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An Election Result

Few expected a Tory majority until the Exit poll. I didn’t dare hope until about 2am.

In Eastern England, a Region with a bigger population than Scotland, The Tories’ hegemony is greater than that of the SNP’s in Scotland, yet no-one is going to give these voters the indulgence which will be afforded to the SNP. Here, The Tories secured 50% of the vote, and all but one MP. The one non Tory MP was a Tory until less than a year ago. The Labour party lost ground everywhere, except London.

15% of Scots voted Tory, equivalent to the national UKIP share. No-one is talking about their “disenfranchisement”. There are now as many Tory MPs in Scotland as there are Labour or Liberal Democrats. The Tories advanced in Wales and devastated the Liberal Democrats in the South-West.
Looking at a map, Labour is reduced to inner London, Birmingham, Newcastle, Cardiff, Liverpool and Leeds. Scotland is monochrome SNP, and the rest of Great Britain is Tory Blue. The Tories’ closest allies, the Ulster Unionists did twice as well as expected in Northern Ireland. 
So. What happens next?
First of all, elections are won by parties with the positive vision for the country. The SNP has a vision of Scotland that resonates with Scots, if not with reality. That 8% deficit limits how “full” their fiscal autonomy can be. I can take Sturgeon at her word, that independence remains off the cards for the time being.
Labour on the other hand, spent the election campaign telling the country it was broke, divided, poor, unequal and some vision of victorian workhouse hell, lorded over by a “rich” elite. Given that inequality fell and “the rich” are paying more tax than ever before over the past 5 years, this clearly didn’t ring true. The Tory message: let us finish the job, resonated with England outside the big cities.
The economy is largely sorted. The coalition undid much of the glue Labour poured into the labour market. The self-employed who paid tax on earnings in 2013/14 paid more than expected. Their earnings will accelerate, and the deficit will close faster than expected. I expect there will be more money for Cameron’s second term. 
Cameron’s biggest challenge will therefore be constitutional. What to do with Scotland, giving the SNP as much of their demands as possible, without alienating England. His job is to come up with a lasting constitutional settlement. Constitutional settlements tend to be more lasting and stable when done under Tory governments, as unlike labour’s devolution in the 90’s there’s less short-term gerrymandering for party advantage. This will involve house of Lords reform, though I would regret this. The mountain of cant spoken about English Votes for English Laws comes from people who’ve got used to imposing the will of the Celts on the English, who’ve long voted solidly Tory. It’s likely there will be a more Federal UK. The community of the Isles is being tested more strenuously than at any point since Irish independence.
There will be a lot of nonsense spoken about the upcoming EU referendum, set for 2015. UKIPpers will not believe Cameron will deliver it. They can be ignored. The fact is, the UK will vote by 2:1 to stay in. Cameron will walk tall having secured an unexpected majority. The Eurocrats will have to give something for Cameron to take back, and Merkel has already said what’s on offer. 
Whatever the offer is, it will be derided by UKIP because free movement of people is a red line that will not be on offer. And quite rightly so. The crucial reaction will be the Tory right. Will they ‘rebel’ and make Cameron’s life a misery like the post 1992 “bastards”. My guess however is that Cameron has answered his Tory critic’s main charge: that he couldn’t win an election. This will mean this election has more in common with 1979 – the first majority after a period of unstable minority, than 1992, an unexpected victory by the fag-end of an administration. 
Labour, for its part, must find a narrative after a period of re-building. They must work out what they are for. If they can make peace with business, and more importantly, markets, then they can come back. Social democracy has a future in the UK, but not Socialism red in tooth and claw. Miliband was in this regard, a last hold-out in the jungle, still fighting after the total victory of Thatcher. Whatever happens, such is the scale of their defeat, especially in Scotland, the next labour PM will probably be beholden to the SNP for any majority.
This is the Second or third time the Tories have destroyed the Liberal party, and absorbed its supporters into the broad Conservative church. Perhaps the Tories should make an offer: Fight elections as the Conservative, Liberal and Unionist party? The liberal democrats had the naive belief that somehow being right, for example on Land taxation by council tax revaluation and extending the number of bands, will somehow translate into votes. There is a place for such a party, and I hope they come back. But this will be a generational project. 
Each of these issues will be the subject of a post in the future. We live in interesting times. Cameron has an enormous, difficult and delicate job. He can be the man who either presides over the destruction of the UK, or go down in history as the man who built the lasting constitutional settlement. He’s been underestimated by most. He has an enormous responsibility. But I am optimistic he’s up to the job. After all, he’s been quietly right, calmly ignoring his critics, and content to let his record speak for itself despite the hysteria of lesser characters. He’s steady under fire, to the point of insouciance. I like that in a leader.
Cameron is now proven winner. Holding the coalition together was a remarkable political feat, for which Nick Clegg deserves enormous credit too. And like Napoleon’s generals, Cameron’s lucky. So Far.

Election Prediction

I think the bottles of port, beers and cases of wine I’ve bet with twitter correspondents, friends and colleagues are going to bankrupt me if Labour win, and give me alcoholic liver disease if the Tories do. So, hot on the heels of my correctly predicting the outcome of the Scottish Referendum, AND the EU elections; I, the UK’s own Nate Silver using little more than reading, wishful thinking and guesswork am going to tell you what’s going to happen over the next 36 hours.

