The Welfare State We're In, The website of the book by James Bartholomew
November 07, 2010
Sunday
OK, I am no expert in climate change but...

I have long been sceptical about global warming but last week I began to think that maybe it is true after all and maybe it is - to an important degree - the result of human activity.

I chaired a debate on climate change for a firm of lawyers. The main speaker arguing that global warming exists and is man-made was Professor Mark Maslin. He argued that the evidence was overwhelming and that none of 26 (?) computer models of climate change made around the world could make sense of the change that have occurred without assigning importance to CO2. But what made me veer towards believing that the 'warmists' could be right were the answers he and the other speaker on his side gave to the various objections that many people, including myself, have been aware of. These answers were during the debate and afterwards, at lunch.

The medieval warm period is a classic objection. If the earth got warm in medieval times when the human output of CO2 was tiny compared to now, then clearly other factors were more important. His colleague and he replied that the medieval warm period took place in Northern Europe but it does not appear to have occurred elsewhere on the planet. It was not 'global' warming.

It was objected that the earth had stopped warming in 1998. He and his co-speaker responded that this was taking just the land temperature. If you added in the ocean temperature, the rise in the temperature chart continued. He also added that taking 1998 was a bit of a trick on the part of the other side. That year was a sudden peak caused by particular factors (he mentioned them but I am afraid I forget what they were). If you exclude 1998, then the global warming shows a more continuous rise.

One thing is very clear. The issue is incredibly complex and none of us who are not specialists can ever hope fully to master it. It is fair to say that even he admitted some uncertainty about the behaviour of clouds. He also mentioned 'interesting' recent work on solar activity. Yet despite the complexity and some uncertainties, we are in the position of having to make major decisions on the basis of whether or not it is true. It is like having to choose a spouse without ever seeing her or him - relying instead on the supposed disinterested expertise of others who, themselves, cannot be 100% sure.

How do you make a decision in these circumstances as to whether to 'believe' or not? I guess that time and again I found his answers to objections plausible. One objection put to him was that scientists are shunned if they do not subscribe to warming theory. He said that on the contrary, if a scientist was able to prove man-made global warming wrong, he would make his reputation and win a Nobel Prize.

That rings true to me. Of course, as a lay-man, I do not think I am in a position to be dogmatic about man-made global warming, either way. I remain sceptical in the simple sense of being not sure. But I have changed my mind somewhat. I now tend to believe it could well be true whereas before I tended to believe it probably was not.

I put it to him that if man-made global warming is going on, there was an elephant in the room: the most effective way to cut it back would be to reduce the number of people in the world.

On this basis, you could answer that the biggest contribution to 'saving the world' had been made by China with its brutal 'one child' policy.

He commented that the production of CO2 per person in America was 22 times that of a person in China. So limiting population growth in China was not as important as it might appear. But he said that the Chinese certainly mention it in negotiations about climate change.

I then suggested that it followed from what he said that the biggest contribution that could be made in the short term to climate change would be a reduction in the population of America. He did not openly agree. I think he was holding back from reaching a conclusion which would appear so extremely illiberal!

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September 24, 2010
Friday
What's wrong with regulation

Stephen Littlechild was a regulator and influential in the whole story of privatisation and the regulation of privatised utilities like telephones and electricity. Last night, though, he described some of the downside of regulation.

He told how he was involved in one of the utilities - I think it was telephones. The rules for the companies concerned ran to 250 pages then, in 1984. The rules, when they were revised ran for 500 pages. Five years later they were 2,000 pages. Recently they have reached 4-5,000 pages.

Regulation has exploded. They now substitute the regulator's view of what people want for the consumers'.

He commented that regulation undermines the 'discovery process' whereby markets find out what people want and what producers can provide and at what price. Regulation means that companies don't compete on price since the regulators set prices. Also the customers don't need to shop around since the prices and services are regulated. So 'discovery' is prevented.

He offered a proposal that users of a utility should negotiate with producers. Apparently this is successfully done elswhere. But he was running out of speaking time when he mentioned this idea and I confess I did not really understand it.

