Wednesday, December 31, 2008

A Time to Revive the Worgl Experiment?

The phrases "brilliant idea" and "Simon Jenkins" don't normally tend to associate in sentences, in this case however: Simon Jenkins idea is brilliant. And has some pretty good historical and economic arguments on it's side.

In 1932 during the great depression, the mayor of the German town of Worgl had an idea to revive the fortunes of his town's flagging economy. He printed his own currency, equivalent to the Austian schilling in value and demanded that businesses in the town accept it as legal tender. The currency had a time based depreciation so that it would depreciate by 1% in value each month, this was designed to speed up the circulation of the currency. It's generally considered that currency played a massive role in reviving the economy.

The reason I'm bringing this up is that the speed of circulation of money is important in a functioning economy, our wages depend on a steady supply of customers willing to buy what we have to sell. Keynes argued that an economic stimulus would have a multiplier effect based on something called marginal propensity to consume (the proportion of income that is spent), for example lets assume the government gives away £1,000 and the marginal propensity to consume is 80%:

  • Of that £1,000, 80% is spent so that means that £800 is spent
  • Those who recieve the £800 of spending go on to spend 80% of it meaning that a £640 is spent.
  • Those who recieve the £640 of spending go on to spend 80% of it meaning that a £512 is spent.
  • And so on...
When you crunch the maths, if you assume 80% of any money recived is spent a £1,000 cash injection equates to a £5,000 of spending in the wider economy and £1,000 in various peoples savings accounts. Obviously that's all very good, the problem is that many economists think that this multiplier effect won't occur because any cash injection will be saved.

By taking it's lead from the Worgl Experiment and issuing a series of vouchers that could be accepted as legal tender up until a certain date when they will be redeemable for money by a retailer, the government could make a cash injection could be made into the economy that will be guaranteed to generate a stimulus with a multiplier effect and hopefully revive the fortunes of the flagging economy.

Tuesday, December 23, 2008

Misunderstaning Ha-Joon Chang

I am a very much admirer of the work of Korean economist Ha-Joon Chang, he is considered just about the best critic of globalisation out there, for anyone interested in his work, he has blogged occasionally on CiF and also contributes to the FT's economist's forum.

It does appear that my enthusiasm for his ideas has gathered a bit of attention, a few days ago, I linked to a Prospect article he wrote a while back criticising current attitudes to protectionism. This article appears to have come in for some criticism (Thanks to Nick for pointing this out).

I think a lot of people have misunderstood his work and the nature of his views, he doesn't suggest that countries should adopt protectionist/activist policies as a route to wealth, he simply argues that protectionist policy tools should not be explicitly ruled out as an option. He also believes that policies such as trade liberalisation are not always win win situations and that the greater opportunities that it might provide could be offset by the damage it might do to jobs and businesses.

Another point I feel should be made is that his views do go far beyond just views on trade, here are a few:

  • He is skeptical about the benefits of unrestricted foreign exchange and unrestricted access to capital markets, he suggests that the liberalisation of Korea's capital markets permitted the developments that led to the Asian Financial Crisis.
  • He is also highly skeptical about foreign investments, he believes that governments should be careful about the kind of foreign investment they encourage making sure that investment is mutually beneficial rather than just being of benefit to the investor. In particular he believes that greenfield investment (investment that creates an entirely new business) is to be preferred over brownfield investment (where a foreign investor buys an existing business).
  • He has reservations about the privatisation of state enterprises, since often the state can get a very bad deal on the matter, privatisation deals can also be highly corrupt even in advanced nations (for example QinetiQ and CDC)
  • He believes that current international intellectual property rights are too strong and have held back business in the developing world as a result
The important lesson to be drawn from his work is that government intervention in the economy should not be discouraged in the kind of absolute way that it has been in recent times and that good pragmatic use of economic policy tools can in fact be beneficial. And that liberalisation policies should be pursued slowly and carefully with a clear view to the benefits and pitfalls. In terms of more advanced economies, I think that the lessons are that governments should not shy away from regulation and should not be afraid to take control of a few more of the levers of economic policy. Given recent events that seems, like a sensible plan.

Monday, December 22, 2008

Not to toot my own horn but....

On Labourhome when talking about the financial setup and the need for change in the post credit crunch world, I said:

"When it comes to control of the expansion of credit we really have to ask whether interest rates are a sufficient measure to control this. They are a blunt instrument and there are often cases where the requirements for consumer credit do not match the requirements for business credit so some kind of additional control mechanism would be useful."

As it turns out, I'm in pretty good company, Sir John Gieve the Bank of Englands deputy governor said:

"Maybe we need to develop something which bridges that gap and directly addresses the financial cycle and prevents the financial cycle and the credit cycle getting out of hand ... I think we need to complement interest rates, which are a blunt instrument - you set one interest rate for the whole economy - with something which is more financial-sector specific."

Wednesday, December 17, 2008

A*'s for Everyone Except the Taxpayers Alliance

We must all do our bit to fight the distortion and propaganda as well as the plain stupidity of the Taxpayers Alliance. Tonight, I'm doing my bit by taking a look at Ben Farrugia's criticisms of the Interim Review of the Primary Curriculum.

Notwithstanding the fact he doesn't acknowledge that this is an interim report and is still open to consultation (will the TPA submit anything?), Ben appears to believe that the changes to the curriculum will entrench the problems in schools rather than solve them. In particular he talks about the recommended thematic approach which ends the subject oriented approach (Maths, Geography, History etc) and replaces it with six broader themes.

  • Understanding English, communication and languages
  • Mathematical understanding
  • Scientific and technological understanding
  • Human, social and environmental understanding
  • Understanding physical health and well-being
  • Understanding the arts and design

From what I can tell the intention is that curriculum will be redesigned for Key Stages 1 & 2 for (ages 5-7 and 7-11 respectively. Ben delivers the following criticism:

If these six themes (or areas of "understanding") were proposed as a new
framework for a GCSE level curriculum - in a country with excellent standards of
educational attainment in reading, writing and maths - they might seem
progressive, maybe even sensible.

As it is, for 8 year olds in a country beset by poor levels of basic
educational attainment, the suggestions are terrifying. The report (like
Government policy on education in general) simply misses the point. What good is
Google if you can't read? How can Gordon Brown hope to build the sense of
Britishness he talks of when history is to be marginalised? When discussing
"one's personal impact on the environment" doesn't it help to know where
Bangladesh actually is?

Which might be a valid point if he actually understood what the review was about. The report mentions on several occasions that too many previous reviews have been bogged down by excessive debate over the contents of specific subjects. It also acknowledges a need to reduce the amount of content in the curriculum.

1.13. One reason for this is that previous curriculum reviews have tended to
focusalmost exclusively on what might be added to, or removed from, each
subject’sprogramme of study; thus debate over subject content is often a contest
of strongviews about what children should learn, particularly in subjects such
as history, andthe share of curriculum time that should be given to each

1.14. Most respondents to the Review accept that in order to have a
statutory National Curriculum there must be some degree of prescription over what the common entitlement should contain. However, three clear expectations of this Review have been voiced by respondents. First, that it will reduce prescription. Secondly, it will halt the trend of adding new content to the curriculum, no matter how worthy thecase may be, unless it can be shown what should make way for it. Thirdly, that it willmake curriculum planning more straightforward and manageable.

Indeed, how about these two:

1.15. Meeting those expectations will require more than tinkering around
withthe burgeoning amount of teaching content. The demands of society on
primaryschools have risen and continue to rise but If we are to establish a
‘world-class’, highquality curriculum we must resist a ‘never mind the quality
feel the width’ mentality,and face the reality of prescribing less, so that
teachers can better teach and, aboveall, so that children can better learn.

1.18. Regardless of the freedom teachers actually have to exercise
professional judgment about how they teach, many believe that the Government, the QCA, Ofsted, and the National Strategies, or a combination of all four,
effectively restrictthat freedom. In other words, it is the total demand on the
school that is at issue rather than the National Curriculum alone.

What this indicates to me is that this review actually realises that there is a need to focus on quality not quantity and not bog the curriculum down with pointless additional content. The TPA appear to have read the new subject headings and just made assumptions based on their own politcal viewpoint. The have then proceeded to engage their propoganda machine and blasted forth that ill informed viewpoint.

The idea that a change in headings in headings will send the curriculum up some politically correct primrose path is absurd. Recommendation 5 indicates the actual intention here:

Recommendation 5: The Qualifications and Curriculum Authority (QCA) should work with relevant leading authorities, such as, subject organisations, the
Royal Society, heads and teachers to validate essential knowledge, skills,
understanding and attitudes in each of the proposed six areas of learning, and
organise them intomanageable programmes of learning.

So, the actual content will be decided by the QCA working in conjunction with expert groups, heads and teachers. This seems like quite a sensible approach, which begs the question: Why are they kicking up a fuss? I believe this little (remarkably contradictory) snippet explains it.