David Cameron will still be Prime minister, probably with help from DUP, and the remaining Liberal Democrats. The alternative, Prime Minister Miliband is too grotesque to contemplate. Tories will probably be quite comfortably the largest party; here’s why:

  1. Miliband is obviously a helpless, flailing git. In the privacy of the polling booth, this will matter, leading to
  2. The usual Tory out-performance of their polling, and labour underperformance of theirs.
  3. The polls are currently showing a small Tory lead.
  4. The polls may well be wrong, on a scale not seen since 1992, because the polling methodology hasn’t been tested with the rise of UKIP, the collapse of the Lib-Dems and the rise of the SNP.
  5. Labour will do a bit better than polling suggests in Scotland, as will Tories (but to little avail in seats)
  6. Liberal Democrats will retain 25 seats
  7. UKIP will have 3: Clacton, Thurrock and one other. Neither Mark Reckless in Rochester, nor Farage in South Thannet will be MPs on May 8th.
That is my prediction with my sensible trousers on. But I think a small Tory majority is possible. That this is wishful thinking cannot be discounted, but the polls have so many moving parts in this election, methodologies are likely to be strained. In particular, spiral of silence adjustments to take into account the ‘Shy Tory’ effect have been getting larger. Yet Tories ALWAYS seem to outperform. In addition, the late swing seen in 92 may just be even later this time.
I would like the Coalition to continue. But I’ll settle for a Tory majority and consider emigration should the emetic Mr. Miliband be Prime Minister.

On Osborne’s Inheritance Tax Cut

Back in 2007, I wrote

there is a very simple solution to the problem, which prevents middle Britain being hit by a tax that is designed to punish the very rich: first homes should not qualify for IHT (subject to caveats such as time occupied and value to prevent abuse – you couldn’t have everyone buying mansions to die in to avoid tax)

…which is more or less what George Osborne appears to be proposing. However I didn’t consider it a priority then, and I don’t think it a priority now.


There will be lots of guff about how “insane” cutting this tax is. It’s not insane. Inheritance tax is deeply unfair, unpleasant and resented. It’s falls hardest on those who’ve not prepared for death. And it has come after big cuts to income taxes, so I’m reasonably content.
The main problem with the UK economy is for people to see property as an investment, not as consumption. This encourages people to see their homes as their main asset, and care deeply about how much it’s worth. People oppose dilution of their assets. This is why any and all development – new houses – are opposed so viciously by “the community”.

The problem isn’t inheritance tax, it’s the tendency of old people to hang around in the big family homes long after their family has flown the nest. And their family, when they come to produce grandchildren cannot have a family home because they’re all owned by the baby-boomers. Children are being brought up in flats while granny lives in the big house. And Granny’s in rude health. By the time the house gets passed on, it will be to people well on the way to being grandparents themselves.


Rather than cut inheritance tax on homes, it would make more sense to abolish stamp duty, and make the housing market more liquid. Encourage granny to downsize as soon as little Jonny and Camilla have left for university, with increases to property taxes like council tax offsetting cuts to other income taxes. Granny should take the equity in the house, and invest it in productive assets for her retirement, or use it to help Jonny or Camilla  buy a house for their families.

Above all, we need more houses. And cutting inheritance tax on houses doesn’t help more of them get built. I never oppose a tax cut. And I dislike inheritance tax because it is unfair. From 2007 again 

It is essentially a voluntary tax and is often described as a tax on the unlucky and the unwise. Businesses are exempt as are farms. Potentially exempt transfers can usually see to the rest, and the threshold at £285,000 [now £325,000 – transferrable] is generous. The problem is that it hits unexpected deaths harder than quiet passings in old age. Consider this: A family loses both parents in a car crash and the tax-man – as a direct result – also takes the family home. That’s not on.

I’d want to see stamp duty go, or see more income tax cuts before I cut inheritance tax. After all, Inhertiance tax is, for most people, entirely voluntary, so long as they trust their children, and don’t die unexpectedly. I see why the chancellor is doing this – UKIP have pledged to abolish inheritance tax completely and inheritance tax is wildly unpopular, even amongst people who are unlikely to pay it. This is a policy aimed squarely at the Daily Mail reader and there’s an election very shortly.

On Discrimination Laws

So, Nigel Farage wants to scrap discrimination laws.

And I sort of see where he’s probably coming from. The left and right have very different views of what’s in the driving seat of society. The left, with echos of Marxist-Leninist ‘vanguard of the proletariat’ thinks the habits of the people can and should be changed by law, and law can and should be driven by the elite, leading the way for the people. Most classical Liberals on the other hand think laws against behaviours tend to happen when a majority broadly support them, and not before. It’s the argument in society leading up to the change in the law which changes behaviour, not the law itself. I doubt greatly whether anti-discrimination laws have affected the level of discrimination much, if at all. I suspect they probably reflect a point where there was a change in society’s opinion, which started long before 1965 race relations act, and continued through the 1980s.

Pre 1965 it was common, apparently, (I was born in ’77) to see “No Blacks, No Dogs, No Irish” signs. Nowadays, anyone displaying that sign, wouldn’t get my business either. I am inclined to let people discriminate, but only if they do so openly, and see what it does for their businesses. Society’s distaste is more powerful at curbing behaviour than the law. But I am really not fussed about race discrimination laws, and certainly wouldn’t make repealing them a priority, partly because I don’t want to be misunderstood and thought to be racist, and partly because I might be wrong about society, and I cannot see what harm having these laws on the statute books does. If it ain’t broken, and I don’t think the architecture of Britain’s race relations are broken, don’t fix it.

