Tuesday, June 30, 2009

Thought's on Norwich North

It's been interesting watching event's unfold over Norwich North from my ringside seat, I thought I'd add a few things to what's been said already:

  • The first thing that I think should be made clear is that much of the supposed dithering occured as a result of unavoidable circumstances. When Ian Gibson was banned from standing again, the chair of the local party stepped down in solidarity with him. This move left the local party in a state of disarray hence the delay in the selection of a candidate.
  • I don't know very much about Chris Ostrowski, the new candidate (I wasn't at the hustings because I live in Norwich South), he was at UEA at around the same time I was, although I wasn't a Labour party member at that time and don't think I met him there. He's not a local party party member, but does have a connection with Norwich.
  • I've been out canvassing in Mile Cross and Heartsease, both are solidly Labour areas, indications seem to be that this is still the case although there is no doubt a fair bit of anger still out there.
  • Expenses does still seem to be a big talking point although very few are specifically angry at Ian Gibson, there were quite a few people angry at how he was treated.
  • The Tories are pouring huge amounts of money into this seat, I've seen a number of Chloe Smith (the Tory candidate) garden boards with her photo, around the place. Seems a little wasteful making a bunch of boards that will only be good for one or two elections. Another point to note is that from the latest poll it is the Greens, not the Tories who are making gains at Labour's expense.
  • And speaking of the Greens, they will also be a threat, they've made most of their gains in areas held by the Lib Dems although they have recently moved into more solidly Labour territory taking the wards of Sewell and Mile Cross in the recent council poll. I'm not sure at this point whether their candidate, Rupert Read will be an asset or a liability.

Of course, the big question is: Can Labour hold on? It's going to be close, but definitely possible. The Labour majority was around 5,500 which gives us a reasonable margin (although obviously this is a byelection), despite lingering anger over expenses there seems to be (fingers crossed) no great issue that would encourage a protest vote. At the end of the day, it really depends on whether we can run a good campaign?

Friday, June 26, 2009

And Speaking of Markets Going Wrong

This is really really scary.

The State and the Economy Part 2 of 94, When Markets go Wrong

Alright folks, time for my next thrilling installment of my series "The State and the Economy", last time, I discussed the concept of coordination and the idea of concious and unconcious coordination. What I'd like to concentrate on this time is the concept of unconcious coordination through the market and when it goes wrong.

At it's most basic level, market signals are about supply and demand, an increase in the price indicates an increased need for the good which acts as a signal that supplies should increase. What is often ignored about market signals is that they are tied to a particular time. Take for example a merchant ship travelling to a far off colony, say one that is six months away by ship. On arrival a merchant may learn of the high price of tools due to upcoming building work, by the time that merchant ship reaches home the market signal will be six months old, in addition it is likely that the market signal has been dispersed among a number of merchant's all of whom will attempt to supply these tools. One year later and the various merchant ships return to the colony, but find themselves out of pocket since there is now a vast surplus of tools.

There is the time delay between the price rise indicating an increased demand and the development of capacity to meet that demand often means an excessive development of production capacity which can lead to a coordination failure as too much resource is directed where it is not needed. There is often a serious cost to this kind of coordination failure since there is a cost involved in correcting the failure.

A huge problem with the arguments put forward by those who argue in favour of market forces is that they assume that there is virtually zero cost arising from these coordination failures. They assume that market forces will simply allow the economy to adapt and reallocate resources almost instantaneously. I would suggest that the adaption is not instantaneous and that as a result there would be an opportunity cost and would second ask whether the correction would ever actually result because the of the delay between a demand signal and the resources becoming coordinated appropriately in order to provide the required supply.

It's my belief that the benefits of markets to an economy are decidedly limited, while a market signal may indicate the need for an increased supply of a good, it gives very little information in terms of the acutal quantity needed. While it can certainly be argued that the pricing signals in markets perform a function I would seriously question the need for the market as an institution taking as dominant a role as it has in the modern economy.

Monday, June 22, 2009

25%!?

I've just heard a chap on BBC's PM discussing the pay of Stephen Hester, the man who's going to be taking the helm at RBS. His pay package is immense, so immense in fact that it's easy to see why there's a fair bit of outrage about it. What interested me is what he said in defense of the high pay in the city, in particular that the city provides 25% of the country's corporation tax revenue, the other statistic that I've heard about is that it makes up around 10% of the country's GDP.

As far as I can see, the purpose of the financial sector is moving money around to the places where it is put to it's best use (I admit that's a gross oversimplification). I have to ask why such a large proportion of the nation's commercial activity needs to be devoted to this cause. Surely, if this task was done efficiently then it would be done at very little cost. If it's not being done all that efficiently, I would have to ask why such gigantic renummeration packages are essential for such a bloated and inefficient industry.

If there was some major added value to all this activity, I could accept it, but as far as I can tell, there isn't. Many companies are closing or have closed their defined benefit pension schemes, the funds for those already exisiting schemes are often in deficit and the public sector schemes of a similar nature are under huge pressure from groups like the Taxpayers Alliance and are frequently labelled unsustainable.

So then, what I'd like to know is: When you look beyond the statistics relating to size and profitablity, what is the point of the city and why do these people deserve such astonomical amounts of pay?

