Sunday, 1 December 2013
You Must Construct Additional Pylons
I've thought about various potential topics to write about recently, and realized, with some regret, that the act of publicizing this blog has, in addition to significantly increasing readership (1,200 cumulative page hits), also meant there are some things I just can't write about anymore. One of the oft-touted advantages of the internet is anonymity, however contentious your opinion on a particular subject may be, it is ultimately the opinion of an online tag, not a real world person. The act of discourse is dependent on context and an agreement between parties as to the extent of the topic, and the degree to which things are "just for argument's sake." Sadly, without this context a attributable one-way online monologue has to be written with at least one eye on how misinterpretable one's comments are. Hence, this is a return to the more innocuous realm of social-economic politics.
**
The pre-cursor leaks to the 'Autumn Statement' due to be delivered shortly by the Chancellor suggest that some form of tax or regulation may be due to land on the Buy to Let / Private Residential Lettings (B2L and RL respectively) industry. The purpose behind this is pretty clear, on the one hand a tax on B2L will raise a heap of cash for the treasury, and secondly it will allow various politicans to claim they are doing something to try and cool the B2L / RL market, which is often seen as a parasitical industry forcing people into a lifetime of rentals rather than homeownership.
There certainly seems to be some substance to the grumbles of Generation Rent, if the rent a landlord charges is expected to pay for the mortgage, plus wear and tear on the property (on average), and turn a profit, then it seems reasonable the renter should be able to pay the mortgage themselves. It is also telling that for most people my age the concern is not with paying a mortgage, but with saving a deposit while also paying rent, the deposit really serving little objective value (with mortgages common at the 90 and 95% level, is the up front payment really more relevant than the ability to pay the monthly amount?).
However, the Government's various schemes seem to be doing next to nothing to help matters, and the latest plan, to tax landlords (the actual proposal seems to be reduce the tax relief that can be claimed on mortgage interest, however the reduction in an allowance and the increase in a tax is a presentational difference not a mathematical one), is likely to make matters worse. As was once very simply pointed out on a news forum "Companies don't pay tax." Now after the scoffs regarding off shoring, tax efficient structuring and so on have abated, the point is more fundamental. Companies really don't pay tax - why? Because companies are ultimately just mechanisms for moving wealth between individuals. If the government removes some of the money from the transactions of a company (through VAT, Business Rates, Employer's National Insurance and so on), its not the company that pays that tax (how can it - companies only exist on paper and online), its the customers (who pay a higher price), the employees (who get a lower wage) and the shareholders (who get a lower return). Hence a corporate tax rise will just result one or more of those three groups receiving less. B2L works in exactly the same way. If a landlord makes £500 a month from a property, and the government changes the tax regime to mean the same landlord now only receives £100 a month, he will just increase the rent by £100/month (or whatever the required amount to keep the profit margin the same). Any increase in B2L taxes will, in full, be paid by those renting - supposedly the very people the proposal is meant to be helping.
The other failed intervention recently is Help To Buy mortgages. The idea here is that when you go along to a Bank for a mortgage you can apply for a Help to Buy mortgage - in this arrangement you take out an, apparently, normal mortgage with the bank (at say 95%). However, behind the scenes the government provides a guarantee on a proportion of the loan (20% I think). The idea is that since part of the loan is secured the banks should be more willing to lend. Effectively a 95% mortgage becomes a 75% mortgage (and therefore less risky) and a 20% loan to the government (far safer than lending to individuals).
However, this seems to be treating the symptom not the problem. The reason people struggle to build a deposit (and therefore need a loan to value mortgages) is because house prices are, relative to incomes, ginormous (- I hate the spelling of that word), driven by an abundance of cheap money. Making it easier for people to borrow vast sums of money just reinforces the problem, thereby pushing prices up even further. (Think about this from the other way round, if your selling a property the more people who can afford to bid the higher you can push the price. Help to Buy means people can afford bigger mortgages, or people who previously couldn't afford one now can, hence demand goes up and so does price).
The higher, and growing, cost of property is also one the reason for the boom in B2L. Buy a property, get a tenant to pay the mortgage and general running costs for you, and watch the property value itself grow. Unlike equity in a family home this is actual capital as well. After all you really can see a B2L house and take the money. (As an aside, I don't doubt that those who bought at the peak of the boom are now sitting on negative equity and it isn't all looking like fun and games. This doesn't really invalidate the industry as a whole, its an oft-quoted rule that shares should be held for the long term (minimum 5 years) to ride out boom/bust. Property is, of course, exactly the same).
With the housing market flooded with not just those looking for a residential property, but also huge amounts of restless capital looking for an investment offering higher returns than stagnant traditional investment channels, its not surprising that the price continues to grow. Higher prices mean its harder for tenants to become owners, so the government makes it easier for them to borrow, so the price goes up even more, so it looks like a better investment, so more B2L landlords enter the market, so the price goes up, so rents go up, repeat ad nauseum.
The solution? There seem to be three legs to this milk-stool of a trilemma; supply, deposit building and demand. (Listed in that order for a reason).
Firstly; Supply. This is the obvious and boring one. If you had more houses the price should drop, supply and demand etc etc. We are in a bit of a trap on this one because of the continually rising prices in general. New builds tend to fall into the "expensive and exclusive" category - why? Because there is demand for this. With the number of million and billionaires growing every year, with wealthy French, Chinese, Russians and so on all setting up shop in London, high market, preposterously priced houses and apartments net developers huge pay offs, and don't do much to help the market. The second problem is a little more insidious; at the other end of the spectrum the value of land a low-ladder property is built on is a big component of the value. A plot of 10 houses with planning permission is worth very nearly the same amount as the 10 houses; and that price goes up every year. So why bother to develop when you could just sit on the land and bank increased asset value year after year?