But ‘KIPpers will not see this, because st. Nigel (PBUH) has spoken and their thick, ignorant activists will go around claiming now that race discrimination legislation allows for discrimination against whites and British, which of course they do not. If there is little racism in society as Farage claims, then race discrimination laws have little effect. And if there IS racism in society, then there is an argument that race discrimination laws are still necessary which is powerful.

This demonstrates UKIP’s amateurishness. If you’re a right-populist party, running on an anti-immigration ticket, constantly beset by accusations of racism, and with several high-profile activists being caught saying really ignorant, stupid things about race, then I cannot see why these laws should be a priority, unless you are openly gunning for the racist, ex-BNP vote in Labour’s northern fiefdoms.

Are you touting for racists’ votes, or are you, Nigel, a thicko with a tin-ear, who’s out of his depth?

The Politics of “Ditch Decisions”

The role of the young army officer, like politicians, is to make expensive decisions, under pressure with inadequate information. Imagine you are walking down the road and you come under effective enemy fire. It doesn’t matter which ditch you jump into, but it’s generally better if you’re all on the same side of the road and know where the bullets are coming from. And that, in a nutshell is what command and control is. You do not stand in the road, getting shot at, arguing about which ditch is best, because the status quo, being shot at, is completely unacceptable, and almost anything is better.

There are many ‘ditch decisions’ in politics.

We need more runways in the south-east of England. Gatwick, Stanstead, Luton and Heathrow ring London, and have their champions, and to whom any decision that isn’t their chosen solution is “crazy”. Someone is going to have to make a decision, and any decision will piss most people off. Boris Island isn’t crazy. An extra runway at Heathrow isn’t crazy, nor is one at Gatwick, Luton or Stansted. Capacity needs to be built somewhere. Does anyone imagine in 50 years, that we would regret building Boris Island, having done so? No, there would be breathless documentaries about how “controversial” it was at the time, but praising the visionary architects and engineers that made it possible.

We have long needed new baseline power generation. Gas, Coal, Biomass and Nuclear all have their adherents, for whom any decision which isn’t invested in their chosen solution, is “crazy”. If no decision is made, then the lights go out. One of Labour’s criminal acts was to play chicken with the prospect of widespread power cuts, unwilling for reasons of electoral triangulation to make a decision about where and what to build.

We need more rail capacity in the UK. High Speed 2 may not be everyone’s favoured solution. I’ve long thought the money could be spent upgrading existing stock and lengthening platforms. But then I get told there’s a firm limit to train length set in stone and brick by some curved Victorian tunnels on the network, so lengthening platforms can only deliver so much extra capacity. I am no expert on Rail. The person who told me this was, and I was convinced, though I cannot remember the details. There is no real alternative to new lines. Again. A decision needs to be made, and whichever is chosen, a majority of people will be annoyed. UKIP, especially, have no need of tiresome “facts” and “information”. They just decided there’s votes in opposing HS2, and they would mouth the anger.

Mundane questions of waste disposal, recycling, power generation, landfill, road-building and maintenance all concentrated harms and distributed benefits and situating the infrastructure is never popular.

What matters is that a decision is made in a timely manner, having considered all the information, as much as possible. Somebody, somewhere is going to get kicked in the bollocks, as a rail line or motorway cuts through the view he paid a fortune for (another argument for a land-value-tax, but that’s a post for another day). One of the things poisoning politics, is an expectation that in a democracy, the Government, can please you in all things, all the time. It can’t because it’s weighing the need of Businessmen to get to New York against the rights of residents of West London – people whose interests in the matter of a new runway at Heathrow are fundamentally opposed. The tendency of people to see ‘each-way’ decisions as binary morality is a result, and a reinforcement of an unwillingness to give the decision-makers the benefit of the doubt, allied to a fundamental mistrust of their motives. The needs of the Businessman to get to New York might mean a concentrated benefit, and the costs distributed across the many. But the benefits of a stronger economy, and greater logistic and transport links are likewise distributed. If you can get to New York (or anywhere else you might like to go) cheaper, you’re richer. But anger is stoked by grievance mongers like the SNP and UKIP, who’re mostly not called upon to make these decisions.

People are ignorant as to how decisions are made. We fear that which we don’t understand. Worse than ignorance is motivated reasoning, which sees the government blamed for all the bad things, yet receiving no credit for positive outcomes and the general well being of the country. There is a robust decision-making process in the UK, one that is mostly uncorrupted, and seeks to weigh competing interests fairly. We are well-governed. We have a diverse and resilient economy. I think we’re governed bit too hyper-actively, but that is arguable, and we libertarians must accept most people do not yet agree with our vision of what the state is for. Politicians could do with speaking human, and accepting that zero-sum decisions need to be made, and someone is going to be worse off. The electorate for their part must have the maturity to realise there are no solutions, only trade-offs, and not vote for half-arsed nutcases like UKIP and the Greens, in a fit of ranty angst. The Government deserves the benefit of the doubt, most of the time, when they do finally decide which ditch to jump into.