Sunday, June 21, 2009

The State and the Economy, Part 1 of 94

Apologies for my recent blogging silence, I'm afraid I've been a little distracted of late and not found the time to blog, anyway, I'm back and I'd like to write about the role of the state in the economy. I've got two reasons for this; firstly, because it's often said that we lefties have statist bias (guilty as charged I'm afraid, but I'd like to put a little effort into explaining why) and second, because I've just read a great book by Ha-Joon Chang on the subject (apologies if it gets a bit geeky).

Anyway, I'd like to start by talking about coordination, the idea that in order to accomplish certain tasks, or produce certain goods a number of tasks of no obvious individual value need to be carried out in a coordinated fashion. The ultimate goal being to achieve a state where resources are coordinated in such a way that they are directed towards their most productive uses.

It's worth explaining at this point about the different ideas of unconcious and concious coordination. Take for example a dressmaker and a cloth factory. In a market system, coordination happens unconciously, the dress maker would contact the factory and ask to buy cloth, this additional demand would lead to an increase in the price of cloth which would signal to the factory that it should raise it's output. A system of concious coordination would see the factory ordered to increase it's output to match the demand's of the dressmaker.

Now, although in my example above a market driven system of unconcious coordination is likely to be the preferred system, it's worth pointing out that much of the activity of individual firms is in fact heavily planned and coordinated. As an example, take the first chapter in Adam Smith's Wealth of Nations. In this chapter, Smith talks about the division of labour used in the manufacture of a pin and explains that the process can be made more efficient if workers each perform a single task within the larger manufacturing process (making wire, cutting the pins, pointing them and adding the head).

The point here is that the firm is a clear example where conciously coordinated activity delivers a better outcome than unconciously coordinated activity. If it works at the level of the firm, we really need to ask ourselves whether the same applies at the level of the state.

In my view, the state should plays a key role in the economy by acting to prevent failures of coordination. A strong industrial policy is vital to this, the exact detail as well as the political justifications I'll cover in future posts.

Saturday, June 06, 2009

Not Good

The Norfolk County Council results are in, and to be frank, they are awful. A wipeout and nothing less. The makeup of the county council is now as follows.

Con 60 (+13), Lib Dem 13 (-1), Green 7 (+5), Labour 3 (-19), UKIP 1 (+1)

The Labour group is a shadow of it's former self, we've lost 19 seats leaving us with virtually no presence on the council. It's bad news all round, I suppose I can take some small comfort in the fact that my vote in Town Close held up.

Thursday, June 04, 2009

Iron Chipmunk!?

Sounds like the name of a bad heavy metal band to me. And what exactly is a "community empowerment agenda"?

On Treating Voters like Adults

Iain Dale reckons that OfCom regulations forbidding the discussion of politics on polling day are patronising and not "treating voters like adults" I'd have more sympathy for his viewpoint if a) the current political climate means that the change would quite clearly work to partisan advantage and b) he hadn't repeated a press release from UKIP that basically suggests that voters are too stupid to unfold a ballot paper in his previous post.

Get out and Vote Folks

Labour for preference (obviously), because I think the minimum wage, sure start, tax credits, improved hospital treatment and more money for education show that rumours of us abandoning our principles and having become little more than Tories in red rosettes have been greatly exaggerated.

If you really can't stomach us comrades, then maybe NO2EU or the Greens might be in order, failing that, the Liberal Democrats are quite nice. If a death star is your idea of a Keynsian demand side stimulus then your could put in a vote for the Tories, and if you for some strange reason like the idea of embracing all the worst aspects of the EU while getting rid of all the best then a vote for UKIP might be in order.

Whatever you do, don't vote BNP.

Wednesday, June 03, 2009

In support of Dr Ian Gibson MP

Ian Gibson isn't my MP, but geography means that the politics of Norwich North & South have a lot in common. I've met Ian on a number of occasions and he's a thoroughly decent bloke, and a committed MP.

I really don't think he deserves the same fate as Margaret Moran, David Chaytor and Elliot Morley, his case is different.

Chaytor and Morley claimed for mortgages they had paid off, Moran flipped homes in order to claim for work against her partner's house. In all these cases, expenses were claimed that should not have been.

In the case of Gibson, it is less clear cut. He bought a flat in London for use as a second home, a reasonable expense for an MP whose constituency is 120 miles from Westminster. His daughter also lived there, and when Ian moved closer to Westminster his daughter and boyfriend took over the mortgage, resulting in them getting a house at below the market price.

I don't think what he's done is especially wrong. Had Ian's daughter not lived there, the taxpayer would be no worse off. Consider the situation; you are an MP and you are allowed to have a second home in London, you are given a limit as to what you can claim but have no limit other than that. Is it so wrong to think "I'll get a two bedroom place, so I can have guests over occasionally" how about "My daughter's going to University in London next year, she could say at the flat"? Is putting your second home to good use really such a sin?

What Ian's done is nothing close to what the other suspended MP's have done and ultimately, the taxpayer is no worse off. Anyway, the gist of all this is that I think Ian's been treated unfairly and I'd encourage anyone who agreed to join this Facebook group.

Tuesday, June 02, 2009

Let the come, Red tape in hand

Nick at Capitalists@Work reckons it's (metaphorical) Franco-German lynch mob is heading for the city, personally I rather like a lot of what's being said about financial regulation by the EU. I have serious doubts about the benefits of our large financial sector and have a suspicion that the vast sums of money being made have come at our expense. A little more regulation is exactly what the city needs, so I'll be welcoming the foreign invaders with open arms.