantial deposits and applying not just limits to the multiple applied to income but also more stringent assessments of the security of the borrower's income. Now that a new standard has been applied the banks are lending more than they did in 2008. In exactly the same way that their lending was suicidally lax over the preceding few years, leading to far too many unserviceable loans being made, so it was tighter than long-term interests required in 2008 while they reassessed their options.

I can see some sense of Northern Rock re-entering the mortgage market and applying the same strict but sustainable lending criteria applied by the other banks. This would produce valuable assets which could be used to service the outstanding government loans, but only if enough sound new business is done to provide sufficient income to service those loans. What I find difficult is that Mr Darling has already announced that mortgages up to 90% of valuation will be made available. The other banks aren't doing this because they perceive it to be unduly risky in these turbulent times. If Northern Rock is to trade its way out of trouble, one would think the last thing it should do is take risks other banks are not prepared to take. Nor does it seem to make much sense to try to trade your way out of trouble when you have already disposed of much of your existing sound business in order to repay two-thirds of an enormous government loan unless what remains is viable as a business in its own right. It seems highly unlikely that it is viable because it has not been able to shift the bad loans which are defaulting at a very high rate.

In order to re-enter the mortgage market Northern Rock needs money. Having repaid £18billion to the government by cashing-in its existing good business, it is now going to borrow up to another £14billion in order to make loans on less sound terms than most of those they have disposed of. On the face of it the whole thing is bananas. It's bananas for Northern Rock which will then be in hock to the government for up to £23billion with no obvious means of repaying this sum other than selling-off every sound loan it still holds and all the loans it is about to make. And it's bananas for the Treasury which needs to find ways to reduce its own borrowings rather than terminating repayments from a debtor and lending that very debtor yet more.

There is only one possible reason for this move. It is to maintain the existing part of the house-price bubble (if not to re-inflate it to former levels) by challenging the other banks to match Northern Rock's new lax lending criteria. If those other banks are foolish enough to do so the result will be substantial additional funds being made available to potential purchasers with the inevitable result of prices being kept higher than they would otherwise be. It overlooks the need for house-purchase to be affordable and, therefore, sustainable and, therefore, a stable force in the economy. Lend too much and prices are pushed up. Lend too much and the level of default will be high. This risks lenders suffering capital losses which will have to be passed onto their customers which will make the cost of credit high, which will risk yet further defaults.

The idea of lending more to "stimulate" the housing market so as to aid recovery from recession is fundamentally flawed. It will not aid the way out of recession because it will not create new wealth, it will just create new pretend wealth (as to which see my offering of yesterday). There will also be marginal benefits in an increase in trade in carpets, corkscrews and Swedish flat-pack furniture, but that will be dwarfed by the longer term stifling effect of the house price bubble being extended. And, at the same time, it will increase government debt yet further thereby prolonging the post-recession period in which real growth is reduced or nullified by the additional taxes needed to repay that debt.

Mr Darling does not seem to realise that this country's systemic economic problem cannot be cured by the creation of more pretend money.

Monday, 23 February 2009

A special lie from poor Gordon

The Labour Party has started a new website using taxpayers' money, it claims to be a site giving unbiased information and so is dressed as a government site and paid for by the little people. In fact it is just Labour Party propaganda. This is such an abuse of office that I do not intend to compound the insult by linking to it or mentioning its name. But I do want to look at something poor Gordon has written on it.

There is a section about the current recession/depression in which the man pretending to be Prime Minister explains what caused it and how it should be solved. He says this:
"In America people were encouraged to buy homes with cheap credit and low starter interest rates, but salespeople made no proper assessment of what level of lending they could afford to repay.
As US house prices fell and the US economy slowed the number of people defaulting on their mortgage started to rise, and once other lenders realised that was happening, the system started to panic, as everyone was trying to work out how many other risky assets the other banks held.

This is so blatantly simplistic and inaccurate that some might be surprised to find it being put forward by anyone who claims to know what they are talking about. How can he possibly think it a fair and accurate summary of the position? How can he seek to explain the situation in the UK by exclusive reference to what happened in America? The man is clearly now so deluded that all hope of hearing sense from him has passed.

The case he seeks to put forward is that there is no problem anywhere other than America and all losses being suffered by banks are the result of defaults by US housebuyers. The man is absolutely barking. It is certainly true that American banks lent money left-right-and-centre to people who couldn't afford the loans, they had to because of a bizarre legal requirement imposed first by Jimmy Carter and then strengthened by Bill Clinton required them to do so as a condition of being granted a banking licence. But what about here in the UK? The same thing was done by many of our banks voluntarily, in pursuit of a quick profit, with the agreement and encouragement of the government. Our houses did not become grossly overpriced because of anything going on in America, our economy is not saddled with countless billions of unaffordable credit card debt because of anything going on in America, our businesses are not burdened by expensive red tape because of anything going on in America; only someone with prawn cocktail for brains could think otherwise.

I've said it before and, being a boring sort of chap, I'll say it again, levels of perceived wealth over the last few years comprised both real wealth and pretend money, money which did not really exist. That pretend money is now being squeezed out of the system. That's what recessions do, they bring us back to reality when we have been living beyond our means on pretend money. Sadly, lancing the boil of fictitious wealth can destroy real wealth in the process, collateral damage cannot be avoided.

I know poor Gordon is an avid reader of my musings, and I now know he has prawn cocktail for brains, so I will illustrate things in terms even he might understand. Take Mr Ordinary on a post-tax income of £12,000. That means, Gordon, that he has £1,000 to spend each month. Rent costs him £500 a month, gas, electricity, food, travel and clothing cost him £450 a month. He has £50 a month spare. Mr Ordinary wants a car, it will cost £6,000 but he doesn't have the cash so he takes out a loan. It costs £75 a month. Woops, he has a problem. He is now a man with a car, ostensibly a wealthier man than he was last month because then he was a man without a car. He maintains his spending as before and soon finds himself overdrawn at the bank. How can this be? He is now wealthier than he was before, how can he also be poorer? The answer, of course, is that his apparent additional wealth is an illusion. Eventually the time will come when he has to cut back on his spending to balance the books. But, and here is the vital point, it will not be enough just to reduce spending by £25 a month because that will only restore him to a break-even position for the future. He also has to repay the overdraft. In order to negate the loss caused by taking out an unaffordable loan he will have to reduce his normal expenditure to below £1,000 a month until the overdraft is cleared. During that period of hardship his real wealth falls, he started out with £1,000 to spend on himself but for a time he has to spend less than that and suffer a real reduction in the quality of life.