Still - it was interesting to hear what is wrong with regulation from someone who has been there and done it.

Stephen Littlechild was one of the speakers at an Adam Smith Institute event last night on Austrian economics.

I talked to the litigation partner in a London firm of solicitors afterwards. He said that litigation on regulation had developed into a big, complex field of its own. People went to law to try to work out exactly what the voluminous rules do and do not mean.

I wish the great believers in regulation - notably John Humphrys, of BBC Radio 4's Today programme who regularly airs his assumption that regulations are a good thing and we should have more of them - could be made aware that their views are not held by quite as many people as they think.

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June 24, 2010
Thursday
How to spot a coming banking crisis

"For banking crises, real housing prices are nearly at the top of the list of reliable indicators, surpassing the current account balance and real stock prices by producing fewer false alarms."

From This Time Is Different by Professors Carmen Reinhart and Keneth Rogoff (p279).

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November 04, 2009
Wednesday
The referendum we should be offered

Now that the Lisbon Treaty has been ratified, the referendum that should be offered would ask three questions:

1. Do you wish the British government to withdraw from the European Union?

2. If Britain remains in the European Union, do you wish there to be a referendum on any future European Union treaty?

3. If Britain remains in the European Union, do you wish the British government to negotiate a reduction in the control of the European Union over British government?

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April 27, 2009
Monday
Harriet Harman versus women

Harriet Harman is wanting to force companies to analyse and disclose the difference between what they pay the women in their employ and what they pay the men. She is still under the illusion that legislation to favour women in employment is doing them a favour. The opposite is the case, as has been shown by the example of Sweden. There women have plenty of legal protection and the result. Women there are paid a lower proportion of what men earn than in countries with less protection for women.

Why? It is obvious if you are in business or have a little imagination. Why employ a woman at all if she is going to have extra privileges and bureaucracy attached to her. Her employability is reduced. Therefore the money she can attract has been reduced.

In Sweden, so I understand from Catherine Hakim who has studied this subject, the rights attached to women are so great that private companies decline to hire them. They therefore have to get lower-paid, more routine government jobs.

What is extraordinary to me is that so few people in government (or most of the media) seem to be aware of these facts.

My fuller posting on these issues is here: http://www.thewelfarestatewerein.com/archives/2005/03/some_commonly_b_1.php

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March 17, 2009
Tuesday
A 'crisis of capitalism'

To a lunch organised by the Centre for Policy Studies. The idea was to look at the apparent crisis in capitalism.

Tim Congdon argued that it was not a crisis in capitalism and that it was the Government had made a banking problem a great deal worse last autumn. It had failed to do what the Bank of England did in the 1970s, namely support the banks behind the scenes. The good news however was that the Government has finally gone in for "quantitative easing" and this will work, causing the economy to begin to turn in six to nine months' time.

Lord Baker pointed out the huge contrast between individuals cutting back on their expenditure and the Government increasing its expenditure. He suggested the budget deficit would become huge. Sooner or later there would have to be cutbacks.

Brian Reading suggested, among other things, that inflation was a danger.

Together, these three (among a variety of other speakers) painted a mixed picture: some recovery, a huge government deficit and a danger of inflation.

My own contribution was to suggest that democracies have an inbuilt tendency to gravitate towards state ownership and regulation. People are unhappy about one thing or another and demand that "something must be done". That gradually leads to more government control and spending. In the 1970's, the economic crisis came out of a period when excessive socialism and union power were seen to be a cause of the problem. It was thus possible for Margaret Thatcher to use this crisis to create a counter-revolution against the Left-ward drift. But the current crisis, rightly or wrongly, is seen by most of the media at least, as a failure of capitalism and so it will be very difficult for those of us who want to reduce the role of the state to use it to our purpose.

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December 12, 2008
Friday
Why do Labour governments always eventually end up with a run on the pound?