Unfortunately in this instance I'm inclined to advocate state interference (I do have a socialist side; its just normally cowering in the background). Social housing, built and sold at cost (or even subsidized) for first time buyers on a buy-to-live basis, will eventually cap and begin to reduce the market price for entry level housing. This will in turn break the appeal of sitting on unused land, and should stimulate the private sector to also begin building (hopefully at a mid-market level).
Second; Deposit Building; as mentioned above a re-occurring grumble is that while you may be able to comfortably pay a mortgage, its harder to have both the monthly outgoings and accumulate a deposit. Before getting on to possible ways to assist with this I want to touch on a slightly tangential point about deposits;
One of the claims I've heard is that accumulating a deposit is seen as a 'test' as to whether an individual can afford a mortgage repayment and still have money left over to cover unforeseen expenses which a landlord would cover for a tenant. If you can save £15,000 in addition to paying your rent, then you can probably afford any expenses that crop up. There is some bizarre logic in this IF you assume that everyone gets their deposit through saving, and continues to save at that rate once they have a mortgage. This however is very, very, stretched assertion. Bank's do not ask for proof that a deposit was obtained from saving, inheritance, poker winnings, work bonuses, deliberate thrift; its all the same. You got the money or you don't; and the how is largely confined to checking for illegal activities. (Note this is not the same as "stress testing" mortgages. Anyone taking out a base-rate linked mortgage today should be able to afford increases to 5% base rate or more, assuming 0.5% for the next 20 years is likely to be a bad bet).
That point aside it is also a reasonable challenge to say whether deposit building even should be encouraged. Why shouldn't we all just rent? Renting certainly has a role to play in a country's residency make up. Renting allows a flexible and mobile workforce, and for those on carefully controlled budgets it avoids the possibility of sudden unexpected costs (i.e. a new boiler and or a tree falling on the roof). I don't even see a problem with the job of 'professional landlord' ultimately having one expert dealing with everyone's domestic problems and building up a network of trade-contacts should be more efficient than everyone trying to do their own thing.
On the flip side homeowner's tend to be less likely to engage in criminal activity, are more likely to plan and save for their future, take more pride in their neighborhood, are more politically active and are more likely to be employed. Home ownership provides a long term stake in a community that renting does not.
The thing that Britain lacks relative to other countries with a much higher proportion of rentals however is a 'big business / long term' rental market. At the moment you might rent for 12, or in extreme, 24 months, mostly likely that a private landlord. This does not provide much in way of stability. Rents can go up year on year, often with short notice. Your landlord might decide to sell up, or simply decide they don't want to renew your tenancy. This does not provide any long term stability, and is one of the main appeals of home ownership.
If residential letting could be moved onto a longer term and more dependable footing, it may alleviate some of the ill-will between tenants and landlords. If leases were 5 - 10 years, with pre-fixed annual increases (to say the RPI), and managed by companies rather than individuals, then renting may become a viable, stable, long term solution. You may also see rental values starting to come down; a company that owns a block of flats outright (due to being both developer and corporate rental), only has to provide a reasonable level of return on a, close to gold plated, investment. Rates should therefore be tracking something comparable to gilts, rather than mortgage repayment rates. Actually bringing this about however would require building a market almost from scratch, and outside the scope of my idle musings.
If all of this is put to one side however, and it is assumed we do want to support those trying to build deposits, it would seem we need a way for those renting who want to save for a property, to get bonus income from somewhere. The simplest way I can think of this to work without obvious risks of exploitation is some form of tax relief. Anyone who doesn't own a property, who rents from a landlord meeting certain criteria (i.e. not your wife if your an MP!), who has income below a certain threshold (40% tax bracket maybe), can apply for income tax relief - with the amount saved being held by the government in some form of savings account. These funds can only be used as a deposit on a house to be used as a primary residence, and could be capped (15-20,000?).
The cost to the government should be relatively trivial, after all the people this would impact do not make up a major source of income tax, and economy should get a minor boost from people spending more of their income as their deposit is accumulating from their tax-relief, and some of the ire is taken out of landlords tax relief on mortgage interest for B2L properties. How much it would cost to administer this may be a factor, as would the potential knock on impacts.
As an attempt to curb the effect this would have on rising property prices it may be possible to force a decrease in loan-to-value as the amount of tax reliefed savings increases. Thus while the average deposit may increase from 10,000 to 30,000, this results in mortgages dropping from 95% to 85% rather than people bidding for more expensive houses. Exactly how to implement this may require a little more thought, but some kind of cap on prices seems a possible way to go. If a cap of (say) 200,000 is placed on the value of a house that the tax-relief fund can be used for, then people could save towards a lower/low-mid range house while renting, but this couldn't be abused by the super wealthy to saver for mega-properties, nor could it force prices up too far. Once the price goes over 200,000 anyone using a tax-funded deposit would be unable to use their fund.
The final point - demand - is again a rather obvious one. More people = more demand for housing = higher prices. While there are potential some things which could be done at a local level to help on this front (i.e. services for finding housemates for professionals?), the more systemic issues around immigration and population dynamics are realistically out of scope here, and are mentioned purely for the sake of completeness.
So, to recap; we should not try to tax landlords since this will backfire, we should introduce a long term, corporatized, rental market, and tax relief is a possible way of encouraging saving for deposits.
House market solved.
/Z
Friday, 8 November 2013
Mathematical Inequality
//
Disclaimer: This one is potentially a little more controversial than some of the other topics discussed. You've been warned.
//
I believe in Meritocracy - meaning appointing the person most able to fulfill the duties and obligations of a role to that role or position. Meritocracy is about equality of opportunity (anyone can apply for the role) and elitism of choice (only the best will succeed). I'm, unfortunately, in a fairly small minority. Why? Because most people don't actually believe in meritocracy - they believe in equality of outcomes. It doesn't matter if the best people are selected, just so long as those people meet the required criteria in terms of factors other than ability (such as race, religion and gender).