That's what recession is all about, not just reducing your current expenditure to match your income but reducing it to below your established comfort level in order to remove the accumulated cost of having lived beyond your means. It applies to a country just as it applies to Mr Ordinary in this example because a national economy is made up of the individual economies of the people and businesses operating within it.

In one respect the problem of American banks being obliged to lend to the indigent has made things worse in that those British banks that invested in securitised US homeloans face losses that also need to to be addressed. The problem, however, is not that the US banks made bad loans and offered British banks the opportunity to buy an interest in those loans, it is that the British banks accepted the offer. Canadian banks did not, because their regulator did not allow it; accordingly Canadian banks are now sitting pretty. Pointing the finger at America is no answer. When someone offers me a pie and my decision to eat the pie follows encouragement from a dietician, the resultant clogging of my arteries cannot sensibly be laid at the door of the person offering me lard and dripping wrapped in a crisp suet crust. It was my choice to eat it and that choice was subject to the ultimate quality control of the dietician. In real life such a dietician would require good insurance. In the fantasy world of Labour politics they make him Prime Minister.

Saturday, 21 February 2009

Simple Harriet's moment has come

From every mainstream news source we are now hearing that which the world of blogology has headlined for months, poor Gordon is a political dead man walking. At every turn, and I really do mean every turn, he makes things worse either for the country or for himself (the two are not necessarily the same, at least in the short term). David Milliband's wimpish attempted coup last autumn came to nothing once he was photographed doing something embarrassing with a banana, and now rumours abound of simple Harriet rustling up support to take over command before the next election. The height of her ambition is exceeded only by the shallowness of her ability, but that has never stood in the way of vain egomaniacs before. She knows her only chance of glory is to take over before Labour risks annihilation at the next general election.

In a way she is the perfect choice for the Labour Party because she says almost all the things the idealist lefties love to hear. After more than twenty years in which socialist dogma has not been spoken by the Party leaders, the grass roots are baying not for action but words. It must be acknowledged that the ludicrous John Prescott did use socialist language at party conferences. That was his job, to keep the true believers happy by letting them hear the words they wanted to hear; and how the rafters shook with cheers when he uttered the "S" word. Yet he was the only one and he was just window dressing. He was enough to keep them on board, but not enough to satisfy them because the actions of the government were not accompanied by the necessary words. They have had the action, all the action their hearts could reasonably have desired. Massive increases in taxes, massive spending by government on all the projects they have claimed to be essential for socialism to be proved the true and right path of human progress, massive increases in the power of The State over the people. It's all there, it's all happened, it's all been tried. But it has not been accompanied by the correct words so it doesn't count.

In the eyes of true believers the absence of the label "Socialist" has been fatal to the whole New Labour project. For them nothing is socialist if it is not said to be socialist. Equally, everything is good if described as socialist. Hence their unqualified support for every repressive and oppressive tin-pot dictator who calls himself a socialist. No matter how many they kill and how many they impoverish, the socialist saviours are beyond criticism. When they intercept aid money and spend it on armaments, the resultant starvation is the fault of those who oppose them. Lists of proscribed books in Cuba are not evidence of repression but of purity in both thought and deed. Intimidation of political opponents is nothing of the sort, it is protection of the beneficial State against treasonous activities. The purpose of elections is to show support for the great socialist leader; the result of the election must, therefore, do just that.

It must be wonderful to have such deep belief, something so important that it sustains everything in your life and gives you hope and purpose. As with every fundamentalist religion it is never enough for others to act in accordance with the creed. Living in accordance with the ten commandments will not save my soul, I have to acknowledge I am doing so through belief that 2,000-odd years ago a middle-easterner was the son of god. Woops, not god, not a god, not just any god, the right god, the one with a capital G. What I do has the same effect on my life and those of people around me whatever the reason I say I am doing it, but that is not enough for believers. Somehow acts change their character and change their substance if accompanied by the correct thoughts and words; and this is so for fundamentalist socialists just as it is for fundamentalist Christians.

Friday's Times carried an article by a former Labour minister, Frank Field. He was appointed Welfare Reform minister in 1997 with the express role of "thinking the unthinkable". No social security benefit or structure was to be beyond his remit, he could pull down the whole edifice of state welfare benefits if he felt it right. Then he issued his first few reports and questioned the need for this and the need for that, questioned whether certain benefits encouraged indolence and discouraged work. None of it fitted traditional socialist dogma, so he became an ex-minister. His article in The Times is the single most powerful argument you could ever read against state initiatives to create employment. As he points out, no less than £75billion has been spent on these initiatives since Labour came to power 11 years and 9 months ago. That's just under £532million a month. It's utterly mind-boggling. £532million is equivalent to the gross monthly salary of more than 250,000 people on an annual salary of £25,000. It represents the income tax paid each month (at current rates) by about 1.7million people earning £25,000 a year or, if you prefer, 2.8 million people earning £15,000 a year. Mr Field described this as "an expensive failure", he described the record of the initiatives in actually getting people into work as "depressing" and the overall results of this sensationally huge amount of government expenditure as "derisory". He looked at it in practical terms and as a member of the party that is in government and introduced all this stuff.

For true believers the failure of this expenditure to produce results is nothing to do with faults in the schemes it financed. Those schemes had no faults. They can't have had because they were straight out of the student union lefty politicos' manual - The State was decreeing who should have what, nothing could be more beneficial. When Mr Field was a minister the head of his government department was simple Harriet Harman. Perpetually out of her depth as head of a complex department she was eventually shifted after so many gaffes that even the thick skin of Tony Blair could take no more. She was instrumental in Frank Field being removed from office because his criticisms of the very policies he highlighted on Friday were not what she wanted to hear.