It has happened again. It just took a bit longer this time. Once again, a Labour government has ended up with a run on the pound. Sterling has this week fallen to an all time low against the Euro. Yes, it is lower now than it was the aftermath of Black Wednesday when Britain came out of the Exchange Rate Mechanism. The incompetent mistakes of that time have now been more than matched by Labour.

Since the recent peak in 2007, the pound has tumbled by 21 per cent against the dollar, by a quarter against the Euro and a massive 46 per cent against the Japanese Yen. This gives the lie to the idea peddled by Mr Brown that the recession we are now enduring is all a matter of international problems. The foreign exchange markets are telling us clearly that this crisis is worse here than elsewhere – that the government here got it more wrong than any other major country.

A run on the pound has happened every time Labour has been in power. It is in the party’s DNA. In the previous Labour administration from 1974 to 1979, the pound collapsed against the Deutschemark – from DM6.05 to DM3.89. The time before that, between 1964 and 1970, the pound slumped from DM11.10 to DM8.74. That was when Harold Wilson made his infamous comment that the devaluation did not mean “of course” that “that the pound here in Britain, in your pocket or purse or in your bank, has been devalued”. In that broadcast, 41 years ago, he said that the devaluation would enable Britain to “to break out from the straitjacket” which had previously meant that every time a government had tried to expand the economy there had been a balance of payments crisis. In other words, he was devaluing to stop the cycle of boom and bust.

Now what other politician proclaimed that he was ending boom and bust? Ah yes. Gordon Brown. Only last year he repeated his boast, “we will never return to the old boom and bust”. And just like Wilson, events are showing that either he did not understand what was going on or else he was deliberately misleading us.

We can go back further still. The post-war Attlee government, much revered by the Left, presided over a slump in the value of the pound from US$4.03 to US$2.80. While Germany and France were embarking on post-war economic miracles, Britain was in financial crisis. The only other previous Labour administration (apart from a very brief stint in 1924) was that of Ramsay MacDonald from 1929 to 1931. There was no devaluation in that short time. But the pound slumped the following year when the same man headed a coalition government. So that’s the record. Five Labour administrations, five devaluations.

Why do they do it?

It is simple enough. They spend and spend until they reach the limits of the taxes the British public will bear and the lending that foreigners will provide us with. They spend like Billy Bunter eats – until they burst with it. They are like Dawn French with chocolates or Casanova with girls. They can’t stop themselves. They spend because it is the only answer they have to any problem and, being socialists, they think always that the government can and should deal with all problems.

They do not reflect that the taxes and debts which the spending causes are, themselves, major problems. They are problems that are now putting Britain in a crisis of recession and unemployment.


Posted by James Bartholomew • Indexed in Off the subject • Politics

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November 12, 2008
Wednesday
Germaine Greer and the "grotesque" profit margins of supermarkets

I went to an Intelligence Squared debate on the motion "It is wrong to pay for sex" last night. One of the excellent speakers was Germaine Greer who made plenty of clever points. But one part of her argument was an attack on capitalism and, in almost an aside, she referred to the "grotesque profit margins" of the supermarkets.

I wondered, though, if she actually knew what the profit margins of our supermarkets are. Had she looked them up? And what would she - or I or you - consider to be "grotesque"? At a guess, a profit margin of 20% would be the minimum. Perhaps 30% or even 50%.

So this morning I decided to check exactly what is the profit margin of our biggest supermarket chain, Tesco's. For those who are not financially minded, the profit margin is the net pre-tax profit as a a percentage of the turnover (sales). In Tesco's latest accounts, the company had turnover of £47.3 billion. Its pre-tax profits were £2.8 billion. Its profit margin, therefore, was 5.9%.

Grotesque? I think not. The margin is certainly less than that of most corner shops. Supermarkets tend to have lower profit margins than most other retailers. They have high turnover of stock, they buy in bulk and so they are able to sell cheaply. They prices can be kept down because of the economies of scale. That is why customers go to them. They are one of the reasons that the price of food in Britain and in other advanced countries has fallen dramatically over the past century, thus ending the days when poor people went hungry.