Meet the UKIPpers

British politics is a pretty unpleasant sight. There’s an anti-politician mood stalking the country. Jack Straw and Malcolm Rifkind are being hauled over the coals for things that aren’t against the rules, nor even against British interests. Rifkind especially should feel aggrieved that for offering to arrange meetings between a foreign firm and British diplomats, he should be accused of Sleaze. In this mood comes the “tax-dodging” witch hunt, where people’s perfectly legal and normal (for those with the cash) Tax planning is being called “tax avoidance”, which is being equated, and used interchangeably with “tax evasion”, which is a crime. People who’ve taken perfectly reasonable tax-planning steps, are being excoriated for things that are neither against the law, nor against the spirit of the law. The crime, in the rather envious eyes of the British electorate, is to have wealth and be involved in politics. And politicians are being assumed to be corrupt and on the make, with journalists happy to fuel the mood.

And the only politician to speak any sense on the subject of tax is Nigel Farage: “Of course people avoid tax, but they do so mainly for their Children“, before going on to talk about the UKIP policy to abolish Inheritance tax. And the media left it there. UKIP having a popular policy that isn’t bat-shit insane isn’t news. But they aren’t called on its implications, like a major party would be, not yet. The Tories, for whom Inheritance tax has also been a popular cut, would be asked “what would you cut/taxes would you raise?” And the policy of abolishing inheritance tax would immediately become about where the £3bn or so it raises each year would come from. Would farage make cuts, raise taxes, or borrow more? We do not know.
No ‘KIPper would consider, having found a policy that works, the potential downsides of abolishing inheritance tax. The long-term accumulation of assets in families for example. Inheritance tax is the only tax where the money raised is not its principle function. Mega-inheritance is not conducive to social mobility, and nor is it always good for the economy. Why is it fair that someone is able to inherit vast sums, tax-free where others are taxed through the nose for money they earn? For me,  if it’s a choice between cutting £3bn off inheritance tax, or taking it off income tax, I’d rather the income tax cut (and the Tories agree with me there…). Whilst I think Inheritance is mostly an iniquitous tax on the unlucky, or those unwilling to confront their mortality, it’s not a priority to cut right now, not when we still need to balance the books. The Tories have taken most ordinary people out of the tax, while leaving it in place for the very wealthy. When you think a UKIP policy through, quite often what sounds right, as a black and white abstraction, is often rather stupid.
But it’s refreshing to see Farage refuse to dance to the media’s tune, even if the average UKIP policy isn’t thought through at all. When asked where the £3bn would come from, you get boilerplate blather about “fully costed policies being in the [as yet unwritten] manifesto“. And the problem with UKIP is that vague grey area between idea, aspiration and policy invites ‘KIPpers to fill in the gaps. And they do, with abandon, but without any learning or understanding.
British politics is as refined a dance as a regency débutantes’ ball. And like the refined movements of the dances, they are designed to exclude those who don’t know the steps, and so utterly baffling to outsiders. UKIP, whose main dancing experience, if we’re extending the metaphor to breaking point, is in the Mosh Pit of a metal club, aren’t invited to a Queen Charlotte’s ball, because they haven’t got the right clothes, don’t know anyone there, what they’re doing or why. UKIP gatecrashing a Season ball will ruin it for everyone, and they will look stupid. Because UKIP aren’t prepared to answer the “so what…?“, they aren’t taken seriously: they haven’t bothered to learn the steps to the dance. They’re not even aware that such dancing exists and so they’re confused when they see it. 
Which brings us to Meet the UKIPpers on BBC2, which showed UKIP members filling in the policy gaps, with all the creativity and skill of a slow-witted four year old at a colouring book. Of course the TV show was superficial. Of course it was selective. But it was revealing. The utterly incompetent election agent, the Twitter question about the “mosque” (Actually Westminster cathedral…), the Creepy, inadequate couple who collect clowns, and the hilariously bigoted old bag who couldn’t see that she wasn’t kicked out for saying “negro” but for saying “I have a problem with Negroes with their Shiny skin, fuzzy hair and big noses” and who then went on to talk about “Jewish noses with a curve to them“, as if that was some kind of defence. This isn’t a one-off bad-apple spoiling the barrel. This is the mood-music of the UKIP. Janice Atkinson, a UKIP MEP described an Asian constituent as “…a ting-tong from somewhere…” (I find for some reason the indefinite article especially damning), while Mark Reckless actually thought UKIP policy was the forced repatriation of immigrants and was prepared to say so out loud and in public. Both survived in post.
This isn’t pogrom-inciting, paki-bashing racism that smashes people’s windows. It’s the quiet bigotry of profoundly stupid people, of a sort that you probably do get at every family gathering involving multiple elderly relatives. There’s always one who will openly opine about how terrible the country’s got since we “let the wogs in“. But the problem is, those nice, racist nans instil ideas into kids, who’ll become angry young men, who will then go out and set fire to a mosque. Which is why such racist talk has been ridiculed and shunned since Warren Mitchell invented Alf Garnet. UKIP is a party for people who haven’t got the joke in ‘Til death us do Part.
The same cavalier attitude towards policy that allowed Roseanne Duncan to riff freestyle on why she has a problem with Negroes while the cameras were rolling, allows the more intelligent UKIPpers to imagine their freestyling on tax, or immigration policy is Party policy. The reason ‘KIPpers are so certain the party agrees with them, is they’re quite openly making it up as they go along. UKIP agrees, because there is no policy, only opinion. The only “policy” is what Nigel decrees, and he’ll let ‘KIPpers hide behind the defence of “free speech” for any idiocies the media turns up. Yet even this “free speech” defence is idiotic. Of course Roseanne Duncan is entitled to her views. But the ‘KIPper view is that it’s all OK, so long as the media don’t see it. Which is why the ‘KIPpers were kept away from the news during the Rotherham by-election. There are a lot of racists in the party, and the party knows it. And why the “Meet the UKIPpers” filming was shut down after Ms Duncan went off-piste. UKIP is a party for stupid, bigoted people. Yes, the political elite has become too distant, the political dance has become too complicated and superficial. But UKIP is not the answer.
‘KIPpers will blame a media conspiracy for misrepresenting them. They will rant about LibLabCon “not listening to the views of ordinary people“, insulting “ordinary people” by the suggestion they’re like Roseanne Duncan. UKIP is not the answer to the problems that ail the UK, and nor will the “media conspiracy” make UKIP “more popular” as ‘KIPpers often allege. All it will do is taint the few good ideas it has, by association with people like Ms Duncan and Janice Atkinson, while bringing back a kind of low-level bigotry we’d once thought abolished back into political discourse. UKIP is poisoning the well of debate. But on the bright side, the more the views of ranty, stupid people whom the party has seen fit to put in positions of responsibility see the light of day, the less attractive it will become. These people are freaks to be pitied and laughed at, which is why they’re stuck in depressing shitholes at the end of the line, and working with UKIP not a grown-up party. Anyone with talent or drive has left, and UKIP’s South Thanet constituency branch is left with a detritus of lost souls, confused by the modern world, whom another party would happily let deliver leaflets, but whom they would calmly not call when they needed anything more serious doing.
Is there a media conspiracy against UKIP? Only insofar as the Body Politic needs antibodies to expel a parasite. Expect more revelations of nonsense from ‘KIPpers in the run up to the election. Expect scrutiny of candidates and activists in places where they might win. Only a loony could think this unreasonable. UKIP has drawn the bigoted, Euro-obsessed puss from the Tory wound, and will roll up the bigots and opportunists from other parties before destroying itself. The only question is how much damage it does to the country while this process goes on. UKIP are poisonous. But it will be fun to watch them tear themselves apart.