How difficult the last dozen years must have been for simple Harriet. Despite being wedded to the religion of socialism, her own career has been more important to her. All the time she kept the "S" word away from her sneering lips you could see her frustration; yet she knew her own advancement and the high salary accompanying it would be at risk. Nonetheless, she has said just about everything else the party faithful wanted to hear, dressed in a code that avoided the "S" word but used it's cuddlier synonym "progressive". The faithful understood her, but still they and she were frustrated because the little people were being spared true enlightenment. How, they thought, could the little people be expected to understand the full glory of what the government was doing if they were not told it was socialism in action? Just that one word would make all the difference. Benefits payments to the indolent and feckless are currently viewed by many as undeserved hand-outs, if only they could be told these payments are redistributions to the needy from the greedy. Oh how the world would change. Oh how eyes would be opened to the true benefit behind this spending of £75billion.

Simple Harriet wants the top job in order to satisfy has massive ego, but she is also driven by another force. She wants to label Labour policies "socialist" because she believes that will make them deliver benefits. Benefits they have so singularly failed to deliver over the last twelve years. £75billion on job-creation schemes? A mere bagatelle. Let's do the same again and call it socialist, then it will work. It is not just in her facial features that she will remind the voters of Michael Foot.

It's gardening time

Here we are, the last week of February, the time that conventionally marked the start of gardening season at FatBigot Towers. Not for the last few years, sadly, concerns about the old damaged ticker not being able to withstand the effort required forced abstinence from digging and weeding; only the compost heaps have been maintained in anything like good order. But after a splendid winter containing sufficient cold to kill off vast numbers of detrimental bugs, I will waddle outside tomorrow, exhume a fork from the shed and set about bringing new life to the flower borders and veggy patch.

A rather virulent argument seems to have broken out at Mr Kitchen's place over the desirability of turning land over for growing vegetable in order to reduce dependence on imported produce. Apparently the National Trust is campaigning for companies to make land available and has gained the support of Monty Don, the former presenter of Gardeners World on the BBC. My own love of gardening owes a lot to Gardeners World and the practical advice and guidance given in years gone by on that programme, back when it was about gardening rather than design and politics. Percy Thrower, Peter Seabrook and, in particular, Geoff Hamilton were absolute masters at showing how simple most gardening tasks are. When Mr Hamilton died and Alan Tichmarsh took over the old ways continued for a time but then there was more about inventive uses for concrete and stainless steel, more bigoted nonsense about not using pesticides, more utter humbug about global warming and less about dibbing and potting-on. All very well for those of us who had learned the techniques, but not a lot of use in teaching new potential gardeners how to actually do stuff. Since Mr Don's enforced retirement from the programme last year on health grounds a new presenter was found, Toby Buckland, who has returned to the Thrower-Seabrook-Hamilton ways, and not before time. Because it's on the BBC he is required to mention climate change at least three times every show, but you can see it's just a script and not something that gets in the way of showing how to separate herbacious perennials, aerate a lawn and make life miserable for slugs.

I can see a point to the National Trust's idea. To the extent that there are people who would like to grow their own fruit and veg but don't have anywhere to do it, making more small plots available for rent will help to meet that frustrated demand. The irritation is that this scheme is being promoted a a way to limit this country's dependence on imported fruit and vegetables. That is utter nonsense. Any thought that it will make a major difference to the amount of food we buy is simply laughable. If you really know what you are doing and have a lot of time to do it you can grow enough veg to feed the family all year in a plot of fifty feet by a hundred. Mind you, you'd have to plan your crops very carefully, have decent harvests of everything and make sure you can store large quantities of produce between harvest time and consumption. It works for some, but only for some. And when we do grow our own the inevitable result is that we don't buy the very things we have grown. So, during British runner bean season we eat runner beans from the garden not from the shops. At that time the runner beans in the shops are British runner beans for the very simple reason that it is British runner bean season and they are cheaper for the shops to buy than those grown overseas. Of course it is possible to store surplus produce for eating during the off-season and that will cut down on purchases of imports, but storage is a far more difficult process than growing and I cannot see how any significant impact is likely to be made. What seems reasonably certain is that any significant increase in grow-your-own will impact most directly on British farmers.

I don't grow my own veg out of a desire to deprive either British or foreign farmers of income. I do so because I enjoy the whole exercise. They also taste much better than anything I can buy in the shops, but that would not be sufficient reason if I did not enjoy growing them. For me it is exciting to see seeds turn into seedlings, and seedlings turn into little plants, and little plants turn into big plants, and big plants provide something tasty. But like all hobbies, it is not for everyone. I can't understand why anyone would want to go fishing, but others enjoy it. I can't understand why anyone would want to swim, but others enjoy it. If it comes to that I can't understand why anyone would want to eat cauliflower or tofu, or drink carrot juice or Dr Pepper, or listen to (c)rap music, or watch 95% of the twaddle available on our hundreds of television channels, or read Mills & Boon romance novels. We all have different interests and different tastes. It is sheer blind folly to think that encouraging people to grow their own veg is going to get people doing something they don't enjoy, just as it is sheer blind folly to think Jamie Oliver's skills will ever persuade fat chavs in leggings to turn from pizza and chips to home made coq-au-vin with steamed broccoli florettes and dauphinoise potatoes.

I don't have any desire to stop the National Trust encouraging people to give gardening a try. But I do wish it would stop making false claims about the potential benefits. If they were really concerned about levels of imports of fruit and veg they should be campaigning against the EU's truly evil Common Agricultural Policy. It is absurd to burble-on about people growing their own when our farmers have thousands of acres of prime fertile soil left unused each year because the EU requires it.

Potatoes, onions, carrots, runner beans and a winter cabbage this year, I think. Yes, they always grow well here and the neighbours love getting the surplus.

Thursday, 19 February 2009

Now, let me see ...

A number of prominent news stories crossed my mind today as I watched England's cricketers limp and hobble their way to failure in Antigua. My thought-process was: Antigua - cricket - Stanford - anti-terror laws - banks - Madoff - MPs' expenses.