But this is politics, not educational reform. As long as politicians of all
stripes have a hand in education they are going to play politics with it.
Misguided proposals such as those put forward by Sir Rose will become law.
Children's education will be jeoporidised.

The Taxpayers Alliance is in fact absolutely committed to playing politics with education in that it want's to stop our taxes paying for it and it's criticisms are simply the application of it's vulgar libertarian views. Education matters to everyone and it's thefore crucial that it's fate is decided by the politicians we have elected and not a bunch of anti tax loonies.

Monday, December 15, 2008

A Word to Patronizing Right Wingers

If you must lampoon left wing ideas, try to find arguments that aren't contradicted by obvious historical examples.

I refer to this post by Tim Worstall on the Adam Smith institute blog, suggesting that it would be a bad idea to fund green industry, we should instead just buy all our green technology from Germany.

This is exactly the same argument that was presented to a foolish developing country by the name of Japan that had tried to develop a car industry. They said that they should import superior cars made by foreign manufacturers such as General Motors.

Fast forward 50 odd years and foolish developing country has produced the worlds first production hydrogen fuel cell car while those superior foreign manufacturers are being bailed out by their government.

A Criticism of NO2ID's "Take Jane"

For those who haven't seen it, it is a very moving video featuring a young woman who lives in fear that her violent ex-husband will catch up to her and take away her daughter Jane. The husband has in the past managed to track her down by bribing an official for information on the national identity register.

There is a legitimate criticism here, there is no real official process for changing your name in this country, you can change it by deed poll but you can simply choose a new name and start using it. The introduction of the national identity register will change all that since because it will actually store name changes against a record. The consequence for this is that you could look up someone by their old name and address and track back to their new address.

There is also the potential danger of the identity reference number (IRN) this is likely to be shared among government agencies and private sector companies. This could then potentially mean that name changes could be available to a large number of civil servants and private sector employees.

For example say Janet's IRN was 123456, for whatever reason she changes her name to Jennifer. She closes her bank account as Janet and opens a new one as Jennifer however when she opens it her IRN is checked and stored against her bank account records. A potential thief could use the 123456 number to track down Janet's new name and details.

Although this is potentially a problem, it is possible to implement the national identity register in such a way that these problems can be prevented. The key is to minimize the number of people who have access to the data pertaining to the name history and taking steps to tackle the problem of an IRN being publicly known.

The first can be done quite easily, nearly all Civil Servants have no reason to access name history since the ID card itself can be used to obtain the identity, the key is to restrict this access to only the staff who maintain the register (maintaining the register itself is unlikely to be staff intensive) and those with the job of changing names.

The second could be done by making it possible to change the IRN, this would potentially allow a person to cut all ties with a previous identity in all systems except the main national identity register. This would nullify the danger of an external system being used to look up someones details.

The point of these measures is that they minimize the number of staff with access to the potentially dangerous data, if every civil servant could look up name changes it would indeed be dangerous since it would present a wealth of potential people to bribe, if this was extended to the private sector it would expand the potential for leaks even further. No2ID have identified a potential danger with a national identity register, although in this case it is one that can be prevented with the right measures and is therfore not sufficient to justify abandoning the national identity register.

Friday, December 12, 2008

How to Live in the 21st Century

Compass' have this fantastic "How to Live in the 21st Century" website for submitting new policy ideas, I've made my own contribution here although it was rather full of typo's and missing a title when I submitted it.

I'm arguing for the reintroduction of a form of Exchange Control based on a tripwire and speedbump approach. The idea is that if a chosen condition occurs such as a drop in the currency of more than a certain amount (a tripwire) a policy is enacted to put the brakes on movement in the currency (a speedbump). For example if the value of the pound dropped below €1.05, an exit tax of 5% could be applied on any attempt to exchange the pound. This is just one example, there is plenty of flexibility within this kind of approach, for example a tripwire could be triggered by an excessive volume of foreign exchange and a speedbump could be any number of restrictive measures.

A big problem fo economies is that in boom times large quantities of foreign investment can rapidly flow into a country and when panic stikes it exits very rapidly. In a time of panic it can force investors to weigh the certain loss from withdrawing investment against the possibility of loss from upcoming economic problems. It should also guard against the problem of excessive interbank lending across international borders.

Quite frankly, I'm expecting to be lambasted as completely bonkers by some and be called dull and technocratic by the rest, but who knows?

Monday, December 08, 2008

The Active State vs Protectionism

Work has generally kept me from doing too much writing, but I thought I'd write something about the Progress conference and what I felt was a fairly major contradiction: most of the government figures there had an acceptance of the need for a more active state, although at the same time they rejected the idea of protectionism (specifically mentioned in James Purnell's speech). I've always held that they are one and the same thing, and personally see no problem with protectionism provided it is applied in such a way to respect the economies of other nations.

Protectionism, as I see it involves interfering in your country's industrial and trade policies through the imposition of tarriffs, subsidies, exchange controls and a host of other measures with a view to giving advantage to specific industries.

An "activist state"? As far as I can tell it is exactly the same thing, we are told that Peter Mandelson has a list of firms he believes should be saved by government intervention if necessary. He is also working on a green industrial strategy, one that could be quite seriously interventionist.

Whether you call it "protectionism" or "the activist state" I very much like the idea of all of this. The missing piece in the current welfare puzzle is the need for decent jobs, a big problem with the economy at the moment is the weakness of British exports. A policy of strategic intervention and investment in certain industries could potentially kill 2 birds with one stone.

PS: To those unsure about protectionism, take a read of this

Monday, December 01, 2008

Thoughts from the Progress Conference

Last Saturday I attended the Progress conference, it's an interesting one for me since my instincts tend to be a good deal to the left of Progress for most things. All in all though it was quite an interesting conference. Over the next couple of weeks I'll try to write some posts on the subjects covered.
A few initial thoughts:
  • Gordon's appearance was a pleasant surprise, his speech was it has to be said not the most astounding but the question and answer session was very much appreciated.
  • James Purnell suggested that a key part of New Labour was about ends and means, he suggested that the means be pragmatic and not be limited by ideology. A decent enough idea, but in my opinion open to more than a little criticism.
  • There seems to me to be a contradiction in the ideas of a "Rejection of Protectionism" and an "Activist State" both mentioned in Purnell's speech.
  • In the dicussion on immigration, I was immensely impressed by Fiona McTaggart MP, she has a very no nonsense attitude and also seems to have a preference for policies that work. She was also the only person on the panel to bring up the consequences of migration to the originating country.
  • I was once again impressed by David Lammy MP, I have heard him speak now on two occasions and he has come across both times as intelligent, passionate and articulate. I do believe that he is the closest thing we have to a British Obama.
  • From what was said Ed Milliband and Peter Mandelson have some kind of very impressive green industrial strategy in the pipeline, I do hope that it lives up to expectations.
  • I was unimpressed by the attitude towards the left expressed by Hazel Blears, particularly Compass. At a time where the Labour party is altogether feeling more unified and comfortable with itself I felt that this kind of attitude was uncalled for I get the impression that I wasn't alone in this opinion.
  • Some of the discussion also seemed a little too fluffy for my liking, I like both the ideas of greater community empowerment and co-operatives but find discussion on the subject a little pointless if it contains no clear idea as to how to encourage them.

Altogether New Labour seems to be pulling in a lot of different directions. Some (such as Hazel Blears) seem to sticking to New Labour circa 1997, others (such as David Lammy, Peter Mandelson, Charles Clarke and Ed Milliband) appear to be looking towards a genuine evolution in New Labour. An evolution where the state will take a far more active role. In my view, this can only be a good thing.

Sunday, November 23, 2008

One Day...

I shall have a dining table free from Labour leaflets and Charles Clarke letters, sadly, that day is not today.

Saturday, November 22, 2008

A Lie That Should not Stand

One piece of propoganda the Tories like to put out is about the massive national debt we have as a result of Gordon Brown's irresponsible spending. This is wrong, the Tories are lying.

In a list of the countries with the largest national debt, Britain does not feature in the top 10, it does not even make the top 20. Britain is 50th*, behind many other nations. What is worrying is that so many people seem to believe the Tories lies, this is something we quite simply should not leave unchallenged.

* I realise that some people may want to bring up PFI, Network rail and Public Sector pensions so... PFI and Network Rail between them are only around 2-3% points between them, this is around 10 places in the rankings. Public sector pension deficits are a universal problem and not especially relevant .

Thursday, November 20, 2008

The Taxpayer's Alliance

I've held a dislike for the Frothing Mad Anti Tax Anarcho Capitalist Libertarian Alliance for a very long time. So I'm very glad to see that someone's actually set up a Taxpayers Alliance site that holds them to account.

Let's spread the word and boost these good people up the Google rankings.