Charybdis and Scylla

Alone among the PIIGS (Portugal, Ireland, Italy, Greece, Spain), Greece was running a massive structural deficit before the crisis. Ireland and Spain in particular were torpedoed by the financial crisis, despite running prudent fiscal surpluses in 2007, which was the only bubble-cooling option available to their governments in the absence of monetary levers. The Irish and Spanish were not partying on Germany’s tick, but were instead trying to manage the structural flaws in the Euro. The Greeks on the other hand were using Germany’s credit card to pay the settlement of their civil war.

Since the 2008 crisis, the Greek right has, inflicted enormous pain on the population, removing graft and non-jobs which had become a birthright for many, and tried to deal with the widespread tax-evasion (evasion probably isn’t strong enough. Many Greeks simply ignored the need to pay much in the way of taxes). Tax rises (for that is what making people accustomed to not paying cough up is) and cutting spending (for that is what dealing with graft and non-jobs is) represents a fundamental re-structuring of the Greek economy, which is now 25% smaller than it was before the crisis. This is beyond depression, and looks more like an economy emerging from a major war.
However, on its own terms, Greece’s austerity has worked. The population now has a GDP per capita more appropriate to their actual productivity, and the country is running a primary (ie before debt service) surplus. More taxes are paid, and public sector jobs mostly exist and require their holders to turn up. This is an appropriate time to default as the smoke can clear before the country needs to tap the bond-markets again. The Greek right will take the opprobrium for the pain of the last few years, the left the plaudits for the recovery. Ain’t it ever thus?
Germany, for its part, will have to wave goodbye to the money it lent Greece, and muse on the fact that it has the European empire the desire for which has burned in the Teutonic heart since the country was unified under the Hohenzollerns, and that means it must sometimes pay others’ bills. Think of it as payback for living under the US security guarantee, which costs American taxpayers 4% of GDP, when Germany spends 1%. With power, comes responsibility.  
Greece should default. Germany should pay. Greece cannot default unilaterally, as they lack the resources to stand behind their banks, so they need Troika co-operation to do so. There’s ultimately no need for Greece to leave the Euro, even though this would probably be better in the long-run for everyone; this would allow the Greeks to default, devalue and move on. However there is no political will for this amongst the players that matter (Greece and Germany), however much British anti-EU types yearn for it. Grexit won’t happen. The default and devaluation would probably mean another 2 years of economic uncertainty, and Greek society may not be able to cope without descending into violence, and it’s probably not worth that risk.
Syriza will not be able to deliver promised spending increases, though the austerity is probably going to be a lot less severe from now on. This is going to leave a lot of people very disappointed. The non-jobs, the state pensions paid for life to siblings, the fictional tax returns Greeks used to enjoy are not coming back. The only certainty is whatever happens, Alexis Tsipras is going to get a very sharp lesson in economic reality and power politics when he sits down in front of Frau Merkel.
Muddling through with a Grumpy German taxpayer picking up the bill for a Battered Greek economy, leaving the fundamental structural flaws of the Euro in place is probably the least bad solution all round.