Nothing is as big in Antigua as cricket. For those who don't follow these things, England were scheduled to play a match against the West Indies on Antigua's new ground last week but it had to be abandoned after a short period of play because the ground was unfit. To the enormous credit of Antigua's cricket authorities a replacement match was arranged at very short notice on the island's old ground, and it is that match that ended today with England snatching a draw from the jaws of certain victory. Antigua's greatest living hero is the retired cricketer Sir Vivian Richards, a man of fearsome talent who graced the professional game for about 20 years from the mid 1970s. Sir Viv was knighted in 1999 under the system of honours set up by his home country the previous year.

There are not many Antiguan knights, another is a fellow by the name of Allen Stanford. Sir Allen Stanford has dual citizenship, being American by birth and having adopted citizenship of Antigua & Barbuda in later life. He holds a lower rank of knighthood than Sir Viv, which might explain why The Times refers to him as Mr Stanford. He hit the front page of The Times today as a result of having got himself into a bit of a pickle with his accounts. All sorts of allegations are being thrown around but the only thing that is known for certain is that no one seems to know what has happened to the money paid to his financial and banking businesses. Time will tell whether he has also been in the baking business and has been cooking the books. Sir Allen Stanford rather enjoys cricket and has sponsored some vastly remunerated tournaments. That, however, would appear to be all in the past because the US financial authorities are investigating his businesses and have frozen his assets.

For more than a day Sir Allen was nowhere to be seen. Noted for his keenness to be photographed as well as his love of cricket, it seemed somewhat odd that he was not lording-it-up with Sir Viv and the rest of the West Indian cricket glitterati, but champagne and dolly birds were there none. He'd done a runner. Where had he gone? No one knew. It can't have been the US because their impeccable anti-terrorist border security systems will have made it instantly apparent that he was there. Ah, woops. He was found in Virginia as the result of a tip-off. When discovered he was served with legal papers relating to the freezing of his assets and of those of his businesses. One of those businesses is the Stanford International Bank which boasted of making extraordinarily large profits for investors year-on-year. Once rumours circulated of the investigation by the US authorities there was a run on the bank and a number of governments had to intervene to stall claims while investigations continue into whether it is a Northern Rock with bad investments or a Ponzi scheme with no investments.

Obvious parallels are being drawn with the recently-exposed Madoff fraud. Whether there is a true comparison will only become apparent later in the course of the enquiry, but what is clear is that nothing is clear. Nothing is clear because the accounting practices adopted by the Stanford Financial Group's accountant (allegedly a one-man firm operating from a small office above a fish and chip shop) were not concerned with transparency. Lack of transparency does not itself cause fraud, but it does allow fraud to go undetected. Madoff took advantage of this for years, as did many fraudsters before him.

It's not just fraud that can remain hidden where rules do not require absolute financial candour. Similarly, the need for candour in financial dealings is not just so that fraud can be eliminated. Companies insist on receipts to back up expenses claims because they only want to pay for expenses that were actually incurred and they need to be able to prove those expenses further along the accounting chain. That they also want to ensure their employees are not cheating them is part of the story, but only part of it. The other part is the need to ensure money is being spent for proper purposes. And that's how my brain arrived at MPs' expenses.

If ever there is a proper use of the phrase "if you have nothing to hide you have nothing to fear" it is in relation to "expenses" payable by the taypayer to those who sets the levels of tax. Transparency is the only way to deter jiggery-pokery.

Tuesday, 17 February 2009

"International Commission" ... it's bound to be bad

For many years people unconcerned by hi-falutin' concepts like human rights and international courts have argued against the imposition of new criminal laws in the name of the "war on terror". It was only a matter of time before the smug intelligentsia of world crime followed suit. Lo and behold, at last the penny has dropped.

Objections to many of these so-called anti-terrorism laws come in various shapes and sizes and more than one line of criticism is often applied to a single measure. Generally speaking it is probably fair to say that the arguments against fall into one or more of four categories: (i) we already have laws that are quite adequate for the purpose, (ii) it won't have any effect on terrorism, (iii) it will be used to outlaw activities for which it was never intended and (iv) it will be used disproportionately to enforce existing minor regulatory offences.

So, we have the police given the power to stop people, search them and ask for their name and address. Something like 300,000 such stop and search incidents have occurred in the name of the war on terror and not a single arrest for a terrorism-related offence has resulted. We have laws outlawing the downloading of, for example, bomb-making instructions from the internet with the result that legitimate research and harmless seeking of knowledge are prevented. We have investigatory powers given, quite bizarrely, to local authorities who use them to enforce petty bye-laws on litter and recycling plastic bottles.

The report from the International Commission of Jurists has taken three years to research and compile and tells us nothing that has not already been analysed and commented on a thousand times. The one difference between the ICJ report and most commentaries is that we little people look at these matters in terms of what actually happens in real life whereas the big wigs of world crime are more concerned with the effect of bad national laws on airy-fairy one-world ideas such as "international human rights" and a particular aspect of "international law".

The concept of "international human rights" is one that causes my addled, flabby brain to fry. Omit "international" and I can just about understand the principle of it. There are certain things The State should not do to the little people and these are classified as "human rights" which should not be infringed save in exceptional circumstances. The problem I have with that proposition is that it is based on standards developed over hundreds of years in just a few countries and, even in those countries, the importance of the principles depends on context and on the historic and cultural values of the particular country concerned.

None of the so-called "human rights" is unqualified. Whether it be free speech, freedom of assembly, the right to a fair trial or whatever, both cultural forces and practical necessity operate to ensure there is no absolute standard. For example UK laws restricting free speech are different from those in France whose laws are different from Germany which applies different principles than the USA. Those differences result from the individual histories of the countries and the different standards applied by their law makers. Each country has to set its own standard. The French have a tradition of not disclosing the sexual peccadillos of prominent figures, whereas we tend to thrive on reading about such things. Would the world be a better place if the French learned of Mitterand's affair(s) or if we didn't know about David Mellor and Robin Cook's unlikely dalliances? Maybe, maybe not. The thing is, no one can tell because it is nothing to do with whether the world would be a better place it is all to do with cultural history and contemporary politics in each country. I defy anyone to promulgate a universally applicable principle about when disclosing prominent politicians' extra-marital affairs will be of benefit and when it will be of detriment to the world in general. Life simply isn't like that.