Hat Tip: Labour and Capital by way of Adam Lent

Tuesday, November 18, 2008

The Conservatives and the Great Depression

I'm currently making my way through The Great Crash by JK Galbraith (it's a good read and contains some very intersting historical paralells), I'm currently up to the section discussing what exactly turned the crash into a depression. One conclusion Galbraith makes is that the policy prescriptions pursued by both the Democrats and the Republicans were the wrong ones, balanced budgets, controlling inflation and economic stimulus primarily through monetary not fiscal policy.

On balanced budgets he stated that the idea of keeping a balanced budget was simply not suited to the complex problems the economy was encountering and was essentially applying a simple logic you might apply to a household nudget to a complex macroeconomic problem was a serious mistake.

On control of inflation he said that a desire to keep it in check was obsessing over memories of bad experiences from the past.

On monetary policy he said something along the lines of "Monetary policy is a thin reed with which to prop up the economy".

So, with that in mind it's good to see one party stand up for traditional solutions, blindly sticking to the same policies that followed the great market crash of 1929 and lead to the great depression. That party, is of course, David Cameron's Conservatives.

Monday, November 17, 2008

A Response...

I wrote a response to a chap called Hugo in this earlier thread criticising a the letter those top economists wrote, I put a fair bit of effort into it, so I thought I'd make a post out of it. To summarize I suggested that public works would actually be an effective way to boost the economy and that the private sector would simply adapt itself to that spending. I was challenged on the point of opportunity cost, that this spending would be at the expense of some indeterminite private sector economic activity. I was also challenged on the point that if the state intervene's in the economy it is no longer free.

First, your point on "free" economies. Even in a what might be termed a "free" economy there are government interventions, taxation is determined by arbitary government choices, interest rates are also set by state bodies it's almost impossible to have a proper free economy 100% free from state directon. We'll always be stuck in a middle ground of some sort.

On your next point the government is an economic actor like any other, but as an actor it has both disadvantages and advantages. It has access to resources on a much greater scale than most private entepreneurs and also is much better at building up an overall picture of the economy. It is also far less risk averse than private entepreneurs and able to consider social externalities beyond the simple profit motive.

I don't accept the conclusions of the writersof the letter because I simply don't accept that leaving decisions to the private individuals is the best way (perfect information, time delays etc), a large number of risk averse investors got their fingers burned on sub prime mortgages because as individuals they failed to realise the big picture, there is a serious opportunity cost to those decisions.

As far as the correllation between state involvement and economic growth, I don't believe there is one. Private property rights and personal economic freedom are, I believe, essentials but beyond that state involvement is of little consequence. To make this clear the best performing advanced economies between 1950 and 1980 were (per capita income growth in brackets) : 1) Japan (6.0%), 2) Austria (3.9%), 3) West Germany (3.8%), 4) Italy (3.7%), 5) Finland (3.6%), 6) Norway (3.4%), 7) France (3.2%)

Of those, Austria, Finland, Norway, Italy and France had very large state owned industry sectors in the industrialized world. Japan and Germany also followed very active industrial policies. Correlation may not imply causation, but we would appear to be 7 for 7 for state involvement, it's a powerful pattern. Investment in public works us unlikely to have any great opportunity cost.

As a final note, it pains me to see how often a preference for right wing ideology is taken as a sign of economic literacy. It seems that sometimes the only qualification for being a professional economist is a tendancy to repeat right wing ideological dogma.

Edit: Added brief summary of the initial argument to the first paragraph.

Wednesday, November 05, 2008

The Inevitable "Yes We Can" Post

Not surprisingly, I'm really quite happy about the result of the US election and I'm really quite optimistic about the next few years of US politics. Some people might be a little down on cliche's, personally I think it heralds a new era of US politics, a true turning point in history, a shift in the ideological tetonic plates, a triumph of good versus evil and a tribute to one of the best run campaigns in the history of democratic politics.

I think it's also worth paying tribute to all those Labour bag carriers who crossed the pond to campaign for Obama and suggesting that this victory also vindicates many of the ideas contained within "The Political Brain".

To those already exercising their cynical muscles (Chicken Yoghurt comes to mind), I'd say disappointment is a fact of life in politics but I'd have taken a disappointing Al Gore government over a George W Bush without hesitation.

Finally, I very much liked this comment from mike over on the Chicken Yoghurt post.

i like the part where john mccain lost.

Tuesday, November 04, 2008

Post Pub, Post Porter

I went to the pub, I game back, then I read some drivel by Henry Porter. It made me angry...

Following Gordon Brown's admission that the government could not guarantee the security of personal data, David Davis concluded on Comment is Free this week that far from protecting us from identity theft 'the grandiose projects of the British state may prove to be its greatest facilitator."

This is right, and Davis's message should be understood by far more MPs than is currently the case. He is one of the few in Parliament who has grasped the nature of the threat and the speed at which it approaches us.

Yet it is not just security breaches and lapses that we have to worry about. The government is clearly committed to a course of selling our personal data to cover its costs and in some cases, like the ID card's National Identity Register, a big commercial operation is envisaged.

So, David Davis "concluded" this did he, how exactly? Did he take us through each example of vunerable data, explain what data was exposed and the potential for abuse of that data. Does he have an understanding of what systems and checks the data could be used to bypass and what techniques might be used? Unlike Messers Porter and Davis I have spent the last 8 years working in IT, dealing with consumer data on a pretty regular basis and I would quite confidently say that the sentence "the grandiose projects of the British state may prove to be its greatest facilitator" is pure unadulterated bull drawn up by someone with no understanding of the actual issues involved.

The model for this activity is seen at the DVLA, which sells details of vehicles and drivers for a fee of between £2.50 and £5. For £3,000 a "reputable user" – in other words, a supermarket or security firm - can buy a link to the DVLA database although they still pay the same fee for driver's details on top of that.

Although the DVLA insists that it is not a making a profit on the 1.64 million sales per annum, which is hard to believe, the fact remains that a government agency is selling information about us to third parties who may have rather doubtful motives – like the Parking Eye company which sent an £80 penalty notice to a driver who broke her late night journey on the M6 to take a nap in her car at Lymm services rather than continue and fall asleep at the wheel.

Some people might suggest that people who operate car parks or have areas of land that be subject to illegal parking by motorists might actually have a need for this data, so that they can get in touch with illegally parked motorists. Like most systems, potential for abuse exists, but the flipside of the coin is the idea that people can park where they like and the drivers have absolute right to anonymity. This is just the usual Porter trick of pointing to a single instance of abuse for a generally sensible law.

But is not just the DVLA. In the summer the police admitted that samples from the national DNA database had been used for unspecified research. How much money changed hands, and what was the purpose of the research, are not known but this is the clearest indication that once the state acquires information – and here we are talking about the biological essence of thousands of people – it comes to think of it as its own, to do with it what it likes.

Another bit of bull, does Henry know if there is actually any danger from this, does he know anything of what can be gleaned from this DNA data. Does he know if the data was anonymous or not? It could be a dangerous story, but that depends on a number of factors.

The vast databases that are being hastily built before the public realises what it is losing represent an enormous commercial prize. The only people who will not benefit from the sale of our information are us, even though we will be supplying it – often under duress – to the government. We'll be soon be in the ridiculous position of giving up every important piece of information about ourselves, together with the right of access to that information, while commercial enterprise will purchase access for their own gain. It is a stark reminder how rapidly the relationship between state and individual has changed in the last decade.

Who owns our personal information, what use they make of it, and what access the public should be allowed to its own data – to correct and formally withdraw it from the database - are issues which are hardly ever discussed by Davis's colleagues, who unthinkingly go along with the idea that possession is ninth-tenths of the law.

Last time I checked, these databases were being very slowly and carefully assembled, the National Identity Register has taken a long time (first consultation was in 2002) and a lot of studies and no one has been issued with a single card yet. One example he cites is absolutely harmless, the other he just hints at vague possibilities of abuse with little concrete proof of anything.

But there is another route, which starts with each one of us declaring that our personal information is precisely that. It belongs to us and we should have control over it, wherever possible. What we need, but hear little suggestion of in Parliament, is a privacy law that entrenches these rights in the environment of a new Bill of Rights. For if there is one clear message to absorb about current situation in which the state plunders what it likes from our personal lives it is that the section that guarantees privacy in the Human Rights Act is a complete joke, and has in fact been the context in which this gross attack on all our privacy has taken place.

What a wonderful idea, let's give it a try...

To anyone who knows my name and address, I demand you forget it this instant, IT'S MY PERSONAL DATA!

If you know my birthday, forget it IT'S MINE AND MINE ALONE!

As a final little twist, when I copied the original article at the bottom were the words "Your IP will be logged":)

Wednesday, October 29, 2008


I happen to think that Russell Brand is a moron and that Jonathan Ross' salary is seriously out of proportion to his actual level of talent. That said, it seems to me that this coverage of this idiotic prank phone call seems just a little over the top. It happened a while ago and the outrage only started when the tabloids started whipping up outrage, I reckon a sense of proportion is needed here.

On a completely different subject, I was very amused by this today.

Monday, October 27, 2008

Why did so many people stick their name on this Drivel?