Politicians with their own views, whatever next?

The normally excellent Tim Worstall (who is a UKIP supporter, see comments) succumbs here to one of his party’s central idiocies: That it is the job of the politician to reflect the views of the electorate.

I’m pretty sure, in this democracy thing, that a political leader is supposed to reflect the desires of the electorate, not mold them.

This is, for example why Douglas ‘Judas’ Carswell voted against gay marriage, despite being personally in favour. I am not accusing UKIP here of hypocrisy, just being wrong.

Running a country is complicated. The control levers available to Government are only loosely connected to the machine of Government. Much of the day to day control is in the hands of a cadre of long-term civil servants, whose job is to implement policy and who act as dampers on any control input. I think of it like a rowing galley, where the tips of the oars are hidden from the captain’s view. He’s trying to steer the galley by guessing the movement through the soles of his feet. Some of the the galley’s rowers can’t be bothered, and many of the rest, don’t want to go where it’s going, and so pull in the direction of where they want to go anyway, and the other half who are pulling in the direction the captain wants to go, aren’t much good. Ultimately the captain can barely see what difference his changes to the beat of the drum and nudges to the tiller make (especially as everyone’s free to choose their own tom-tom drum, and progress through the water is barely steering-way) until long after he’s been ousted by mutiny.

I like this metaphor, because the command economy, where the rowers are chained and incentiveised with whips, go much faster through the water to some direction chosen by the management, but the Captain still can’t see to the tips of the oars, and they inevitably hit the rocks.

Sometimes the people on the watch-tower (think-tankers, philosophers, policy analysts, economists) see a looming shape in the fog off the prow of the galley. They shout to the captain who’s only just in earshot. If he’s lucky, the captain can, with almighty heaves of the tiller and a bit of cajoling of the rowers down below (those who can be persuaded to agree with him anyway) avoid the rocks (Thatcher) Sometimes not (Blair).

This metaphor can be extended indefinitely.

Politicians are the people to whom we outsource political economy. This is every bit as sophisticated, with arcane knowledge as being a Gas engineer or Lawyer. And when a Gas Engineer starts looking at political economy, he’s staring at a fog of unknown-unknowns at least as complete as were Ed Miliband to have a go at servicing his own boiler. The difference is Ed Miliband KNOWS he doesn’t know what he’s doing. But EVERYONE thinks they’ve got the political answers. Everyone thinks their politics are “common sense”.  But if you don’t know what’s been tried, you’re going to come up with some ‘common sense’ which is already proven wrong. Rent control, for example which is the great, unflushable turd of political ideas, or Free Parking.

There is a particularly UKIPish line of thinking which runs thus:

  1. I am reasonable
  2. Therefore my views are shared by reasonable people
  3. Everyone I know thinks [x]
  4. Therefore everyone who doesn’t think [x] is by definition, not reasonable
  5. A not reasonable belief can only be held for malign reasons
  6. Therefore the Government fails to agree with me because of conspiracy or incompetence.
Go on. Go to a pub in London, and ask the punters whether rents should be controlled or whether parking should be free. Then go and find an economist who agrees. 
Of course 
  1. Everyone think’s they’re reasonable, but not everyone’s got the same information to be reasonable about. Even twins disagree on stuff.
  2. People seek out like-minded souls and avoid controversial subjects such as politics with people who’s views you don’t already know. Tories particularly sociable around the “sound”.
  3. This is called selection bias.
  4. This is an incorrect but common logical inference (the mistake, if you will in this chain of reasoning)
  5. Attribution of motive is pure projection, and particularly common on amongst the stupid, particularly by Labourites, who cannot grasp the more subtle cause and effect of  ‘right wing’ economics, and by UKIPpers who cannot grasp the right end of a shit-stick, let alone a political argument.
  6. This is the crowning idiocy of UKIP the sheer lack of belief that a reasonable person might not be in a frothing frenzy about EU fish quotas or the Bulgarian who moved in next door. The belief that policy is run for “their mates in big business” or the despicable EU cabal.
But there is no British Political Elite. It’s true the sons of politicians find it easier through name-recognition and nepotism to get a foot in the door, but they also have the benefits of experience gained through osmosis in how the controls to the galley work. This is why people from all walks of life often end up doing what their parents did. But if you really, really want to be Prime Minister, you need the talent, luck, charm, skill and so forth, and you go for it. No-one will stop you. It’s easier for sure, if you read PPE at Oxford, but there are plenty of MPs who didn’t.
If there was a British Political establishment, you’d expect to see it represented at the top.
David Cameron’s dad wasn’t an MP he was a stockbroker. Neither was Gordon Brown’s who was a minister of religion. Nor, for that matter Tony Blair’s who cavorted in fire with little horns on his head, a black cape and goat’s feet (Leo Blair was an actor – but he may have been cuckolded by Belezebub). Or John Major’s who was also on the stage. Margaret Thatcher’s dad was a Grantham shop-keeper. Jim Callaghan’s dad, also Called Jim, was a Chief Petty Officer in the Royal Navy. All of these people entered politics, not because they wanted to join a self-serving elite (anyone think someone like Cameron would settle for a measly £142,500 a year in any other job?) but because they thought they could do it, it interested them, they got the skills and qualifications and they took their chances. They sought a safe-seat. Then they waited for an opportunity, building a reputation, getting to know the means to climb the greasy pole, until there was a leadership election in their party. Then they went for it. Then we voted for them by the million.
That’s not to say everything’s perfect. I even agree with your average UKIPper on many individual issues. But the job of the Politician is to apply his judgement, experience and knowledge of his electorate, to try to be a man FOR them in the job, even if he doesn’t always do what a simple majority of the noisiest ones want. Representative democracy isn’t a tribal headcount, and it is not majoritarian tyranny. It’s at least as much about what the majority can’t do to a minority as it is reflecting 50%+1’s views. 
Worse: there was no local referendum that say Carswell vote against equal marriage rights for homosexuals, but rather by his own admission, a look the contents of his letter bag, from a collection of angry, poorly educated bigots living in his god-forsaken, depressing retirement home at the end of the line, and who’ve now gone over to UKIP with him. The people who write letters are not the cheerful, sound fellows you sometimes meet down the pub, but the sour and bitter old bags who complain about the noise. 
Is that who you want running your country, or do you want to have people who’ve at least tried to work out cause and effect before they pull on that tiller?