**
There is, for want of a better word, a zeitgeist at the moment towards equality in various fields (pay, FTSE directors, university admissions and so on), based purely on population characteristics. 50% of the population is female, so 50% of total pay must be earned by women, 2% of the UK population is black so we must have 13 black MPs and so on. The main point of these factors is they ignore actual ability. For proportional representation style of equality to work it is necessary to prove that actual suitability for roles, actual productivity, actual work-ethic is evenly distributed.
Note - I pointedly use the term actual here. This is vital. I make no attempt to even touch on the minefield like subject of whether the neurological and biochemical make up of the male brain is more or less likely to produce talented astrophysicists than the female or any comparable topic. Instead the query runs more like this: Pick 100 random people off the street and give them a maths test which starts relatively simple (2+2) and finishes with post-graduate level algebra. You then grade and rank and papers. Are you really going to be that surprised if the results come back that 6 of the top 10 scores are female, 18 of the top 25 are male, and 30 of the top 50 are female? Hopefully not - even if you state as a precondition that men and women are not inherently better or worse at maths that doesn't mean any given sample will not have a bias one way or the other.
Rather than try and illustrate my point with anecdotes or theory as usual I'm instead going to use the dark art of simple mathematics. This is to try and head off the inevitable counter arguments predicated on my own 'innate bias' or some other straw-man counter which avoids addressing the genuine issue.
To run this out I created an excel spreadsheet with 100 Sample Groups, each Sample group containing 50 people from group "A" and 50 from group "B". (For a total of 10,000 observations). Each observation was then allocated a random score between 1-100 using the Excel RandBetween function. Therefore, assuming Excel itself is fair, the score an individual received was not based on their Group - the precondition of potential equality holds.
For each Sample Group I then summed up the scores for Group A and Group B, and allocated the group winner as either A or B based on the total. I then reproduced this across the100 Sample Groups to produce 1 Test Result - displayed as a percentage (i.e. 45% A / 55% B).
To flesh out the test size I re-did this for 100 Tests, giving a total sample size of 1,000,000 observations (10,000 observations per Test and 100 Tests). Now the population/representation lobby would predict/require/demand that the outcome here is equality - 50/50 split between Group A and Group B.
The actual results were as follows;
68 Tests had a higher percentage of sample groups won by Group A (compared with 32 Tests for B)
The average difference between Test Wins was 7.5 (i.e. if 50/50 is 0 and 49/51 is 2, the average was 7.5).
The most skewed Test was 63/37 (i.e. out of the 100 Sample Groups in the Test, 63 of them were won by the same Group).
Now repeating this exercise would no doubt deliver different results, but it is unlikely to deliver an exact 50/50 split between the groups on a specific interation (Out of my 100 tests only 13 came back as 50/50 splits between Group A and Group B, meaning by extension 87% of Tests had a skew (For those interested the numerically most common skew was 8 points (54/46), occurring in 17 Tests). While 50/50 may be the statistical 'average outcome' any given iteration of the Test is more likely to deliver a result within +/- some margin.
The purpose of this is simply to highlight that even with a perfectly level playing field going in (everyone gets a random value between 1 and 100) its not unlikely, or unusual, or unfair, for the total aggregate results to show a skew towards certain groups, simply because of the randomness of the sample.
(A tangential observation is about poker players. Imagine a poker player plays 1,000,000 hands in their life, and on average should get dealt the winning hand 15% of the time. That means in your life you have an expected value of 150,000 winning hands. Yet by the same virtue of randomness as shown above it isn't really that unlikely that someone out there might get 175,000, or 200,000, and for 1 in a million people they might even get 300,000 or higher. Maybe successful poker players really do just get better hands more often. This isn't because of a rigged deck, or an unfair game or anything else, its just a case of actual results not exactly matching statistical expectation).
With the maths out of the way my final point is about what I think the above illustrates. Firstly, (as with many of the points I raise) we (pluralist national "we" now) need to make a decision about what we want; equality or meritocracy. They are probably mutually exclusive. If you want the House of Commons to be exactly 325 men and 325 women then you have to accept that your not picking the top 650 candidates.If you want the top 650 candidates then you have to accept that due to the quirks of actual ability, your going to get a 55/45 split or a 49/51 or even a 63/37.
If the conclusion is equality is more important than meritocracy then while I disagree, at least the objective is consistent with quotas, positive discrimination (a horrendous phrase that should be demised as quickly as possible. Discrimination is discrimination, "positive" discrimination is akin to stealing something and giving it to Oxfam, then calling it charity not theft), and all the other malarcky of the current zeitgeist.
If we pick meritocracy we still have our work cut out for us, but in a very different way. There really is inherent bias in many systems, whether its preconceptions about women, or race or sexual preference these prejudices do exist. The quest for the meritocrats should be to devise ways to prevent these biases from impacting on decision making processes, if a process can be cleansed of bias then the outcome whether it be 100% white middle class male, or 31% black under 21s, or anything else is equally acceptable.
On that final point a suggestion that came out of comparatively recent discussion was to remove face to face interviews in a recruitment process. Some companies already ask for 'age neutral' CVs which contain no dates or other age-identifying information, why not go one further and have name/address/age neutral CVs, and shortlist candidates who supply their answers to the interview questions in written form? Certainly this ships with its own problems (not in scope of this post), but its not an entirely ridiculous proposal.
Happy Trails,
/Z
EDIT: In response to a valid comment raised regarding this I feel I should clarify that the purpose of this is not to try and defend the current situation with regards to parliament/FTSE directors or anything else, its a rebuttal of the view that the outcome (i.e. exact 50/50 split by gender, or ethnic group or anything else) should be set in advance, and if necessary enforced through reserved seats, gender-fixed shortlists or some other approach.