And so it goes with all of the so-called human rights. Take the right to a fair trial as another example. Many European countries have examining magistrates who both guide the police investigation and have to decide whether and what charges should be sent for trial. Nothing could be further from the English system in which investigation and the decision whether the evidence justifies a trial are separated. Which is right, which is wrong? The answer is that neither is right and neither is wrong because there is no single standard against which they can be judged. At the same time, each is right because each has been developed within the countries concerned and is accepted by the people of those countries as an appropriate way to do things. Does a fair trial require a jury of ordinary people or is a trial by three judges better? It all depends on what is accepted as the better system in a particular country. There are no absolutes.

We mustn't forget the right to life. Abortion, is it murder or is it not? Ask the Pope and his followers and you will get one answer, ask others and the opposite opinion will be expressed. Each country has to take a position. Whatever position it takes will meet disagreement by many of its citizens, some vociferously or even violently. That's what happens when people in civilised nations are allowed to express their views. There is never a single, once-and-for-all answer. The debate never ends on abortion and it never ends on countless other subjects which are matters of personal opinion and belief.

So, what are "International Human Rights"? The most they can ever be is an expression of hope that all countries will adopt general standards that have been developed in various ways and with various results in western democracies. Try to impose them on countries that do not have a political culture that can absorb them and you have a recipe for disaster. Try to impose them on a political culture that can absorb them but has not yet absorbed them and you are guaranteed to meet resistance. The very fact that a political culture can absorb them but has not yet absorbed them means it is taking its own time to develop principles suited to its culture and people. Any attempt to tell them to adopt certain principles into their law will be seen as a disrespectful imposition. That leaves only one option, to impose them on countries that already have them. Ah, bit of a problem there, if they already have them the imposition is pointless. And that is exactly what "International Human Rights" are, utterly pointless. Actually, I might have overstated my case there. They are not pointless if they are a point of reference for developing countries. And therein lies the problem. Therein also lies the link to my earlier point about so-called "International Law".

International law has an important part to play in international affairs. There are four aspects to international law. Much of the earth and much of the sky is not "owned" by any country. If ships are to sail and planes to fly across the bits no one owns, there have to be rules to minimise risk. The first part of international law is about movement of people and goods through non-national territory. The second part is about war. Left to its own device war is indiscriminate. With a view to trying to restrict the damage done by armed conflict, there is an international law of war. The third part is about the relation between nations. There is a body of international law about diplomatic relations. The fourth part is where the problems occur. The fourth part is all about supranational bodies and their power over sovereign nations.

The very idea that an international body should be able to dictate what a sovereign nation does or does not do is anathema to me. We have enough trouble here, a country with one of the longest histories of continues democratic rule in the world, in getting the government (of either party) to debate issues fully and pass workable laws. Having laws imposed by a body even more remote from the people than their own parliament strikes me as a bad idea.

The International Commission of Jurists seems to disagree. It is more concerned that bad national laws undermine the authority of international law than that they undermine the condition of life for the people directly affected by the offensive laws. The aspect of international law they address is the power of supranational bodies. Oh, do I see a bit of personal interest here? Do I detect the fear that countries making their own laws might undermine the authority of the International Commission of Jurists and the supranational ideas they promote?

There is an important role for international bodies to play in matters labelled "human rights", but that role is purely advisory. Any other role is, by definition, a role that bears powers of compulsion. In practice, compulsion can only be exercised against those who are playing on the same field. Only the most developed countries have sufficiently advanced social and political structures to be able to incorporate principles of so-called human rights into their law. Once those nations create supranational bodies to promote so-called human rights there is only one inevitable result. The supranational bodies will seek to justify their existence. Advising developing nations will not be enough and compelling developing nations will be impossible, the only thing left is to compel the very countries that set them up to adopt laws that those (by definition) sophisticated and developed countries have not felt it appropriate to adopt.

Just as the EU has taken on a life of its own and developed its own agenda, so all supranational bodies do the same. They might do some good at the margins, but that just encourages them to demand more powers, powers which will be exercised without democratic control and with no regard to the cultural sensibilities of the countries subject to their commands.

Monday, 16 February 2009

Freedom of speech is not a right

The other day a Dutchman with a funny shaped head wanted to speak at the House of Lords, because he had been invited to do so. Apparently he has some involvement with a film that argues the spread of radical Islam isn't the most cuddly thing in history. Indeed, as I understand his position, he says it is a recipe for repression on a scale not seen in Europe since the 1930s when an Austrian who always missed a bit shaving and an avuncular Russian with a taste for genocide both got rather overexcited.

I can't say I disagree with the general thrust of his argument. Throughout history political movements based on selective interpretations of religious texts have gained power by picking on minorities. Identifying a pariah group is an effective way of welding together others who enjoy the feeling of superiority and readily give support to the leaders who massage their frail egos. No doubt some of the leaders genuinely believe they are carrying out their god's work, but something in my ever cynical mind thinks rather more are just happy to find an excuse to wield power. Over time it would not be surprising to find some in the first category reassessing their faith but continuing to pursue the cause because power itself is hard to relinquish; equally some in the latter camp might find they become persuaded by the religious texts when previously they considered them little more than an excuse for self-aggrandisement.

Whatever the motivations of the leaders the result is the same. They gain support by telling potential followers of their superiority over the sinful minorities and then strengthen that support by using such brutal measures against dissenters that followers dare not express doubts. If you are not with them you are against them, and if you are against them your life will not be worth living. All promises of power and happiness for followers soon melt in the dust as the need to suppress dissent in order to maintain power takes precedence over everything else.

Rule by militant Islamists follows this pattern today in every country they govern. There is nothing specifically Islamic about it, it is just a universal pattern of behaviour for idealist governments. The ideal trumps everything. If democracy does not embrace the ideal, they tinker with democracy because democracy must be faulty. If ancient rights and liberties do not sit comfortably with the ideal, those rights and liberties will be trimmed because they must be faulty. If existing customs do not embrace the ideal, they will be abrogated because they must be faulty. Everything gives way to the ideal, regardless of the consequences.