On Sunday the following letter appeared in the Telegraph, it is signed by lots of people with important titles like "Chief Economist" it serves as proof that the vast pay packets they command are a sign of overdeveloped egos, not well developed brains.

Further to your interview with Alistair Darling, we
would like to dissent from the attempt to use a public works programme to spend
the country's way out of recession.

It is misguided for the Government
to believe that it knows how much specific sectors of the economy need to shrink
and which will shrink "too rapidly" in a recession.

Thus the Government
cannot know how to use an expansion in expenditure that would not risk seriously
misallocating resources.

Furthermore, public expenditure has already
risen very rapidly in recent years, and a further large rise would take the role
of the state in many parts of the economy to such a dominant position that it
would stunt the private sector's recovery once recession is past.

Occasional slowdowns are natural and necessary features of a market

Insofar as they are to be managed at all, the best tools are
monetary and not fiscal ones. It is inevitable that government expenditure and
debt naturally rise in a recession but planned rises in government spending are
misguided and discredited as a tool of economic management.

If this recession has features that demand more active fiscal policy, which is highly
disputable, taxes should be cut. This would allow the market to determine which
parts of the economy shrink and which flourish to replace them.

Dr Andrew Lilico, Europe Economics; John Greenwood, Chief
Economist, Invesco; Richard Jeffrey, Cazenove Capital Management; Dr Ruth Lea,
Economic Adviser, Arbuthnot Banking Group; Trevor Williams, Chief Economist,
Lloyds TSB Corporate Markets; Dr Nigel Allington, University of Cambridge; Prof
Philip Booth, Institute of Economic Affairs; Prof Tim Congdon, Author, Keynes,
the Keynesians and Monetarism; Prof Laurence Copeland, Cardiff Business School;
Prof Kevin Dowd, University of Nottingham; Prof Kent Matthews, Cardiff Business
School; Prof Alan Morrison, Said Business School; Prof Sir Alan Peacock, Former
Chief Economic Adviser, Dept of Trade and Industry; Dr Mark Pennington, Queen
Mary College, London; Prof David B. Smith, University of Derby; Prof Peter
Spencer, University of York

So, why is it drivel? That relates to the fantasy economics of paragraphs 2 and 3 and the belief that the economy involves entirely naturally. Anyone with half a brain can look at the economy and see that where the government has intervened the economy has adapted around it. It doesn't matter whether the government interferes in a free economy or not, the economy adapts to fit.

To back up this assertion, take a look at the South Korean steel industry, POSCO is the worlds third largest steel producer and a symbol of national pride among Koreans, it was originally created as a state owned enterprise by the Korean government. Now Korea has a gigantic steel industry, all as a result of a good government decision.

Rather than look at a public work and examine it from a pragmatic point of view: Will it be useful? Will there be a demand for it? Will it stand the test of time? Questions any business person would consider essential when considering a business venture these people have chosen to sacrifice pragmatism at the altar of free market ideology.

I would question whether this free market ideology actually has any benefit at all, once again Korea has grown massively over the past 50 years in spite of government intervention on a large scale. Furthermore, the idea that there is a natural tendancy for the free market to assert itself and create economic activity where it's needed seems flawed. In many developing countries where farming has collapsed there has been no rise in alternative economic activity to replace the collapsed industry. In the developed world we the market is now in 2008 giving us signals that the expansion of credit derivatives was a bad thing several years after the event. The market is no better at planning economic activity that the government.

In my view then, it's not a good letter it makes lots of spurious claims about the role of government in the economy. It makes suggestions based on ideas with a questionable factual basis and it deserves not the slightest consideration by the government.

Friday, October 24, 2008

Past Confessions, Comparison Websites and Mortgages

One of my previous employers was a company called Moneyfacts, a financial data provider who were in the business of gathering and selling information relating to financial products (mortgages, savings, loans & the like). It gave me a few unique insights into various aspects of the consumer end of the financial services industry that I thought were worthy of posts.

Moneyfacts began it's life in the late eighties as a regular newsletter listing all the mortgages/savings accounts and loans provided by the major banks and building societies. As the range of products expanded, the publication grew from a being a small newsletter to become a serious of monthly magazines, eventually backed up by comparison websites. They also provided best buy tables detailing the best products in certain categories. What I'm going to cover in this post is the role of comparison sites in the sale of mortgages.

By the time I came to work there, Moneyfacts had been eclipsed by several competitors, notably MoneyExtra and MoneySupermarket the reason for this was due to a business model (Moneyfacts eventually went the same way) based on selling customer leads to mortgage brokers*, it works like this.

The customer searchches for a mortgage, entering the criteria they are looking for, on the subsequent results screen is a list of matching products. Next each mortgage is a Proceed button, clicking it takes you a screen where you can hoose to contact the lender direct or to speak to a third party mortgage "expert" (a broker).

The brokers themselves would bid for specific leads. The winning broker would receive details of the website applicant and attempt to sell a product roughly in line with what they specified on the website. The expansion of comparison websites lead to a huge increase in the number of mortgages sold through brokers including some of the more questionable mortgage products.

I'm not particularly sure if there's anything particularly wrong with this business model. IFA's have been around for years although the comparison websites seriously increased the amount of business they received. As far as solutions go, I'm not sure, the big problem is that a lot of IFA's are more like salesmen selling products from a specific range of providers rather than actual advisors they have to be transparent on commission, but I wonder if this is enough.

As a start, I think it's important that sales staff on commission are no longer referred to as Independent Financial Advisers, both the "independent" and "adviser" words are misleading and should be reserved for people who genuinely provide imartial recommendations for a fee. This will do far more than putting this information on a "Key Facts Statement". Further to this, I think that the comparison websites should follow up on this and make sure that consumers are made clear that they are being sent to sales people, not experts. This may clip the wings of some financial businesses but is, I think, necessary to restore that finance remains honest.

* By a mortgage broker, I mean an Independent Financial Advisor (IFA) who sells mortgage products.

Tuesday, October 21, 2008

Blogroll Additions..

Laziness plus work have kept me from blogging for a while, but I've found the time to add a few links consisting of LEAP's left economics blog, PooterGeek, Never Trust a Hippy, Tom Miller, Snowflake 5 and Next Left (The Fabian Society blog).

Anyone else wanting a link, drop me a mail or leave a comment.

Monday, October 13, 2008

More Markets?

Over at Labour & Capital (who I've noticed has been kind enough to add me to his blogroll) a post about shorting that ended up in a discussion about the potential for shorting on housing. Nick Drew likes the idea and suggests some kind of market for housing, personally I'm not so sure, firstly because Nick is right wing capitalist type and second because I'm not sure it would give any great benefit.

First, I'll have a crack at how such an idea might work (this is unknown territory for me so it's just a guess). Obviously we can't go buying and selling bricks and mortar so I'm thinking a system of vouchers, the value of these vouchers tracks a housing index (so £1,000 of vouchers when average houses are £100,000 would translate to £1,500 worth when they are £150,000), a governing body redeems these vouchers against the purchase of a house and regulates the market and participants buy and sell contracts and options on these vouchers.

The relationship between such a virtual market and a housing market would not be exact, but likely to follow in roughtly the same vein, the market could drag prices up or down because it would reflect what housebuyers who participate in the market would be prepared to pay. It would go up and down with the housing market although there's likely to be some level of difference.

Regardless of whether my little setup above is on the ball or not, the big problem with the market is that it would allow additional participants not really interested in speculation more than bricks and mortar. The injection of speculative capital in the housing market would almost certainly drive house prices up generally, further to this if behavoir in other markets is anything to go by, we can expect this speculation to drive pro cyclical behavoir.

It seems to be an instinctive thing among city types that they seem to think inside a box that views a market as a solution to almost any problem. The problem seems to be that the most active participants are are likely to be middle men looking to make money rather than genuine producers and consumers. As I understand things, this kind of behavoir is exactly what happened in the oil and commodities markets driving up prices beyond actual realistic levels.

I would question whether we really need this kind of financial innovation and whether it ultimately gives any great benefit that could not be addressed created by other means. To me the idea of creating a new market for housing seems like more trouble than it's worth, further to this, I do wonder whether same is true for some of the other more exotic markets.

Friday, October 10, 2008

Let them go...

The financial system is in chaos the taxpayer is riding to the rescue and all of a sudden the idea that these city workers with their gigantic salaries and even bigger bonuses might be overpaid has moved from being the rantings of left wing, politics of envy madmen like me to commonly held popular opinion.

Despite the chaos, the city's PR machine appears to be in full on spin mode, here, for example. I can't believe the bloody cheek of these people! Not only are they suggesting that pay shouldn't be reined in, they're even saying that compared to equivelant workers in Asia they are underpaid.

Personally, I say, carry on, rein in the bonuses and if these people want to go, let them. I'm sure the financial firms of Asia will be falling over themselves to recruit all those people who did such a good job in London.

Tuesday, September 30, 2008

So, how does this wealth creation lark go then?