Wednesday, 16 October 2013
The OxCam Entitlement Paradigm
I didn't go to Oxford or Cambridge (I didn't even go to the L.S.E.), however, it wasn't until recently that I actually clocked to how obsessed with these institutions certain parts of the media and the wider world are. Why?
**
I actually attended the University of Warwick and in due course graduated with a 2:1 in Politics, Philosophy and Economics, having learned important life skills such as how to play poker, how to drink borderline fatal quantities of alcohol and how to wash my clothes, cook my dinner and vaguely manage my finances. It should also be said that I picked up a splattering of economics, was exposed to a range of political ideologies, and spent enough time immersed in the grand thoughts of two thousand years of human curiosity that it fundamentally changed how I view the world.
It should also probably be pointed out in the interests of fairness (and to some extent to lay the ground work for some of the comments below) that Warwick, for all the fact that pretty much everyone who goes there is an Oxbridge reject, topped the current university league tables for Economics (as it did in at least 1 of the years I attended), beating out the LSE (2nd), Oxford (3rd) and Cambridge (4th).
Those same university league tables also make for some interesting reading, for example Buckingham has the highest rating for Student Satisfaction and St George's University of London has the highest rating for graduate employability.
Oxford and Cambridge no doubt do well, and come out on the top of the table in a number of high profile subjects (such as Medicine, Law, Business and Mathematics), however this seems at least in part due to the innate bias in the system. Part of the ranking is made up of an assessment of the average academic attainment required to gain entry into an institution. Thanks to Oxbridge's vaunted status they set higher entry standards, thereby boosting their ranking, thereby keeping their elite status. This may have some intrinsic value if it were not for the fact that A-Level results prove little beyond short term memory ability and some basic aptitude in exam technique and dropping in key buzz words.
Are Oxford or Cambridge graduates a superior species then? I have no doubt that the words "Cambridge University" next to your BA (Hons) opens doors, and that a certain sense of entitlement settles on to those who spend enough time in these ancient institutions, an air that translates well into interview confidence and pay-negotiation demands. I was told at least one anecdote of an Oxford graduate who submitted a CV to the graduate scheme of a major bank that read simply "John Smith - Oxford University". More worrying this individual actually got an interview (though not the role).
I have friends who attended these universities, I have met colleagues, acquaintances and randoms who have passed through them, they are, for the most part, intelligent, confident, well-informed individuals. But so are my friends from Warwick, Edinburgh, LSE, UCL, Cardiff, Durham and so on, Oxford and Cambridge do not hold a monopoly on genius, or curiosity or appreciation of beauty.
There are currently around 120 universities in the United Kingdom and a further 180 higher education institutions. They all have their share of the bright and brilliant, and to some extent the mediocre and the drug-addled (students remember). Yet the media, the government (both political and institutional), certain parts of the city, are dominated by Oxford and Cambridge graduates, and a lot of them, subtlety, take part in the social paradigm that sets the Old Universities apart from the rest of the world, above, beyond, the normal "small u" universities that the plebs attend.
I don't really have a definitive point to this, I'm not going to produce statistical tables that show that Oxford/Cambridge graduates do, or don't, on average make less good or bad policy decisions than alumni of other high caliber universities. But I would call attention to the OxCam Entitlement Paradigm. Next time you hear someone, anyone mention, even in passing, that they attended one of these institutions, ask them how that is relevant to the point they're making, or why they think that's a helpful contribution.
Please let me know if you get any meaningful responses,
Ta.
/Z (BSc (Hons) PPE)
**
I actually attended the University of Warwick and in due course graduated with a 2:1 in Politics, Philosophy and Economics, having learned important life skills such as how to play poker, how to drink borderline fatal quantities of alcohol and how to wash my clothes, cook my dinner and vaguely manage my finances. It should also be said that I picked up a splattering of economics, was exposed to a range of political ideologies, and spent enough time immersed in the grand thoughts of two thousand years of human curiosity that it fundamentally changed how I view the world.
It should also probably be pointed out in the interests of fairness (and to some extent to lay the ground work for some of the comments below) that Warwick, for all the fact that pretty much everyone who goes there is an Oxbridge reject, topped the current university league tables for Economics (as it did in at least 1 of the years I attended), beating out the LSE (2nd), Oxford (3rd) and Cambridge (4th).
Those same university league tables also make for some interesting reading, for example Buckingham has the highest rating for Student Satisfaction and St George's University of London has the highest rating for graduate employability.
Oxford and Cambridge no doubt do well, and come out on the top of the table in a number of high profile subjects (such as Medicine, Law, Business and Mathematics), however this seems at least in part due to the innate bias in the system. Part of the ranking is made up of an assessment of the average academic attainment required to gain entry into an institution. Thanks to Oxbridge's vaunted status they set higher entry standards, thereby boosting their ranking, thereby keeping their elite status. This may have some intrinsic value if it were not for the fact that A-Level results prove little beyond short term memory ability and some basic aptitude in exam technique and dropping in key buzz words.
Are Oxford or Cambridge graduates a superior species then? I have no doubt that the words "Cambridge University" next to your BA (Hons) opens doors, and that a certain sense of entitlement settles on to those who spend enough time in these ancient institutions, an air that translates well into interview confidence and pay-negotiation demands. I was told at least one anecdote of an Oxford graduate who submitted a CV to the graduate scheme of a major bank that read simply "John Smith - Oxford University". More worrying this individual actually got an interview (though not the role).