One might be tempted to think that the ideal itself is immutable throughout this process, yet nothing could be further from the truth. Ideals are re-written, updated, re-defined, modernised, re-interpreted and always expanded so as to extend the power of those relying on them as their basis for power. I believe this to be inevitable because once power is taken or used in order to advance an idealist ideology the power and the ideology become self-supporting. Having power is justified because it advances the ideal and the ideal is justified by the fact that it is exercised by those in power. Any hint that the grip on power might be challenged or that the ideal can extend to areas it has not yet touched will lead to an expansion of power and a tweaking of the ideology to secure that extension. Throughout the whole exercise the justification for power is not, and cannot be, the subject of rational debate. The justification of power is a higher authority - a god, a little red book, a tome written in the British Library, or some such.

I am not sure the Dutchman with the funny shaped head objects to radical Islamism because it is the latest example of this pattern of oppressive rule, although the little I have read about him suggests he does. Objections to his presence in this country were sufficiently persuasive for hapless Jacqui the so-called Home Secretary to find a moment in her busy schedule to turn from calculating how much she get the taxpayer to pay towards her domestic bills and sign a letter informing said Dutchman that he won't be allowed into the UK. The reason given was that his presence risked inciting racial and religious hatred.

This case made me think about the distinction between idealist politics and practical politics. It is possible to look at principles such as the right to free speech as being idealist in nature and in a way they are in as much as they appeal to a general principle. The difference, as I see it, between idealist and practical politics is that the former is concerned with meeting a pre-determined, top-down edict whereas the latter is concerned with what makes life comfortable for real people living real lives and is essentially a reactive, bottom-up process. In practical politics established ways of doing things can be discarded if they no longer provide a benefit, just as the cathode ray tube has now almost disappeared from view despite being a major part in the majority of British homes for forty or more years. Other technologies have supplanted it and provide a better product, so out goes the old fat telly and in comes the slim-line model. Flat tellies did not corner the market because the manufacturers said they had to. They were offered for sale alongside their plumper rivals and took over because the little people at the bottom decided to say hello to thin.

The so-called right to free speech is very much a bottom-up concept. It is a nonsense to think of a government decreeing that everyone must speak freely, the desire to speak freely exists in us all. We all have opinions, including opinions on subjects we actually know very little about. In the absence of a legal restriction we will express our opinions, so the right to free speech reflects something that is in our nature as human beings. Of course, these days it is sometimes seen as a right given by government (or, to be more precise, Parliament) because it is contained in the Human Rights Act. And when questions arise about the use of governmental discretion to suppress free speech the debate is sometimes quite legalistic and revolves around the wording of that Act. Yet this fails to acknowledge that we all speak freely unless prevented from doing so. The law does not give us free speech, our brains and mouths do that very nicely thank you. The law can only restrict the extent to which we can speak freely without fear of sanction. It is, in my view, fundamentally wrong to talk of "the right to" free speech. It is like talking of the right to sweat or the right to chew or the right to sneeze or the right to micturate. These are not rights, they are parts of the human condition, they are things we do naturally.

Free speech can be limited on either practical or ideological grounds. Indeed in many instances the limitation is the result of both practicalities and ideology. Debate cannot operate productively unless each speaker is allowed to make his contribution without undue interruptions. If we want to hear all sides of the argument it is necessary to stop other people speaking while one contributor is having his say. The practicalities of the exercise require freedom of speech to be curtailed in order to allow each case to be put. Practicalities also require all sides to have a fair amount of time to put their case. Ideology also comes into this. We generally accept that open debate is beneficial. That is an ideological proposition, yet when analysing why we hold that ideology we get back to the simple fact that we all hold opinions and human nature dictates that we wish to express them. The ideology comes from the bottom-up not the top down, and there is no conflict between ideology and practicalities in this example.

The law of defamation is somewhat different. If our words cause harm to another we step beyond the realm of mere speech. Untrue words can ruin an individual's life and they can ruin a business. The law steps in to penalise untruths that cause significant harm for essentially the same reason it steps in to penalise physical violence, the harmful consequences are unacceptable. It is not necessary for you to know that what you say is untrue, if it is in fact untrue and it causes the necessary harm the law of defamation hold your liable (subject to certain exceptions which I needn't deal with here). The law in this field is more top-down than bottom-up because it imposes a penalty even where the guilty party is sure he has told the truth. In the field of defamation, for all the many faults with the law as it stands, the truth is always a defence.

If the law is to impose a limitation on free speech it risks being brought into disrepute unless there is a solid ground for doing so. New laws over the last decade have sought to restrict free speech like never before. There are arguable justifications for some of these laws. For example, religious beliefs are at the heart of many people's lives and to find their religion being vilified is, no doubt, a matter of great distress to them. Similarly, discriminating against people because of their pigmentation (I refuse to fall for the "race" argument, it is nothing to do with race it is all to do with pigmentation) leads to them being treated unfairly and is not acceptable in a sophisticated country like the UK. Arguing for discrimination against those of dusky hue can, therefore, be seen to be sufficiently harmful that freedom of speech should be curtailed in that respect. Yet even though burning heretics and refusing work to someone of dark pigmentation are rightly unlawful, to take the argument one stage further and prevent debate on the subject is another matter entirely. There is no more justification for preventing such debate on the ground that it might encourage some people to barbecue the local vicar, than there is for allowing the debate so that the good sense of not engaging in a clerical conflagration can be spread to the widest possible audience.

What troubles me most about the new laws, as exemplified by hapless Jacqui's letter to the Dutchman with a mop on his head, is that they are based on idealism not practicalities. The ideal in question is the new religion known as "anti-racism". It causes boxing commentators to differentiate between a large dark-skinned man and a large pink-skinned man by the colour of their shorts when the difference between their pigmentation is far more apparent. It causes the word "black" to be reserved for use as an exclusive label based on pigmentation, to such an extent that I have witnessed a senior government minister frowning at the question "black or white coffee" and answering "with milk". It causes children in need of a loving home to be refused a suitable placement because the foster/adoptive parents are of different pigmentation to the child. It causes walking on eggshells in so many fields, and all of it serving no useful purpose. And, like so many shallow and narrow ideologies, there are victims of all pigmentations scattered along the way.