I wouldn't call Germaine Greer's ignorance of capitalism and how it works "grotesque". It is commonplace. But I do think it regrettable that someone of her fame and influence does not bother to do any research before she makes assertions about company profits.

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October 17, 2008
Friday
President Clinton contributed to the current financial crisis

The BBC - especially the Today programme on Radio 4 - is showing ill-disguised delight at the current crisis of capitalism. Presenters such as John Humphrys have no doubt that it was as all caused by stupid, greedy capitalists and that a high priority now should be to ensure that these said capitalists do not get bailed out or rewarded or let off their crimes. His questioning of Alistair Darling, the Chancellor of the Exchequer, a short while ago was nearly all directed at attacking the idea of the innocent taxpayer being made to pay for the self-serving idiocy of bankers. He asked what the taxpayer was getting out of this.

It was, of course, a rare pleasure to hear Mr Humphrys suddenly develop an interest in the well-being of taxpayers. For many years he has suggested that the answer to any problem is for the government to spend more money on it and thus increase the tax burden. Leaving that to one side, what Mr Humphrys seemed to have trouble grasping is that we are dealing here the risk of a major recession and that the whole purpose of the Mr Darling's dramatic interventions was to try to prevent this happening. Mr Humphrys seemed unaware that banks are not like other businesses. They are central to the working of an economy. Incidentally, he also seemed unaware of the difference between spending money that disappears (as in spending it on a meal) and handing over money to banks that will in theory - and probably in reality - repay it.

Given the statist leanings of Mr Humphrys and other presenters, it is not surprising that the whole crisis is treated as a failure of capitalism and no effort is made to establish what role governments had in creating it. No, that is not entirely fair. I did hear Laurie Taylor, in an afternoon programme, searching for any academic economist who had forecast this crisis. He found a retired Professor Dale who had long ago warned about the change in the law that was known as Big Bang. This made it much easier for banks to own securities. He suggested - nearly 20 years ago - that the owning of securities by banks contributed to the Great Depression in America. He implicitly warned that Big Bang carried with it a risk of a repetition. This ascribing of at least a little responsibility to a government was unusual. There is much more scope, though, in this area.

Some may think, "How on earth could governments have contributed to the crisis?". I suspect there are a variety of ways but here, for a start, is quite an important one. On September 30th 1999 an article appeared in the New York Times headlined, "Fannie Mae Eases Credit To Aid Mortgage Lending".

Fannie Mae was the biggest underwriter of mortgage loans in America. I am no expert on American instituions but I understand it was an offshoot of government and in response to government pressure, according to the article, it was now going to "encourage...banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans."

Essentially this was an official move to embark on sub-prime lending - the very sub-prime lending that is at the core of the current financial crisis. Sub-prime lending means extending mortgages to people whose credit is "not good enough".

Part of the idea was to make more profit. But the article plainly states that Fannie Mae "has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people". You can easily imagine that Clinton and other Democrats thought it was a generous and popular act to get Fannie Mae to underwrite lending to the poor. But, as we now know, it was a disastrous act. The poor can't pay their loans back. The institutions that rely on them to pay back go bust.

Impressively, the writer was aware of this danger: "Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's."

That was spot on.

Let us lay to rest the idea that this crisis is entirely made by greedly capitalists. One President Clinton, that figure much-loved by the Left-wing consensus at the BBC, was one of its creators.

The New York Times article is here.

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August 22, 2007
Wednesday
Human rights do not exist

Frances Lawrence is dismayed and who can blame her? She has learned that Learco Chindamo, the killer of her husband, Philip, will not be deported when he comes out of jail because of his ‘human rights’. The following is most of an article which I wrote yesterday for the Daily Express:

The trouble is, the idea of ‘human rights’ has become all powerful. It is a new kind of religion. It demands obedience whatever the circumstances and sometimes drives out common sense. ‘Human rights’ govern much of our lives these days and how we tell other countries to govern themselves, too. But does the idea itself make sense? Do ‘human rights’ exist, in fact, or are they are just a fantasy? And does living slavishly in accordance with them really make our lives better?