I have friends who attended these universities, I have met colleagues, acquaintances and randoms who have passed through them, they are, for the most part, intelligent, confident, well-informed individuals. But so are my friends from Warwick, Edinburgh, LSE, UCL, Cardiff, Durham and so on, Oxford and Cambridge do not hold a monopoly on genius, or curiosity or appreciation of beauty.
There are currently around 120 universities in the United Kingdom and a further 180 higher education institutions. They all have their share of the bright and brilliant, and to some extent the mediocre and the drug-addled (students remember). Yet the media, the government (both political and institutional), certain parts of the city, are dominated by Oxford and Cambridge graduates, and a lot of them, subtlety, take part in the social paradigm that sets the Old Universities apart from the rest of the world, above, beyond, the normal "small u" universities that the plebs attend.
I don't really have a definitive point to this, I'm not going to produce statistical tables that show that Oxford/Cambridge graduates do, or don't, on average make less good or bad policy decisions than alumni of other high caliber universities. But I would call attention to the OxCam Entitlement Paradigm. Next time you hear someone, anyone mention, even in passing, that they attended one of these institutions, ask them how that is relevant to the point they're making, or why they think that's a helpful contribution.
Please let me know if you get any meaningful responses,
Ta.
/Z (BSc (Hons) PPE)
Tuesday, 1 October 2013
Warning Low Power
There was a time, perhaps, when politicians believed they were in
the business of Government; that is the responsible stewardship of a
nation. Sadly those times are long past, and our current crop are
clearly in the business of power-retention. With that end in mind, it is
increasingly obvious that the preferred model for winning elections is
now to throw money at swing and core voting blocks, with whichever party
offers the greatest bribes buying its way into office. Hence we come to
the latest debacle in a long line of debacles.... Mr Miliband's plans
to revert to cold war communism and begin setting the prices private
companies can charge.
**
As far as I can tell there are three issues which need to be addressed in the energy debate;
1.) Should the provision of electricity be run as a utility or as a private enterprise?
2.) Are energy bills too high? And if so why?
3.) Is it 'acceptable' to make a profit off the provision of a 'basic' requirement like power?
*
1.) Nationalise, Privatise, Re-nationalise...
The question of whether power companies should be utilities is further complicated by the split issue of whether we are talking in ideological or practical terms. On ideological grounds I see no problem with nationalised energy companies - in the modern world electricity and/or gas is as much as requirement of existence as water and shelter. It is what allows us to heat our homes, cook our food, warm the water for our showers and power the lights (not to mention keep the internet-hamsters happy so we can write online blogs). As an a priorii principle I am happy that the government should consider the provision of basic utilities as part of its role in providing the institutions on which society functions. In this version of the world of course nationalised industries are efficient, well run, well funded and receive regular investment from central government to build, develop and maintain infrastructure.
From a practical perspective however, energy companies are now private and that is unlikely to change. The current market capitialisation of the big six energy companies is around £140 billion (share price x number of shares), so even without a take-over premium this is the kind of figure a re-nationlisation would cost. While I acknowledge this is a bit of an off-the-wall comparison, if renationalising meant no shareholder dividends had to be paid, but everything else was kept constant (i.e. no loss / gain in efficiency, no changes in price etc just no profits), then it would take about 125 years for the Government to earn back its £140 billion upfront investment. Together with a potential backlash from investors over any mass appropriation of private companies, and possibly massive job losses as a result of amalgamating six companies back into one national one, it seems unlikely British Gas as a national entity is likely to be making a return anytime soon. Thus, for point 1 it seems safe to say energy is going to remain private.
2.) How much!?
Energy bills are certainly a material component in most people's outgoings. According to the industry body Ofgem the 'average' dual fuel bill is £1,315. This compares to a (bizarrely high in my opinion) average household income of £40,000 for a household with two adults (source: http://www.bbc.co.uk/news/magazine-15197860 - and I would be delighted with anyone who can find a more reasonable number, this is one must be skewed by super high earners dragging the average up). Assuming this is made up of 20x2 then your post tax household income is about £32.8k, and energy therefore accounts for around 4%.
I'm not going to dismiss 4% as trivial, but it is worth noting that energy bills are far more of an emotive subject than their actual costs warrant. A survey conducted in 2012 showed only 14% of respondents had a idea of what their energy bill was, or how the appliances in their home contributed. 81% admitted to having no clue whatsoever. This combination of huge ignorance, plus the rather painful experience of getting 6 months (or even annual) bills in one hit suggests its easy for people to get over-excited by energy costs.
Even putting to one side the issue of whether that £1,315 is a high enough percentage to warrant outrage, the question then arises of whether that number is in, and of, itself too high. To answer that let's look at what goes into the average energy bill (all taken from Ofgem):
Electricity Bills:
58% - costs of running the business (billing, sales, costs of having an office and staff etc)
16% - costs of distribution network (pipes and cables)
11% - costs of paying government subsidies for green energy schemes.
5% - VAT
4% - costs of high voltage transmission network (trunk connections)
1% - Rounding errors, misc, etc.
Which leaves a grand total of:
5% profit - or the equivalent of about £65 on your £1315 bill.
It's also worth pointing out the government takes another pop at that in the form of corporation tax at 23% (put another way the government takes 1.2% of your bill in tax, and the company makes 3.8% in profit).
The figures for gas are comparable - with some tweaking (the transmission is cheaper for gas, but the costs of the rest of the business are higher - the profit rate is comparable).
3.8% isn't a massive figure, and is comparable to entities like Tesco's who pay a dividend of around 4%. It seems then that allegations of the energy sector making vast profits off the back of the exploitation of freezing children are somewhat unfounded. The tactical use in the media of the figure of £3.3 billion in profits is designed to be inflammatory, and ignores the fact that that represents 3 years profits on a combined industry investment of £140 billion. While I sympathize (to some extent) with those who struggle to pay their heating bills, I can not, in all honesty, say the figures support a view of a market rampantly exploiting its customers, or its market position.