Via Sadie, I found an interesting post by Chris Dillow, who makes a very good critique of a post by Fraser Nelson that is a complete pile of tosh.

What Fraser is saying that these rich people are jolly good because they contribute a gigantic proportion of the total tax take and that this therefore means that Nigel Lawson was the most redistributive chancellor ever. He then talks about the good old Laffer curve and how reducing taxes on the rich makes them pay more tax.

Chris basically points out that the rich paying a greater proportion of the total tax take can simply be a sign that wealth distribution is very unequal.

Of course, at this point the right generally like to start talking about wealth creation and how this inequality creates wealth and just means a much bigger pie. So, to counter this I would like people to refer to the following graph (taken from this report):

Lawson's tenure is marked in blue, I've added marks in red to in order to mark the figures I'm about to refer to. I'm using the wider context of 1960 - 1980 and 1980 - 2000, this seems fair enough since Lawsons tenure began early on in the second period.

So, let's compare GDP per capita for the wealth creating 20 years after 1980 with the more equal but supposedly less productive 20 years before the 80's. In 1960 the figure (in 1995 £'s) is £6,000 in 1980 the figure is £9,000 meaning a 50% increase in wealth in this 20 year period. By 2000 the figure is at £13,500 which is of course a 50% increase on 1980.

Obviously, economic growth between 1960 and 1980 was about the same as growth between 1980 and 2000, the whole idea that these tax cuts for the rich lead to "wealth creation" is a myth. The rich have taken a larger share of the country's wealth at the expense of everyone else.

Monday, September 29, 2008

Why the Lib Dems aren't the Answer

Over on LibCon at the moment the resident Lib Dems are having a bit of a recruitment drive, suggesting that the Lib Dems are the true home for socialists and for the liberal left more generally. Naturally, I disagree with this viewpoint.

Reasoning seems to be along the lines of:

  • Labour are generally a bit of a busted flush, they've let us down and implemented some very authoritarian policies.
  • The Lib Dems are commited to a large number of goals similar to socialists, in particular the commitment to easing taxes on the poor while increasing them on the wealthy.

First, I reject utterly the idea that Labour are a busted flush. This years conference did a lot to renkindle the flames. In particular two very important statistics, first education spending per pupil has more than doubled under Labour, second the number of people who have to wait more than 6 months for NHS treatment is down from 284,000 in 1997 to virtually no-one. Despite the current anti Labour mood music Labour have actually done a good job.

Second, we come to the Lib Dems themselves, some people wonder why people display tribal loyalty to Labour rather than making judgements based on policies. I would say this is due to a trust Labour have built up that the Lib Dems no longer have, people expect politicians to disappoint but at least remain true to their values, the Conservatives cut taxes Labour help the poor. The Lib Dems in government are an unknown quantity, no one's sure what they'll do.
In my view the Lib Dems don't help their case through their inconsistency, the party is made up of a combination of Social Democrats and more traditional Liberals. Currently the classic liberals seem to be in ascendancy, meaning tax cuts and a smaller state, but you don't have to go back far to see the Lib Dems backing poicies to the left of Labour. They seem to be very much followers of fashion when it comes to policy, for example they originally said that the government's road tax measures on gas guzzlers were too tame and put forward a £2,000 road tax for gas guzzlers, more recently Nick Clegg is on record as being in favour of eliminating the tax altogether. Until the Lib Dems pick their ground and stick to it I think they'll have a hard time winning over tribal Labour voters.

Finally, I'll come to my personal reasons for disliking the Lib Dems and that is their policies of efficiency savings on government spending and cracking down on tax evasion. I take the view that such promises should never be taken seriously. These two policies are no brainers, a government would be mad not to implement them. Savings are, in my view not something that can be achieved easily with the levers available to a Minister and are threfore not to be trusted as serious policies.

So, all in all then, nice try, but no cigar.

Tuesday, September 23, 2008

Fisking a Mad Tory

Some Tory PPC has been going on about New Labour being too left wing. I thought a good fisking is in order.

There is a big myth in politics, and it is this: that New Labour really was new. That it was a truly centre-ground party that had radically abandoned the leftist ideologies of yesteryear that had led the country into the mire of the late 70s. Fitting then that the party's theme song Things Can Only Get Better should have been by a group called D:Ream. Because now we've woken up from the dream of Blair to find ourselves in a country that at heart is testament to deeply leftist politics.

Deeply leftist politics? I've been seeing a country where criticising a director's right to his annual 15% inflation busting pay increase is considered politics of envy, where talk has been of "light touch" regulation has been the fashion.

The tax burden is actually higher now than in 1978 (at 36% of GDP, compared with 33% three decades ago). We now boast a civil service of half a million - about the size of Sheffield. That includes a cut in the size of our armed forces from 238,550 in 1978 to 73,290 today. Yet it does not include all the jobs that have been pushed off the public-sector books by being recategorised under a plethora of agencies and trusts. And we are facing huge national debt - a financial position that is closer to the 1970s than we'd like to think.

A 33% tax burden is a little hard to believe for 1978 with a publicly owned gas and electricity board, British Leyland, British Telecom and British Rail, UK Public spending gives a figure of 42.9% for public spending and that would either mean the tax burden figure is woefully inaccurate or the government was seriously spending beyond it's means.

As for our armed forces, I've found a news story here that indicates that the MOD currently has 215,000 people in it's employ, I'm really not sure where she's getting her figures from, but they seem more than a little off.

While we're on the subject of defense spending, a few % of GDP figures:

1978 = 5.679%
1997 = 3.091%
2008 = 2.819%

So the Tories cut defense spending by 2.6% (they nearly halved spending) whereas Labour cut it by 0.2% of GDP (around a 9% cut). As a final point, it's worth noting that public debt as a % of GDP is around the same level it was in 1997 and had come down from a far higher figure by that point.

SNIP - Boring Bit - SNIP

It's a real shame. An opportunity missed. New Labour could have delivered the dream and truly changed Britain for the good - if only its control-freak instinct could have been resisted. Even now, Labour politicians talk of "empowering people". But the very fact that it is Whitehall granting people these so called "powers" over their own lives, which were theirs to begin with, reinforces Whitehall's dominance.

Giving a school "power to innovate" is simply giving it permission to apply to central government to avoid a barrage of unnecessary Whitehall restrictions, for a limited period. That's not empowerment - it's centralisation in disguise.

I'm not sure what to make of this bit, I can't offer any clear criticism but I would say this. All governments like to say they dislike central planning and bureaucracy but as DonPaskini pointed out a while ago, the Tory frontbench is rather lacking in hard headed technocrats with the expertise required to cut back the bureaucracy. There is no reason to believe the tories can do any better than Labour on this score.

As the credit crunch begins to bite in the high street and bastions of the financial world fall like dominos, the grim reality now dawns that, once again, the country's been spent out by a leftist government. Once again, it will take hard-headed, sensible, centre-right politics to sort it out.

The credit crunch is the consequence of letting the ideas of rightwing intellectuals rip, liberalisation of the financial sector is an idea with right wing origins, why should followers of this flawed set of ideas be the ones to sort it out?

Will Gordon Brown retreat further back to his deep-left core at his party conference speech tomorrow, and reach for the "capitalism is bad" vote? If he does, he will be disowning any success he may have presided over in the City. But even if he does not, the nation just does not have the time or money for any more pseudo centre-right. The D:Ream is over. Things are getting tough, and it's time for the real thing.

Possibly just personal opinion, but there really is no deep left in the Labour party no more. The LRC who whould probably count as the hard left would like a little more national ownership, higher taxes for high earners and stronger unions but this is not particularly more left wing than previous Old Labour governments. And the thing about capitalism is it works in theory, it just doesn't work in practice.

Talking of academies, I attended the opening ceremony of the new Brightstowe Academy, in Shirehampton, Bristol, this week. The previous school (Portway) had struggled for years, but the Oasis Trust came in and gave it a new birth.

I was struck not only by the energy and vision of Oasis, and the head, Julie Winterman, but also by their sensitivity to what young people need and want. Perhaps the most striking part of the day was seeing how many of the things that really made a difference didn't cost anything. One girl told me how, when Oasis took over, they were all put into houses, in their school, and had inter-house competitions.

I saw the benefits in action: the opening event was finishing and hundreds of young people were getting ready to storm out of the marquee. Chaos looked certain to ensue.

The head took the microphone. "I know which house is the winner of the behaviour competition," she said. (Or something similar.) "But if you don't all behave and leave in an orderly fashion, that might change." Hush fell. And several hundred teenagers filed out in order.

Good buildings and excellent facilities are important - but won't make a school. A good head, organisation and vision cost nothing, but are priceless. Here's to future success at Brightstowe.

The last bit, I would say is more a salute to Labour. Under Labour, teaching has become a far more desirable profession among graduates, our improvements have meant that the teaching profession has been able to attract far more talent. A good head, organisation and vision depend on being able to attract talented people to the profession, the reason talented people have been attracted to the profession is because of the extra funding Labour has put into education.