But more, there is also a far wider harmful consequence to the very people this muddled new religion claims to help. It creates formal legal divisions between people of different skin colour. It also creates a government-approved sense of victimisation even where there is no justification for it. Some argue that instilling a sense of victimhood in people of dark pigmentation is a deliberate consequence of the new religion because it makes them more likely to support the politicians who label them victims. I'm not convinced of this, I believe it is more likely to be an unintended consequence of unprincipled good intentions being taken too far.

It seems pretty obvious why the Dutchman was excluded. It was not because he wished to argue against the spread of radical Islamism. It was because he wished to argue against a religious-political movement which involves almost exclusively people of non-pink pigmentation. What a curious irony it is that preventing radical Islamists from exploding themselves in the tinned fruit aisle at Sainsburys requires CCTV cameras on every street and random searches by the police, while someone who wishes to argue against radical Islamism is excluded from the country in case his speech is construed as being less than chummy to any human grenades who happen to be a bit brown.

Many have commented that this issue is an example of our current government introducing thought crime onto the statute book. They have a point. I prefer to look at the way the legislation was formulated and describe it as ill-thought crime.

Saturday, 14 February 2009

Objective global climate warming change

It is always nice to find people taking an interest in things one has written, whether their interest is sparked by a desire to show the writer up as a cretin or to pat him on the back. A couple of my recent posts (here and here) have created, by the modest levels of interest this site engenders, a veritable flurry of activity. Much of that activity comprises comments from Mr W, including what might be a question. He wrote: "Perhaps you're not really interested in the science, but prefer to be ideologically driven?" I replied to this possible question then felt my reply could have been construed as rude or petulant and deleted my comment, by that time he had already answered it and confirmed that it was intended to be a question, which he then re-phrased and expanded by asking "Do you see yourself as looking objectively at the issues, or are you swayed by the `political' issues involved, as I think most involved in bog debates are?" Yes, I know he meant "blog" not "bog", but so many blog debates surrounding AGW get bogged down by people talking at cross-purposes that "bog debates" seems quite apposite.

There seems to me to be an inherent flaw in Mr W's question. It presumes that it is possible, in the current state of knowledge, to be objective about the effect of carbon dioxide in the atmosphere. I believe this to be impossible. As always we must define our terms to ensure we make ourselves clear. There is no single, definitive meaning of "objective", so I will adopt the meaning I believe to be used in science, namely "not subject to interpretation or opinion". This is my formulation, I do not claim it possesses any magic, but I do believe is accords with the way the term is generally used in science. There are two elements to objectivity in science, one is purely factual and the other is a process of comparison with established thinking and is, essentially, circular in reasoning. I can illustrate what I mean by reference to an anvil and my big toe.

If I hold an anvil in my plump sweaty hands and let go it will drop to the floor and land on my big toe. I say "Ouch". A scientist says "gravity". So, since we're doing science today rather than fat toes, what is gravity? It is two things. It is a purely factual description of what is observed - the anvil falls, something causes it to fall and we call that thing gravity. But what is gravity? What is the force that makes the anvil fall? The answer, of course, is that no one knows for certain but theories are put forward and assessed by people who claim to understand them and the most persuasive theory at any given time is treated as correct until something more persuasive comes along. Old Isaac Newton might have known a thing or two about the Cox's Orange Pippin and the Bramley, but current scientific thinking is that he was wrong in his theory about what gravity is. Ask a scientist who claims to understand gravity and he will spout a theory.

It is important, in my view, to recognise that any argument based on a theory rather than observable fact is circular. "What is gravity", "a force", "what is that force?", "it is X", "how do you know it is X?", "because Y says so", "how do you know Y is right?", "because no one has proved it isn't X".

Many theories that were accepted by scientists for generations have had to be abandoned because a newly-found fact provides definitive dis-proof. How many of us had a relative who suffered from a stomach ulcer and spent decades burping at inopportune times on the number 53 bus, saving the big one for when the snooty lady who smells of cats got on board? It's a pretty safe bet they were told in the 1950s or 60s or 70s or 80s or 90s it was caused by stress or a fatty diet. Then someone had an idea about a particular bacterium and investigated it. Lo-and-behold, the old theory went straight into the wheelie-bin in 80% or so of cases despite decades of the most eminent medical people believing it to be universally correct. Yet the original diagnosis of stress or fatty diet was objective in the state of knowledge at the time. The two strands of objectivity were seen - (i) Mr Belcher had a stomach ulcer, fact, it could be seen, it was objectively true, (ii) Mr Belcher's stomach ulcer was caused by stress and/or diet because the state of knowledge at the time gave no other explanation.

In the same way that it is fair to describe an analysis as objective because it corresponds with a theory accepted over time as being more likely than any other, so it is necessarily true that nothing about a scientific analysis can reach the status of being objective until a consistent theory has been accepted over time. In order to be accepted by any fair-minded person it must be shown to be consistent with factual observations and to be more consistent than any rival theory. There is nothing unique about science here. In every field requiring deductions and inferences to be drawn from observed facts, the deductions and inferences we draw depend on our knowledge, and our knowledge is based on our acceptance of theories promulgated by others.

So, how does this relate to Mr W's question?

First, we must differentiate between objective facts and interpretations of those facts which correspond with established theory to such an extent that it is fair to call them objective. For current purposes I assume it is a matter of objective fact that the overall proportion of carbon dioxide in the atmosphere was 280 parts per million by volume in about 1750 and it is now about 385ppm. I also assume it to be a matter of objective fact that an increase in the proportion of carbon dioxide in the atmosphere increases the capacity of the atmosphere to store heat. Beyond that we are in the realm of interpretation, as the discussion Mr W had with other commenters shows. They put forward arguments and analogies and received arguments and analogies in return, the amount of objective fact involved in both proposition and rebuttal was limited.