3.) Lawful Evil Incorporated
Economic arguments aside, I've heard many claims along the lines of 'its immoral to make a profit of providing basic human needs.' This extends to whatever the current target of vilification is - landlords? Shouldn't be allowed to make a profit, supermarkets? How dare you make a profit of people avoiding starvation! Medicine - outrageous that anyone could make a profit of treating disease! And so on..
This seems to me to be a symptom of a media and social paradigm that ignores the role of capital in production.
In the most basic sense production is a functional of f(labour) x f(capital) [i.e some function of labour multiplied by some function of capital]. Capital in this instance means anything that isn't labour, and while traditionally has meant things like tools, factories, tech etc in the modern world it also has the very simple meaning of money.
All the above formula says is that output requires you to have people willing to work, and the infrastructure to enable them to work, and one without the other is pretty useless. It is the accumulation of capital over thousands of years that separates the modern day hedge fund manager from the stone age hunter-gatherer. Education has improved the quality of our labour (supposedly) and the investment and growth of capital has raised the capital stock available to support that labour.
Just like you expect people to earn salaries in exchange for their salaries, so too should investors earn dividends in return for their capital. To expect capital without returns is in the same boat to expecting labour without salary. Its possible (after all slavery is still going strong), but it generally requires a coercive element which isn't compatible with claims of liberal rule-of-law capitalist democracy.
If you truly want people to invest in pharmaceutical companies so fund new medicines, in tech companies to give us new gadgets, in supermarkets to make buying food easy (etc etc) and in energy companies to deliver power to the little sockets in our homes, then you need to let them earn a reasonable return on investment.
The alternative is to centrally fund things (i.e. the Army - we don't have a private military anymore, and so the government pays the salaries, and coughs up the capital spending which would normally be attracted by the prospective dividends), now, as mentioned above, I'm not ideologically opposed to a nationalised energy company, but I very much do not trust the current brand of politicians to fund such an enterprise properly. As any gamer will tell you Logistics Wins Wars (though they may know it as 'macro harder!'), and that translates to fund your infrastructure well, and fund it early. Research technology, upgrade hardware and reinvest the growth generated into faster and further improvements. But there is no political capital in funding energy infrastructure. High levels of capital spending that would keep things ticking along without issue and at a potentially lower cost to the taxpayer carry no benefits (people don't notice things working well), while taking the money away from infrastructure and spending it on headline grabbing policies buys votes, and therefore power. Plus, at the end of day, if an adviser tells you the whole national grid is going to fall over in 10 years unless you spend now - so what? Chances are the other side are going to be in power by then and you can blame the whole mess on them. It therefore seems inevitable that a politically run power-company will invest insufficiently.
On the other hand, companies which generate profits attract capital flows - investors want to get in on a good thing, and so companies doing well can raise new funds to invest and grow further. Energy companies may be struggling to invest in the levels required without government subsidy, but maybe that's because they deliver such uninspiring levels of return. Why invest in Npower, with all the political risks, when you can invest in Tescos (which for the most part bumps along under the radar) and posts similar returns? Or even better invest in a major bank which despite all the recent flak still outperform utilities?
There is however a point which needs to be made in response to this - that of 'super-profits'. Under basic economics companies are able to derive a profit from their activities and still be in equilibrium. In fact equilibrium is achieved when a company can produce at a price which the market will pay, while covering sufficient salaries to attract the required labour, and sufficient dividends to attract the required capital. However, in some circumstances where perfect competition has failed (i.e. a monopoly or oligopoly), companies can make 'super-profits' - i.e. profits above that level required to attract sufficient capital for the business to function. These 'super-profits' are a market failure. In perfect competition the presence of super-profits should prompt new companies to move into the sector, and charge a lower price. Although they make a lower profit they still make sufficient profit to attract capital, and by undercutting the 'super-profit' firm should attract all the business.
If there is evidence of the energy companies generating super-profits than it is potentially an argument in favor of intervention (of one sort or another), but from the figures outlined above this seems hard to support.
4.) Temet Nosce
The energy sector is not without potential improvements, and one key one would be in the realm of customer knowledge. Even as a fairly cynical (and clued up) contract reader, and someone with experience of the labyrinthine terms and conditions of financial products I found my energy bill difficult to decipher. For the average customer its borderline impossible. Clear, straightforward billing, in a standardized measurement, along with up front explanations on things like changing tariffs (i.e. you pay about 5x more per KwH in the winter because of a 'seasonal adjustment') would help boost customer confidence in the sector. The problem is not necessarily what the energy companies are doing, but the complete ignorance most people have of what that is.
The final point I'm going to touch on is the madness of politicians promising/threatening to set prices in advance. First off this wiped £3billion off the share prices of the big six companies instantly. At that rate we could afford Mr Miliband to make about 100 speeches a year for his first term in office, after which he will have talked into oblivion the entirety of the FTSE 100. One thing politicians of all flavors who aspire to government need to learn (and many never do) is that they are not talking to the electorate, they are talking to the incorporeal world composed of all the interlocking confidence tricks that make the modern world work - poke them at your peril.
Second, if this seriously looks like coming into force than all the energy companies will do is raise their prices pre-emptively - potentially bringing forward price rises planned for 2017 to 2014 or sooner, again I struggle to see how this is supposed to help with a 'cost of living' crisis.
Finally, this sends a very clear message that Labour is swinging towards a social model in which wealth creation via investment is outlawed. Profits will be hunted down and banned through price fixing. This means that investment has to come from central government, and how will it be raised? You know it - more taxing, and more borrowing.
Assuming the lights stay on that long,
/Z
**
As far as I can tell there are three issues which need to be addressed in the energy debate;
1.) Should the provision of electricity be run as a utility or as a private enterprise?