I suggest that the whole idea is figment of the imagination. If one looks at how it developed, it is fairly clear that it was dreamed up by intellectuals to justify resisting the power of kings. The French philosopher, Jean-Jacques Rousseau, was probably the first to use the phrase, “les droits de l’homme” – ‘the rights of man’ – in 1762. It is well known that the French were angry at the way the kings of France used their immense power in the 18th century. Naturally their minds turned to how they could justify opposing a king who, according to the theory of the time, was annointed by God. A contrary theory was needed to make those who wanted to curtail the king’s power feel virtuous instead of sinful. The ‘Rights of Man’ fitted the bill and it is no coincidence at all that the American revolutionaries eagerly picked up on the phrase to justify rebelling against British rule.

So that’s where we got the idea. It was a clever justification for rebelling. You could even call it a kind of ‘spin’. During the French revolution, the rights they were demanding were “Liberte, Egalite, Fraternite!”. But the human rights which people insist exist keep on changing. That, indeed, is one of the reasons for believing that they don’t genuinely exist. Rights under human laws exist, of course. And people create legal rights based on their notions of human rights. But human rights themselves do not exist.

Or, if they do, who created them? Now that our society is secular, nobody claims any more that they were created by God and if they did make such a claim, they would find precious little support for it in the Bible. There the emphasis is on how human beings must be good and worthy of heaven, not how they can demand one thing or another.

Proponents of the idea of human rights think these rights exist independently, without having been invented by us. If so, what is the evidence for their existence? The modern world is meant to be scientific and want proof of things. Where is the proof that human rights exist?

Jeremy Bentham, the British philosopher, called the idea of human rights “nonsense on stilts”. Bentham really got the wind behind his sails: “from real laws come real rights” he said. But “from laws of nature, fancied and invented by poets, rhetoriticians and dealers in moral and intellectual poisons come imaginary rights, a bastard brood of monsters, ‘gorgons and chimeras dire’”.

If human rights had an independent and true existence, they would have been around at all times, in all countries. Yet somehow, we are to assume, the vast majority of civilisations that have ever existed never noticed them. It is part of the vanity of modern times to be quite comfortable with the idea that we are much cleverer and more perceptive than, say, Socrates or Confucius.

“Ah yes,” someone might say, “human rights are an intellectual fantasy, but they are a jolly useful one. The idea has done a lot of good, furthering human happiness and bringing down tyrants.”

Is that true? I accept it may be possible that, in some circumstances, the idea might have helped a bit. But there are thousands where it has not helped at all. It is not doing much good in Zimbabwe right now. And there are a great many instances where it has led humans into stupidity or cruelty.

The French Revolution led to a ‘reign of terror’. Thousands who had done no harm to anyone were guillotined. All this was fed by a sense of righteousness that the concept of human rights encouraged. The concept of ‘human rights’ was the grandfather of communism and the miseries and terrors of Mao’s China and Stalin’s Russia. If only these people had been suffused with an idea of decent human behaviour, they might not have killed millions. Instead they were filled with the idea that they were creating a perfect world to which people had a ‘right’.

In modern times, the Human Rights Act hamstrings the government as it tries to keep out terrorists and fight crime. And then there are the times when the effect of human rights is just silly. Earlier this year, a zoo in Sussex wanted to hire someone to be the Fat Controller of its “Thomas and Friends” railway. The zoo’s “legal human resources advisers” warned that it must not advertise for a fat male. Indeed, there must be no question of discriminating against a thin female to play the role. Yes, it was all a matter of ‘human rights’. This was truly, “Nonsense on stilts!”

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January 23, 2007
Tuesday
Website down

The website has been down for a week or so. Sorry about that. It is now working (mostly).

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May 15, 2006
Monday
Light relief - the BBC interview of a taxi driver

The funniest thing that has happened in Britain for a long time....

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May 09, 2006
Tuesday
We are losing 'hearts and minds' in Iraq

I attended a lecture last week by a British officer who had served in southern Iraq. He said his experience was 'exceptional'. It certainly was awful.

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