If these are the so called "New Tories", they seem to be full of cliches, devoid of ideas and in absolute denial of the good Labour have done in 10 years of office.

Hat Tip: Labourhome

Tuesday, September 16, 2008

Defending ID Cards Part 2, Identity Management

It's been a while, but once again I'll try to write a defense of ID cards, this time taking a look the way government agencies look after their data and what advantages an ID card scheme could bring. I do realise that I've not yet touched on Civil Liberties issues, I'll be addressing that issue next.

As it stands, the database state is not omnipotent, it's actually a bit thick. Different departments know different facts about you, but there is no easy way to tie these various bits and pieces together. Further to this, there is no easy way for a state agency to check that the information it's been given is correct. Identity documents might work here, but there are often easily forged and very few act as concrete proof of address, there are also similar problems with the actual issue of these documents in the first place. Time for background checks are often tight, especially when the request is for something of a high volume nature.

The check that is performed for the ID card combines an interview with a background check and a check against existing biometrics for duplicates. It's not perfect, but it's a stronger and better check than anything else. At this point the system would assign a unique reference number in order to unqiuely identify that person. Once a record is present on the national identity register it means that a check can be performed with a similar level of strength in a matter of seconds using a card fingerprint combo.

The advantage this gives to government agencies is twofold, first whenever you have to confirm your identity, the process will be faster and harder to fool. It'll no longer be able to give a false address, or impersonate someone else. This will mean that any future government IT project (carbon credits for example) will be able to use an out of the box customer identification system with built in checks to assist in identifying and preventing fraud.

The second is that it will be far easier to cross check data against that held by other agencies. As an example of the benefits of this kind of cross checking, the audit commissions data matching progamme identified £140 million in benefit fraud and overpayments. Rolling out this kind of checking across government departments could lead to considerable savings by pre emptively identifying problems such as overpayments.

Overall, rather than being viewed as an expensive white elephant, there is a good chance that an ID card system will, in the long term lead to cost savings.

Monday, September 15, 2008

A closer look Citizens Income

Those pesky libertarians love the idea of a citizens income, the basic idea is that you scrap all current benefits, tax credits, housing benefit etc and replace it with a single income guaranteed to all citizens. Another fan is Chris Dillow, a blogger who commands a fair deal of respect across the political spectrum. Often devoid from the discussion is the actual cost of implementing such a scheme, so I thought I'd try and crunch the numbers. This is all a bit "back of a fag packet" estimates from different places and such, but not a million miles off I'd reckon.

Let's start with a basic idea for a system, and make a few assumptions on the numbers. I'm assuming a UK population of 61 million, of this 80% are over the age of 16. I'm choosing an income level that should just about give a roof over your head and food on your table, so I'm going to say that Citizens Income will be £6,000 a year tax free for those over 16, £3,000 a year will be paid to the parents/guardians for those under 16.

On these calculations the cost of a citizens income before administration costs is £329.4 billion, £292.8bn for adults, £36.6bn for children. Quite expensive, but let's compare it with existing spend on this graph (courtesy of Labour Left Forum).

I'm assuming that this is "social protection" and therfore £161bn, therfore a Citizens income would cost over twice as much to implement, £168.4bn more in fact. If plonk this on top of the existing 587 million government spending we are left with a figure of 755.4 billion. As a percentage of GDP this is 54.7% (assuming a £1.38tn GDP), far higher than the current figure which is around 42.5%.

Of course, it will be argued at this point that a citizens income will be far easier to administer than the current myriad of benefits. Looking at the costs, the figure for DWP administration is around 6 billion based the following figures (source):
  • 402 million for the administration of child benefit
  • 1,083 million for the administration of the NI system
  • 241 million for the administration of disability benefits
  • 57 million for the administration of pensioner benefits
  • 2062 million for the administration of benefits to working age people
  • 2,160 million for corporate & shared services
On the assumption that a 75% cut in costs (£4.5 billion) could be achieved, this would give a total spend of £750.9 billion cutting state spending to 54.4%, a saving of 0.3% of GDP. In my book, not exactly a massive saving.

What I would conclude from all this is that a citizens income would require a massive increase in state spending. Far from shrinking the state it would lead to a massive increase in state spending. Further to this its worth pointing out the many issues a citizens income wouldn't address, for example care services would require a separate system. It also wouldn't take into account geographic variations in the cost of housing. What I would conclude from this is that at society's current level of wealth, a citizens income doesn't seem to be an especially viable option and is unlikely to give any massive gain to society.

Wednesday, September 10, 2008

Sarah Palin, a gift not a problem

The Republicans have been spinning John McCain's running mate like mad, everything right down to what kind of glasses she wears. Another more major one doing the rounds is how she's going to cause serious difficulty to the Obama campaign. What a crock is all I can say to that. Sarah Palin is a gift to the Obama campaign, she's bonkers!

Take her views on abortion: I'd Oppose Even If My Own Daughter Was Raped. My copy of The Political Brain (It's great,if you haven't, read it) points out that around 75% of Americans disagree with this viewpoint and support a more balanced view on abortion.

Again on the subject of marriage, I wouldn't be surprised if most Americans have a similar viewpoint. They may be fond of traditional family values, but it's serious stretch to go from that to believing that forcing your 17 year old daughter to marry the man who got her pregnant. Surely most people don't consider that "family values".

She may talk proudly of her views, but she's like the obnoxious bore in the pub, loudly expressing her views for all to hear. No one really agrees with her, but everyone's too polite to tell her to shut up. The Obama campaign shouldn't be polite, they should make it quite clear what they think of her and her views. Almost everyone will thank them for it.

Tuesday, September 09, 2008

Polly Toynbee is great..

I would just like to say, that I think Polly Toynbee is great. I like her articles I like the issues she addresses. The right has built up criticism of her to the level that there's almost a "sensible lefties don't like Polly Toynbee" attitude. What a bunch of crap, I like her writing and feel no embarrasment about that.

Today, she is right on the money.

Monday, September 08, 2008

Rethinking Protectionism

I commented on this post on a Lib Dem blog a zillion years ago, today I found out it got nominated for an award on LibDem voice. It's managed to stir me into finally writing something.

What is worrying me about this kind of post is that it's a sign of a very simplistic view of international trade being a popular, widely held viewpoint. The Lib Dems obviously aren't alone, most political parties view protectionism as inherently bad and free trade is inherently good. The problem with this viewpoint is that it ignores some of the complications within these arguments.

When people think of protectionism, what comes to mind is "beggar thy neighbour" policies that by their implementaion have seriously disrupted the trade of neighbouring countries. What is not so well reported are the enormous successes that occured as a result of protectionism, Nokia became the globally recognised company today due to serious restrictions on capital market access, Toyota and Honda are the result of policies designed to nurture developing industries and the industrial development of the US owes itself to protectionist policies.

Further to it's development advantages, there is the price stability argument to consider. In the perfect free trade world global food prices would depend on the world supply of food, this would be subject to fluctuations based on supply. Due to the nature of food production, suppliers are likely to be slow to adapt to pricing signals and therfore highly volatile. The result is that many farmers are likely to be unable to sustain their business since they will not be able to plan for the volatile prices.

The point I'd like to make here is not that protectionism is always a good thing, just that it should not be rejected out of hand as a policy idea. My view is that many developing countries could do with more flexibility over the setting of such policies and that occasionally, even in developed countries it is worth the government intervening for purposes of redevelopment and preservation of industry.

Monday, August 25, 2008

Data Loss and ID Cards

Over at Sadie's place, a post on the government data loss story has spawned something of an argument (no surprise there). As a Labour blogger who does go on about the virtues of ID cards I'd like to explain why government data loss scandals are not proof that the government should not implement ID cards (above and beyond the simple reason that the NIR contains virtually nothing that isn't held elsewhere). I would like to point out that I work as a software developer in the private sector, so what I write is from professional experience and is more than mere party hackery.

First I'd like to talk about data loss, and my views on the matter. I regard data loss as inevitable, our personal data is held by numerous government agencies and often to an even greater extent by commercial companies. One of my previous employers was in the business of selling on personal data (with permission) to third parties for marketing purposes. And let's not even mention the publicly available data on the electoral register (although this is going to be tightened up). Given the huge number of agencies holding data, the number of staff who have access to it, the frequent transmission of the data. Given also the ease with which data can be stolen undetected (for example, a poorly built e-commerce website can have data stolen from it without it's owners realising, an employee with a spreadsheet of customer data could quite easily copy it onto memory stick or send it through webmail undetected) I think there is a good deal of justification for this opinion.

The obvious worry of leaky data is that it could be used to impersonate someone's identity, say to apply for a passport in their name or to open a bank account, obtain credit or apply for benefits. One of the cunning parts of the ID card scheme is the biometric signature. The idea behind this, is that if an agency, say a bank, wants to be really sure you are who you say you are it can perform an biometric ID check. This works like this.