2015 Is Going to be the Best Year in Human History

Last year I wrote some predictions How did I do?

The FTSE100 will reach an all-time high, for the first time since 1999, and will continue the bull-run. 7,000 will be left behind.
Thanks to tightening money, The Oil Price will fall below $100 and stay there. The Brent/WTI spread will narrow from 99/111.

Yup, I spotted the fall in oil price. But I didn’t bet on it, nor did I expect so precipitous a fall. I think the FTSE will break out in 2015

The Labour lead will fall from 6-8%. UKIP will win popular vote in the European parliament elections, then their support will drift back to the Tories thanks to a strengthening recovery. Scotland will vote ‘No’ to independence. Ed Miliband will remain a worthless union stooge. The voter-repelling and emetic Ed Balls will remain shadow Chancellor, because his boss is a spineless dweeb, with shit for brains and “Red” Len McClusky’s hand up his bum. Tories will post a lead, but I doubt it will be done consistently.

Labour’s lead has fallen, UKIP did top the poll in the Euros and are now fading. Scotland voted ‘no’. Ed Miliband’s utter unsuitability for Prime Ministerial office continues to be displayed every day.

The Syrian civil war will not end, but Assad will regain control of much of the country, leaving an islamist insurgency. The world will continue to look the other way.
China’s growth will slow. The rumblings of dissent new riches have smothered will start to grow louder. The Communist Party may seek to use Sabre-Rattling with Japan to detract domestic opinion from the looming economic crisis.
Something dramatic will happen on the Korean Peninsula.

I didn’t really predict anything specific, nor was I far from consensus. But Korea? Was I prescient?

So onto 2015.

  • I think 2015 will be the year the FTSE breaks 7000. One day it will, one day I will be right.
  • Oil will fall to $40, and maybe below and stabilise in the $40-60 range. USA becomes the world’s swing producer
  • The Conservatives will win a thin majority in GE2015. There maybe 2 elections. Don’t ask me how. no polling backs this up. But the country doesn’t want Miliband, and Cameron’s actually done a pretty good job under difficult conditions and doesn’t deserve to be sacked. UKIP to win 3-5 seats, Farage to fail in Thanet, the party’s national vote share in the 10-12% range.
  • China’s growth over the past few years will prove to have been overstated. China’s slowdown to get worse. India to continue to develop rapidly. Modi proving his critics wrong: He may be the man to get India working and taking its rightful place as a major economic power.
  • Russia will try to save whatever face it can for Putin, as it withdraws from Ukraine in response to the falling oil price and continued sanctions. Russia will be set up to rejoin the world financial system in 2016.
  • IS will be reduced to a rump by the end of the year, as having been stopped in their tracks on a number of fronts, they will find the supply of jihadis will dry up.
  • Darfur will be the international flash-point to watch.

We live in a time of miracles. 3-D printed lungs, and people landing space probes on distant orbiting rocks. The benefits of these miracles are unequally distributed. But they do eventually benefit everyone. Luxuries once unthinkable even to Louis XV such as the world’s knowledge at the touch of a button, are available to most, through the miracle of stable institutions, and the creative destruction of free-market capitalism.

This provides opportunity for self-improvement, but also can be a productivity-sucking distraction. Who manages to make the most of the opportunities will set the agenda. Wars end, elections happen. The relentless search for better ways to do things however doesn’t stop. Nations hold elections. But policies can be reversed, or turn out to be right all along. But people keep passing on knowledge, which is accumulating at an ever-accelerating rate. We will work stuff out. In time.

Meanwhile a billion people still subsist by patchy subsistence agriculture. Between the relentless march of new miracles, and the acquisition of already acquired technology by new users, there’s centuries of improvement in the human condition, economic growth, right there. Meanwhile Britain is climbing UP the economic rankings. Real wages appear to be growing sustainably and the growth returns.

Signal to noise ratio, people. Neither the world, nor Britain is ‘going to the dogs’, there’s no need to vote UKIP. 2014 was the best year in human history. 2015 will be even better.

The Oil Price Collapse, & why No-One Starves in the West.

Two years after the fall of Soviet Communism, a visiting Russian official seeking to learn about how free market systems worked, asked the Cambridge economist Paul Seabright “Who is in charge of Bread Supply in London. He was astonished by the answer: “No-One”.