This, inevitably and necessarily, means that the argument is all about interpretation. Any talk of carbon dioxide being a "forcing" gas or a "driver" of the climate is, to my mind, subjective rather than objective because it relies on a theory that fails both parts of the objectivity test. Not only is the "forcing" or "driving" effect not substantiated by observed facts but it is a theory that has not been around for long and has not been able to gain general acceptance. I must qualify what I have just said because those who argue for carbon dioxide being a "forcing" gas fall into two camps, some argue for it having a widespread deleterious effect other consider it of no real consequence to anything.

Ah, yes, now we've reached the real issue.

Who gives two hoots about human activity changing the climate if it has no deleterious effect? If it comes to that, who gives one hoot? The whole issue is of purely academic interest unless it presents a real problem to human life or, if these things are of concern to you, animal and plant life. Maybe Mr W is concerned with this issue as a matter of pure science and has no axe to grind other than to ensure that obscure blogs written by fat retired lawyers in North London should be scientifically accurate. If so, I am very grateful that he should spend so much of his time trying to correct what he perceives as my errors and those of others kind enough to leave comments in my little pop-up box.

Somehow I think that might not be the case. Somehow I think he feels the need to argue a particular case for some reason other than the fun of doing so. Somehow I think he feels the need to sway the mind of someone he does not know and will almost certainly never meet. I might be wrong, I often am, but it doesn't seem to me he is engaging in an exercise equivalent to debating the number of angels who can balance on the end of a salami sausage.

His initial question was whether I am interested in the science or ideologically driven. It is impossible to be driven by ideology if you are not an ideologist and, to the best of my knowledge, I am not. The question was absurd because it supposes only two possible reasons why someone would write about the AGW Armageddon theory on his insignificant blog (or bog, if you think that a better description of my corner of the interwebnet).

He then asked me if I am more interested in the science or the politics. An error again, you cannot separate the two. The issue is no more relevant to we little people than are angels on a salami without the political aspect, and the strength of the political arguments depends on the strength of the scientific arguments. All who have the privilege of a vote and the burden of a tax man are entitled to clear explanations of why we should put our cross in one box rather than another and write one figure rather than another on the cheque we send the Treasury.

That is why I opined about what 385 parts per million by volume means to me. It puts the Armageddon theories in some sort of context. Maybe a scientifically irrelevant context, so be it, argue the case if I'm misleading myself. But don't pretend objectivity comes into the equation except at the margins because you will only mislead yourself. And that is why I cannot see Mr W's questions as questions, in each he was arguing a case not making an enquiry, even if he thinks he was being objective.

Friday, 13 February 2009

British jobs for British taxpayers' money?

You want to build or make something and there are two rival bidders for the job, one a British based company and the other based overseas. Engage the former and hundreds of jobs are kept safe in the UK, choose the latter and Johnny foreigner is secure in garlic and offal while more Brits go on the sick to disguise rising unemployment. What should you do?

Normally I would argue that you should get the best value for your money. Those of us with vivid memories of subsidised British industries shiver at the thought of paying the inefficient to produce sub-standard goods simply to keep jobs within these shores. This week the government announced that it had contracted with a consortium for lots of expensive new trains, the manufacturer in the consortium is Japanese. There was all the usual guff about creating and preserving jobs in the UK, although it seems pretty obvious that placing the contract with a UK-based manufacturer would be likely to create or preserve even more. The value of the contract is said to be £7.5billion and the number of UK jobs preserved or created is claimed to be 12,500 of, if you prefer, £600,000 a job. The successful consortium said it will spend 70% of the value of the contract in the UK, leaving a mere £2.25billion to be paid by UK taxpayers but spent outside the UK.

As always, nothing is as simple as it might appear at first. The bidding documents issued for these major contracts include all sorts of provisions requiring each tender to comply with very detailed criteria, usually including a requirement that a certain percentage of the money will be spent in the UK. In addition there is a requirement on the government to treat all bidders fairly and judge their tender on its merits. Define the relevant merits too nationalistically and you risk high-quality overseas companies not wishing to be involved. The exercise cannot operate sensibly on the basis that the contract will be awarded to a UK manufacturer come what may, because an awful lot of money is involved and additional future expense arising from ordering the second-best rather than the best can easily outweigh any short-term benefit from keeping jobs at home.

All the usual suspects have lined-up to criticise the government for placing the contract with the Hitachi consortium. The Conservatives have aligned themselves with Trotskyite union leaders and similar Neanderthal extremists by calling for British Jobs for British Workers. The local MP for the area in Derbyshire which houses the UK's last remaining train manufacturer has expressed his disappointment in strong terms, something which does him great credit because he is a Labour Party MP and has put the interests of his constituents above those of his party.

What I find so difficult about the criticism of the government's decision is that, for once, they appear to have sought value for money. £7.5billion is a vast sum. Every penny of it will come from taxes and on a commercial decision like this value for money must always be paramount. There have been too many instances of taxpayers' money being spent to preserve jobs in marginal Labour-held constituencies, yet providing a boon for a Labour marginal was put to one side this time. It might be fair to infer that the Hitachi bid was markedly superior to that of the British based rival bidder. Were they neck-and-neck one would expect the British bid to be successful, if for no other reason than that keeping £2.25billion on shore is important in the middle of the deepest recession any of us will experience. It might well be that the government looked for ways in which it could justify keeping this contract at home, I would certainly expect them to do so with a view to electoral advantage. In the end they felt they could not justify placing the contract here.

The very fact that this contract was placed with an overseas bidder at this time suggests to me that it was probably the right decision to take. The trains in question will have to remain in safe and efficient service for a long time. The better quality they are, the lower their maintenance costs and the longer they can run all contribute to future savings compared to buying a lesser product.

Although I can see a benefit to modest protectionism in difficult times, everything must be placed in context. Where there is no real difference in quality between what can be bought here and what can be bought elsewhere, by all means buy in the UK to bolster British jobs and British businesses. Where, however, you are dealing with vast sums of money which have to provide a benefit for many years to come, long-term value for money must always prevail.