Customer: I'd like to take a out a loan for £5,000
Bank Staff: Could you give me your details please
C: May name is James Somebody, I live at 6 Some Street, London, E6 3ZZ
BS: Put your ID card here, and swipe your finger

Such a check could yield several results, an initial background check could reveal the details as completely fake. Alternatively if the applicant is an ID thief and has done the legwork, then the details would check out, at this point it would compare the fingerprints, the fraud would be detected at this point because they wouldn't match. The point of ID cards is to make neutralise the danger of data loss by strengthening the actual ID check, it would mean that data loss would not matter nearly as much, because the data itself would be insufficient to actually use for ID fraud.

PS: I'm sure someone will point me to Ben Goldacre's article on Biometrics, or the mythbusters video so I would like to point out the following, In order to fool a biometric scanner, you would need to first obtain or clone your target's ID card. You would then need to obtain their fingerprints, it's difficult to get both. A scan could ask for a combination of fingers and this would effectively neutralise the use of fingerprints picked up of the card itself. Storing the prints on the card itself would be a bad idea for this reason. Also, the bank staff might notice that you're using gummi fingers.

Friday, August 22, 2008

Count the If's

This latest data loss scandal, the prisoner's data stick is another storm in a teacup. It's the media giving undue priority to what actually a minor problem.

In order for the data to be misused, first the memory stick needs to be found, in addition the finder will have to be aware of what the data is. If they get this far they can set themselves up to sell the data top people seeking retribution against criminals. In order to do this they will need to have contacts, or find contacts among the private detective world in order to sell this information on.

So, IF the stick is found and IF the finder realises what it is and IF they then decide to try and sell it and IF they can then find an outlet for if THEN there is the possibility that it could cause problems.

Further to this, the main implication of this data loss is that it could be used for retribution, this I would suggest is a very small number of people. I would also suggest that those who would go as far as wanting retribution, then there are plenty of other sources to obtain this information and that the lost data would do little to make the job of finding someone any easier.

Thursday, August 21, 2008

Liberalising Da Kapital Markit

Tim Worstall, often likes to talk about us lefties just don't get da markit, but for all this arrogance this post about liberalising capital market flows is somewhat lacking, he quotes a paper mentioned on Cafe Hayek about how liberalisation of capital markets brings foreign investment and encourages economic growth. Curious, because it's the complete opposite of what I've read about it.

Foreign investment in markets tends to follow a herd behavior moving in when prospects are good and creating a bubble then moving out with equal alacrity in a downturn exacerbating worsening the downturn. For a developing nation that could do with a steady flow of capital this kind of behavoir is deeply harmful. This was demonstrated very clearly in 1997 in the Asian crises. The stock markets of developing nations are especially vunerable to this because of their small size relative to those in the developed world, the largest, in India is 1/30th of the size of the US stockmarket.

The main effect of capital market liberalisation is to cause volatile money flows in and out of a country to no real good effect. There are policies to encourage growth in developing nations, and they do involve opening up the economy to the rest of the world, but this one should be way down the list of priorities.

Tuesday, August 19, 2008

When Projects Go Wrong

Don Paskini has linked an excellent article on IT projects and management consultants explaining just why there seem to be quite so many lurking in the corridors of power. It's a should serve as a very sobering read for any Tory who imagines that as they take control of their department they'll be able to go "consultants, out, now!".

As someone with a fair amount of experience working on IT projects, I agree wholeheartedly with the article and much of the sentiment. The general impression of large government projects (IT and otherwise) in the media is that they frequently go vastly over budget and take forever to deliver. Often the changes in delivery time and cost can often be explained. So, I thought I'd have a crack at explaining why projects sometimes appear to go wrong.

Changing Costs, Changing Deadlines
What most people don't realise is that when an IT system is initially designed, the customers are not totally aware of what it will do. They will have a rough outline, but the fact is that it's very difficult to envisage the final shape of the project at it's inception. If this sounds strange, consider the following example.

A NHS Trust has developed a system that automatically schedules home visits for nurses, every day a nurse with home visits to perform recieves a list of patients, the nurse them gets the appropriate records and goes off to visit the patents. As the system takes shape a number of additional requests get thrown into the mix.

  • Managers suggest that it would be good if visits were grouped together by distance so that nurses completed their visits more quickly.
  • Doctors suggest that rather than have nurses take the patient record, the patient list should include a list of what checks and treatments are required, with the results then recorded afterwards.
  • Accounts suggest that it would save form filling if the travel distances were automatically sent to them for calculating mileage payments.
So what we have is a simple idea that has grown larger over the course of the project. Modern development methodologies recognise that this kind of occurence is not uncommon, meaning that changes can be accomodated without the need to rewrite the system. This project may have been happily recieved by it's users and have delivered a number of efficiency improvements, but on paper looks like it was delayed and over budget.

Another good (although non IT related) example of bad reporting on the subject is the 2012 Olympics, although very little building work has taken place, we get reports of spiralling costs. Whether the costs have overrun or not will not be known until 2012 when everything is built. Most of the cost announcements so far have related to spending plans rather than costs.

Constantly Changing Justifications
Opposition politicians like to bash ID cards because apparently the government is constantly changing it's reasoning for it. One week it's terrorism, the next week it's identity theft. The truth is rather different.

Most government agencies have problems verifying identities, when someone gives them their details they simply have to take that person's word of it. Some checks might be made, but this is often a long and complicated process and in a lot of cases, not worth the hassle. A national identity register, creates a single identity record that is checked in detail when it is created. This gives government agencies far more accurate identity verification, it also gives them the ability to better check their own data against that held by other agencies.

The upshot of this is that government agencies have far more accurate data and much greater ability to act in a more joined up fashion. The result is benefits accross a very large number of departments. To sum up, it's not that the government keeps changing the justification, it's that there are many different justifications.

Sunday, August 17, 2008

Ivan Lewis: Tax the rich not the middle classes

I'm liking Ivan Lewis, he seemed very angry about the Tories "Vermin" press release a few weeks ago. He called it gutter politics and I'd say that was a 100% accurate view on things. In the Times today, he says "Tax the Rich not the Middle Classes", another sentiment I totally agree with.

Often, the suggestion of taxing the rich has long been greeted with the suggestion that such a move is a return to 70's style socialism. The truth is that a minor hike in the top income tax band is nothing of the sort. We already have a progressive taxation system, the principle is sound, what's wrong with making it a little more progressive?

The other major argument against this kind of move is that the rich are good for the economy, they are the wealth creators, the geese laying golden eggs. I disagree with this in that I believe that only a limited subset of the rich are actually these fabled "wealth creators", most contribute no more to society than any ordinary person. Additionally, the tax regime can be structured so that entrepreneurs still see the benefits, entrepreneurs derive much of their income from dividends and capital gains and these are taxed differently to income tax.

Further to the argument that the rich aren't all that good for the economy, I would suggest that some of the consequences are actually destructive. High private sector salaries have had a knock on effect on the top public sector jobs, leading to additional expense for the taxpayer. Wealthy individuals also tend to invest far more of their money, meaning that the price of assets such as houses and shares become inflated, often leading to a squeeze on incomes for everyone.

In conclusion then, I think Ivan Lewis was right to say what he said and the Labour party should be looking to implement policy along these lines.

Crossposted on LabourHome

Thursday, August 07, 2008

Sensible thoughts on housing...

Cliff D'Arcy at the Motley Fool reckons that messing around with Stamp Duty is akin to blowing into a storm and for that reason really a bit pointless, I'm tending to agree. Also worth noting is the that he discloses that he will gain from a housing price crash, I doubt his doom mongering will change anything, but I admire it on principle. Especially since none of the endless property porn shows and estate agent puff piece articles were ever as open.

An interview with Garvis Snook, scaffolders son turned property firm boss who criticises the way the building industry treats it's workers, arguing in favour of health and safety training, directly employing workers (rather than the more common self employed arrangement) and the rights that entails. He's also very critical of the trend towards property ownership arguing for more social housing (Cap Doff: Labour left forum)

Wednesday, August 06, 2008

The Media is Clueless on Identity Theft

Making the news today was a story about identity theft on a gigantic scale. A possible 45 million credit card numbers could have been stolen from US retailers TJX. Obviously a bad thing, but what really annoys me is the level of ignorance in the reporting.

While "identity theft" may be what this is being reported as, a far better term would be "credit card fraud" because that's basically what this was. The diference is that credit card fraud involves using someone's card details to commit fraudulent purchases, it's quite a simple crime. Identity theft is more involved and complicated, it generally involves applying for credit in someone else's name, it's a process that's riskier and involves a lot more legwork.

The important thing to realise is the difference. If your credit card is stolen, a fraudster simply has to do a bit of online shopping, If your personal details are lost, a thief will have to go through a complicated process involving the search for sufficient personal data and obtaining false documents in order convince to convince a financial institution that they are in fact you.