No-one has starved in a free market system since the Potato Famine in Ireland in the 1840s, which happened because of the failure of a staple crop, and despite significant Government initial efforts to alleviate it. The free market failed there, for a huge number of reasons but that remains the only example, and much has been learned since. Many of the other famines in what were nominally free-market systems, like the Bengal Famine of 1943 can be put down directly to interventions in the markets such as the (democratically elected) Punjabi Government preventing the export of food to Bengal, whose other major source of food, Burma, was having a little local difficulty which became known to history as World War 2. Because of this intervention by the Punjabi government in the market in response to shortages, and subsequent inaction by the Indian Government, over a million people died.

The oil price rose throughout the ’00s in response to the rise of Chinese demand, lower interest rates and increased car use in the developed and developing world. Then people started to hurt. Oil price protests rocked the world. The cost of maintaining subsidised petrol in the non-petro-state middle-east is one of the sparks that lit the ‘Arab Spring’. In the west, cars got more efficient as the price (and taxes on petrol) rose. People bought smaller and more efficient cars. Highway speeds fell, as cars started to have ‘fuel economy’ displayed on the dashboard and people realised how much more it cost to drive at 90mph than 70. People changed their behaviour and drove less: ‘Peak car’ was in 2005 in the USA.

Meanwhile, engineers went looking. We had long known about ‘Tight oil’ (oil soaked into porous shale or tar-sands), but it was expensive to produce, and uneconomic to extract, until the prices rose. And when they did, engineers sought means to improve production efficiency. And they were successful. The spike of Oil prices in response to cheap money and the recovery from the credit crunch led to an enormous explosion of production in Texas and North Dakota in particular. The USA became the world’s largest oil producer in 2013. Cost of tight-oil production in Texas is around $40 and falling. In much of the traditional reserves in the North Sea, it’s $35.

There is the equivalent of five Saudi Arabias worth of reserves in the Eagle Ford shale in East Texas alone. (1.25tn Barrels of Oil Equivalent vs 255bn BOE) . And it is ALL economically viable to extract so long as oil remains above $50 per barrel. And there’s the Bakken in North Dakota and others. Peak Oil? Um… no.

So the response to a temporary shortage of Oil was for people to use gradually less in response to a price signal, and for people to go looking for more, in response to the same price signal. And the result is the glut of Oil the world is currently enjoying as oil that was prospected when the price was $120 is now hitting the market. My guess is we can expect $45 or so and then stabilisation around $50-70. Having got used to Oil at twice that price, it will feel like a tax cut for the world. (Except Nigeria, Venezuala, and Russia…).

What is true of Oil – the price goes up when demand exceeds supply – is true of wheat, and pork bellies, and olive oil, and corn or Tea. And the substitutes, barley, chicken, rape-seed oil, Sorghum, coffee, and so forth get used instead. People economise and substitute. So long as the market remains, it will become increasingly profitable to move stock from places of low value to places of high value where things are scarce.

Even the much-maligned speculation, or what used to be called ‘hoarding’ helps, by creating a reserve  in anticipation of higher prices to come, to be released onto the market in response to shortages. Hoarding ensures the commodity is always available at a price. And so no-one starves.

And the lessons: how to grow crops or burn fuel more efficiently, cannot be unlearned. So when supply returns, prices often collapse, the speculators often get badly burned, but the economy as a whole is richer as a lot is being done more efficiently.

Ah… I hear you say… but what about Africa: how can Africans pay the same prices as Europeans? But 21st century famines in Africa are almost never SUPPLY problems, but DISTRIBUTION problems. This isn’t about cash-crops being removed even as people starved, like Ireland in the 18th Century. We in the rich west are not taking African food because we can pay more, indeed quite the opposite. There’s often plenty of food, grown in the region or supplied as Aid, but due to poor infrastructure or more often, war and banditry, it cannot get to where it is needed. Where the rich west is holding Africa down is by preventing much of the continent from developing a cash-crop economy. The Africans are actively prevented from supplying our markets with cheap food by rich-world Farm subsidies, So roads aren’t built, and when the crops fail, food cannot get in from outside, either in response to rising prices or even Aid. Aid which often as a by-product, destroys the livelihoods of local farmers by undercutting them.

The European Union, USA and Japan, to name the most egregious examples have their boots on the face of Africa, keeping him down, but not in the way you’d think. African farmers cannot compete against our heavily subsidised farmers and so cannot invest or develop their production, even if they wanted to. The market for the end product isn’t there. Without that bottom rung, the rest of the development ladder is much harder to climb. Then, by demanding Africa opens up their economies to everything, except the one thing they have a comparative advantage, African economies struggle to compete and struggle to develop.

The fact Africa now contains some of the Fastest-growing economies on earth is a testament to the triumph of the human spirit in the face of adversity. Imagine how much better it’d be if we’d not retarded African development by to appease French farmers’ selfishness. Every famine since 1840-41, everywhere in the world is BECAUSE, not despite a Government somewhere intervening in the market. And the same is true of poverty. The African governments and their trade partners who’ve worked this out are doing well. But it took millions of lives, and is still not widely understood.

Rising prices are merely the means by which no-one starves and the pumps still have petrol. Would you rather we ran out occasionally?