2.) Are energy bills too high? And if so why?
3.) Is it 'acceptable' to make a profit off the provision of a 'basic' requirement like power?
*
1.) Nationalise, Privatise, Re-nationalise...
The question of whether power companies should be utilities is further complicated by the split issue of whether we are talking in ideological or practical terms. On ideological grounds I see no problem with nationalised energy companies - in the modern world electricity and/or gas is as much as requirement of existence as water and shelter. It is what allows us to heat our homes, cook our food, warm the water for our showers and power the lights (not to mention keep the internet-hamsters happy so we can write online blogs). As an a priorii principle I am happy that the government should consider the provision of basic utilities as part of its role in providing the institutions on which society functions. In this version of the world of course nationalised industries are efficient, well run, well funded and receive regular investment from central government to build, develop and maintain infrastructure.
From a practical perspective however, energy companies are now private and that is unlikely to change. The current market capitialisation of the big six energy companies is around £140 billion (share price x number of shares), so even without a take-over premium this is the kind of figure a re-nationlisation would cost. While I acknowledge this is a bit of an off-the-wall comparison, if renationalising meant no shareholder dividends had to be paid, but everything else was kept constant (i.e. no loss / gain in efficiency, no changes in price etc just no profits), then it would take about 125 years for the Government to earn back its £140 billion upfront investment. Together with a potential backlash from investors over any mass appropriation of private companies, and possibly massive job losses as a result of amalgamating six companies back into one national one, it seems unlikely British Gas as a national entity is likely to be making a return anytime soon. Thus, for point 1 it seems safe to say energy is going to remain private.
2.) How much!?
Energy bills are certainly a material component in most people's outgoings. According to the industry body Ofgem the 'average' dual fuel bill is £1,315. This compares to a (bizarrely high in my opinion) average household income of £40,000 for a household with two adults (source: http://www.bbc.co.uk/news/magazine-15197860 - and I would be delighted with anyone who can find a more reasonable number, this is one must be skewed by super high earners dragging the average up). Assuming this is made up of 20x2 then your post tax household income is about £32.8k, and energy therefore accounts for around 4%.
I'm not going to dismiss 4% as trivial, but it is worth noting that energy bills are far more of an emotive subject than their actual costs warrant. A survey conducted in 2012 showed only 14% of respondents had a idea of what their energy bill was, or how the appliances in their home contributed. 81% admitted to having no clue whatsoever. This combination of huge ignorance, plus the rather painful experience of getting 6 months (or even annual) bills in one hit suggests its easy for people to get over-excited by energy costs.
Even putting to one side the issue of whether that £1,315 is a high enough percentage to warrant outrage, the question then arises of whether that number is in, and of, itself too high. To answer that let's look at what goes into the average energy bill (all taken from Ofgem):
Electricity Bills:
58% - costs of running the business (billing, sales, costs of having an office and staff etc)
16% - costs of distribution network (pipes and cables)
11% - costs of paying government subsidies for green energy schemes.
5% - VAT
4% - costs of high voltage transmission network (trunk connections)
1% - Rounding errors, misc, etc.
Which leaves a grand total of:
5% profit - or the equivalent of about £65 on your £1315 bill.
It's also worth pointing out the government takes another pop at that in the form of corporation tax at 23% (put another way the government takes 1.2% of your bill in tax, and the company makes 3.8% in profit).
The figures for gas are comparable - with some tweaking (the transmission is cheaper for gas, but the costs of the rest of the business are higher - the profit rate is comparable).
3.8% isn't a massive figure, and is comparable to entities like Tesco's who pay a dividend of around 4%. It seems then that allegations of the energy sector making vast profits off the back of the exploitation of freezing children are somewhat unfounded. The tactical use in the media of the figure of £3.3 billion in profits is designed to be inflammatory, and ignores the fact that that represents 3 years profits on a combined industry investment of £140 billion. While I sympathize (to some extent) with those who struggle to pay their heating bills, I can not, in all honesty, say the figures support a view of a market rampantly exploiting its customers, or its market position.
3.) Lawful Evil Incorporated
Economic arguments aside, I've heard many claims along the lines of 'its immoral to make a profit of providing basic human needs.' This extends to whatever the current target of vilification is - landlords? Shouldn't be allowed to make a profit, supermarkets? How dare you make a profit of people avoiding starvation! Medicine - outrageous that anyone could make a profit of treating disease! And so on..
This seems to me to be a symptom of a media and social paradigm that ignores the role of capital in production.
In the most basic sense production is a functional of f(labour) x f(capital) [i.e some function of labour multiplied by some function of capital]. Capital in this instance means anything that isn't labour, and while traditionally has meant things like tools, factories, tech etc in the modern world it also has the very simple meaning of money.
All the above formula says is that output requires you to have people willing to work, and the infrastructure to enable them to work, and one without the other is pretty useless. It is the accumulation of capital over thousands of years that separates the modern day hedge fund manager from the stone age hunter-gatherer. Education has improved the quality of our labour (supposedly) and the investment and growth of capital has raised the capital stock available to support that labour.
Just like you expect people to earn salaries in exchange for their salaries, so too should investors earn dividends in return for their capital. To expect capital without returns is in the same boat to expecting labour without salary. Its possible (after all slavery is still going strong), but it generally requires a coercive element which isn't compatible with claims of liberal rule-of-law capitalist democracy.
If you truly want people to invest in pharmaceutical companies so fund new medicines, in tech companies to give us new gadgets, in supermarkets to make buying food easy (etc etc) and in energy companies to deliver power to the little sockets in our homes, then you need to let them earn a reasonable return on investment.