Most data loss scandals (including those by the government) such as lost laptops and similar data loss have generally contained personal details rather than financial information that can be used to commit direct fraud. The media often acts as if the loss of personal data could lead to some terrible occurance, the truth is that the danger in many data loss stories is often seriously overstated.

Friday, August 01, 2008

I Just Don't Get It

One of the few sensible things David Davis said shortly after he stepped down was that sometimes Westminster does seem to exist inside it's own little bubble of reality. At this time, I'm seriously noticing it. I'm not a bag carrier or a policy wond, I'm an outsider, someone who writes programming code for a living who also happens to support Labour.

The way I see it is this, David Milliband writes an article suggesting that Labour ought to be holding it's head high and laying into the Tories. Now I can understand how this could be setting out your stall for the leadership in the current climate of low poll ratings and bad by elections. Perhaps we'll get answers at the press conference.

The way I saw the press conference was that David said that the article was not intended to be the opening salvo in a leadership battle. The press seemed to think that because he did not rictually disembowell himself for his affront to the supreme leader that clearly it was a leadership bid. If that was the case, why did Milliband issue such a clear denial?

Fast forward and number 10 is apparently furious (so say "sources close to the Prime minister"), Marshall-Andrews is calling for Milliband's sacking, the world inside the Westminster bubble has gone mad and on the outside this activist is wondering what on earth is going on.

Wednesday, July 30, 2008

That Milliband Article

I'm mostly a member of the "lets not indulge in stupid press fueled speculation" faction of the party. I'd also have to say that if a leadership contest were to arise I don't think Milliband would be my preferred choice for leader. Regardless of all that, I have to say that it was a very good article.

The Tories have been dominating the news agenda, they've managed to shape coverage around their ideas. David's article tackles the Tories head on, it exposes their broken society rhetoric as empty, it takes every Tory claim that's wormed it's way onto the tips of peoples toungues and rightly delivers a factual smackdown. It finishes off by making clear exactly what it means to be Labour.

Every member of the Labour party carries with them a simple guiding mission on the membership card: to put power, wealth and opportunity in the hands of the many, not the few.

This is, over and above everything else, what it means to be Labour. As one commenter says.

I'll be voting Labour at the next election and I'll tell you why.

I'm 85 and been in and out of hospital frequently since 1992. I can say categorically that things are infinitely better now . Back in 1992 not just a long waiting list but when you got a date you had to ring up on the morning to see if there was still a bed. 2 times out of 3 there was not. Now medical procedures have improved and speeded up. When the consultant says "we'll have another look in six months" you get an appointment in precisely six months. In the nineties a medical exam under anaesthetic meant three days in hospital now you go in at 8AM and sent home 4PM. Many internal examinations are now done by endoscopy and you only spend a couple of hours in hospital. I know because I served on a Health Service Committee that the long waiting lists were due to lack of funding.

I'm also voting Labour because I'm better off. Yes things are tighter than they were 12 months ago but I'm a damn sight better off than 12 years ago. Then my pension just about covered day to day living, now there is some over for the odd luxury.

No doubt the above will cause apoplexy among the majority who contribute to Cif. I get the impression they are nihilists or anarchists and anti-government and within six months of a change of government the bile and invective will be as OTT as it is now.

Btw will those who use the silly phrase "NuLabour" do so in the opening sentence. I can then skip to the next comment because I know their unoriginal contribution will be the same old rubbish that all users of "NuLabour" spout.

The same applies too to those who use BLiar, Broon Harperson et al. If you've got a constructive point you want to make it is not improved by unoriginal Private Eye name calling.

In conclusion then, what David said is exactly what we should all be saying if we want to win a fourth term.

Monday, July 28, 2008


A big database of the moment is the database containing records of phone calls, texts, emails and internet access. News coverage once again invoked the spirit of Big Brother, and Henry Porter was in full on criticism mode in his Observer column. While I normally regard this kind of crying wolf as reason to switch off, I think it should be said that in this case there is actually a wolf.

Regular readers will know that generally I'm inclined to defend the database state and generally think that the dangers are hard to pin down, so I think it should be made clear that I'm no liberal engaging in an anti statist rant when I say what I'm about to.

This IT system should not go ahead, it is dangerous and will allow massive potential for abuse. An unscrupulous government could snoop on the data and discover the confidential plans of political opponents. Political lobbyists and the press could use the information as a gold mine for blackmail information. From the looks of things, there is a clear case against this system.

A Small Caveat
Something missing from most of the stories on this subject is the exact nature of what's being held. For example with text messages will the database show the content of my text of just the fact that I sent a text at a certain time, ditto for emails. Either way, the system is open to abuse but a system that records occurences rather than actual contents would be far less dangerous.

Sunday, July 27, 2008

A Response to Daniel Earwicker

I got into an argument over at Sadie's place with a chap who seems to think my views that the city is in need of a good dressing down are some kind of mad rant. Here's his argument and my response.

..SNIP explanation of basic trade and capital flow..

Similarly, global currency trading performs the service of adjusting exchange rates. The US had a trade deficit for along time, spending dollars on foreign products. But as a result, the world is now awash with dollars, so the value of a dollar continues to fall compared to other currencies - dollars are easy to get. The result is that US goods appear cheaper, so American exports are booming, automatically fixing the original problem. This can only happen because currencies are traded so that we discover their real value.

Your original comment also mentioned the idea of a "real economy", compared to which financial services are supposedly like a barnacle or leech. In fact the economy consists of masses of interdependent sectors, none of which would make sense by themselves, so this quality of being dependent on something else does not in any way prove that one sector is somehow false or not legitimate.

Then there are the solutions you propose, which all feature the word "restriction" - somewhat ironic as we are on the brink of recession, meaning that economic activity is already starting to restrict itself. What problem are they intended to solve? There is almost no economic situation in which they would have a positive effect, but certainly against the backdrop of today's world economy, they would be severely detrimental, making it much harder for the economy to stay out of recession, and more likely to stay stagnant for longer - less able to borrow money to fund growth, less able to move money to where it would do the most good, less able to serve customers wherever they happen to be found.

Or are you merely recommending them as ideas that would be popular? No doubt they would indeed "go down quite well" with many voters. But that says more about economic awareness than it does about any positive effect such ideas would have. This is the main reason I'm glad you're not in charge, but the sad truth is that you'd make an excellent politician. Don't bother to think about whether an idea would do any good! Just think about whether it would make your supporters bay for more blood.

The central problem all those suggestions have, beside being solutions for problems that don't exist, is that they are based on the notion that politicians are special people who have an ability to decide things that far exceeds that of the millions of ordinary people who share those decisions today. Politicians, you think, can choose the right amount of lending, the right size for a bank, the right amount of currency to allow in and out of the country, and so on. The truth is they have been repeatedly proven to be unable to solve those problems, and the reason is simple: they are without the information needed to make the decisions.

The thing that would really help would be some kind of regulation on the growth of government spending, which in the end we all have to pay for (at exactly the same rate, whether rich or poor) due to the resulting inflation a few years later - precisely the problem we face now

Ok, moving goods around, trade, generally a good thing. Tea is pretty much worthless unless it's in close proximity to tea drinkers. Makes sense for other goods as well. So how about logically extending it to money? Again this makes plenty of sense, money needs to go where the good ideas are, where there's a need for a service that people want and are willing to pay for, again that's a nice sensible idea, no objections there.

Where I have a problem is the whole liberal world view that these things should not be restricted or regulated, my view of the financial sector is that it is needed, but that it has grown beyond being a healthy middle man for money into something altogether more worrying. Money is freely loaned to private equity companies who then proceed to load those companies up with massive debts, share prices no longer bear any reseblance to reality and Unrestricted lending of money has caused a massive surge in house prices. In addition to this,we have the credit crunch, caused by the irresponsible packaging up and selling on of mortgages. Financial institutions have moved way beyond simply acting as a source of funding to business.

As to whether there is a problem, Britain has not had a positive balance of payments figure for 26 years, the service industries that replaced manufacturing did not replace the lost exports. As a result, the British economy has been sustained on debt. This debt will one day need to be repaid. In addition there is the question of inequality, financial liberalisation has massively increased inequality, something I view as very negative.

I feel that both of these problems need to be solved and I feel that part of the solution is far stricter regulation on finance, which I believe has played a huge part in causing inequality. I think the revival of British manufacturing will also need to play a part.

On the whole individual choices point, I think this is basically dogmatic free market bullshit. Indiviual choices only lead to a short circuit decision, not any kind of perfect choice. The idea that politicians were "repeatedly proven to be unable" is incorrect.

For example, if I compare the GDP per capita growth of the developed world in the more regulated period from the 60s to the 80s (3.2%) with the same figure for the 80s to the noughties (2.2%) we can see clearly that the more regulated period delivered superior growth. Japan and East Asia adoped hugely interventionist policies relating to trade and finance after WWII, the results speak for themselves. The truth is that government intervention in the economy works.