The alternative is to centrally fund things (i.e. the Army - we don't have a private military anymore, and so the government pays the salaries, and coughs up the capital spending which would normally be attracted by the prospective dividends), now, as mentioned above, I'm not ideologically opposed to a nationalised energy company, but I very much do not trust the current brand of politicians to fund such an enterprise properly. As any gamer will tell you Logistics Wins Wars (though they may know it as 'macro harder!'), and that translates to fund your infrastructure well, and fund it early. Research technology, upgrade hardware and reinvest the growth generated into faster and further improvements. But there is no political capital in funding energy infrastructure. High levels of capital spending that would keep things ticking along without issue and at a potentially lower cost to the taxpayer carry no benefits (people don't notice things working well), while taking the money away from infrastructure and spending it on headline grabbing policies buys votes, and therefore power. Plus, at the end of day, if an adviser tells you the whole national grid is going to fall over in 10 years unless you spend now - so what? Chances are the other side are going to be in power by then and you can blame the whole mess on them. It therefore seems inevitable that a politically run power-company will invest insufficiently.
On the other hand, companies which generate profits attract capital flows - investors want to get in on a good thing, and so companies doing well can raise new funds to invest and grow further. Energy companies may be struggling to invest in the levels required without government subsidy, but maybe that's because they deliver such uninspiring levels of return. Why invest in Npower, with all the political risks, when you can invest in Tescos (which for the most part bumps along under the radar) and posts similar returns? Or even better invest in a major bank which despite all the recent flak still outperform utilities?
There is however a point which needs to be made in response to this - that of 'super-profits'. Under basic economics companies are able to derive a profit from their activities and still be in equilibrium. In fact equilibrium is achieved when a company can produce at a price which the market will pay, while covering sufficient salaries to attract the required labour, and sufficient dividends to attract the required capital. However, in some circumstances where perfect competition has failed (i.e. a monopoly or oligopoly), companies can make 'super-profits' - i.e. profits above that level required to attract sufficient capital for the business to function. These 'super-profits' are a market failure. In perfect competition the presence of super-profits should prompt new companies to move into the sector, and charge a lower price. Although they make a lower profit they still make sufficient profit to attract capital, and by undercutting the 'super-profit' firm should attract all the business.
If there is evidence of the energy companies generating super-profits than it is potentially an argument in favor of intervention (of one sort or another), but from the figures outlined above this seems hard to support.
4.) Temet Nosce
The energy sector is not without potential improvements, and one key one would be in the realm of customer knowledge. Even as a fairly cynical (and clued up) contract reader, and someone with experience of the labyrinthine terms and conditions of financial products I found my energy bill difficult to decipher. For the average customer its borderline impossible. Clear, straightforward billing, in a standardized measurement, along with up front explanations on things like changing tariffs (i.e. you pay about 5x more per KwH in the winter because of a 'seasonal adjustment') would help boost customer confidence in the sector. The problem is not necessarily what the energy companies are doing, but the complete ignorance most people have of what that is.
The final point I'm going to touch on is the madness of politicians promising/threatening to set prices in advance. First off this wiped £3billion off the share prices of the big six companies instantly. At that rate we could afford Mr Miliband to make about 100 speeches a year for his first term in office, after which he will have talked into oblivion the entirety of the FTSE 100. One thing politicians of all flavors who aspire to government need to learn (and many never do) is that they are not talking to the electorate, they are talking to the incorporeal world composed of all the interlocking confidence tricks that make the modern world work - poke them at your peril.
Second, if this seriously looks like coming into force than all the energy companies will do is raise their prices pre-emptively - potentially bringing forward price rises planned for 2017 to 2014 or sooner, again I struggle to see how this is supposed to help with a 'cost of living' crisis.
Finally, this sends a very clear message that Labour is swinging towards a social model in which wealth creation via investment is outlawed. Profits will be hunted down and banned through price fixing. This means that investment has to come from central government, and how will it be raised? You know it - more taxing, and more borrowing.
Assuming the lights stay on that long,
/Z
Saturday, 21 September 2013
A Fleeting Muse
In the fields of Alexandria
She called me, on the day I died,
To walk the Path and see beyond the veil.
Many have gone before me
To tread the path to New Alexandria.
I have walked the deep deserts,
In hues of dusty ochre,
I have danced atop the dunes,
As I followed the paths of those who wander.
I rode the white horse across a field of water,
And heard the song of the witch of autumn,
I swam in the emerald lake beneath a lilac sky,
And ate alone at her table,
But she has gone before me,
To the towers of New Alexandria.
Stone and snow have raised me up, here
At the ceiling of the world, I have looked
For a road to take me to her,
But the sun blinded me, and the moon tricked me,
So the stars fell on me, on an ice cold night,
A thousand perfect points to show me the way,
To guide a journeyman to the gates of New Alexandria.
I walked the cities of man,
And saw all the shades of steel and grey,
I paced the glass valleys, and wept for the tortured skies.
I was caught in a dream of industry,
A nightmare of grinding gears and sleeting numbers.
The labyrinth held me, lost and far from home.
She called me, the day after I died,
Sang me my song of wandering,
I could only hear her, the voice of dusken angel,
Calling me to New Alexandria.
I left behind the jungle of stone, and walked in the
Halls of the green, I listened for her on the wind,
But heard only the breeze through the branches.
I slept in the boughs of the forest, and
Breathed in the scent of the wild.
I sang her song and found the stars in a crystal stream.
The great ocean lay before me, its roar fills my ears,
Its scent fills the air, but my eyes see neither tide nor
surf,
For I see a city, in pale marble and gold.
She called me, the day I died,
Called me away beyond the veil, to the end of the path.
Now, I walk in sunlight, in a garden of green and silver,
Dazzled by a morning sunrise over a pale wall,
I came to here, to New Alexandria,
To find those who had finished their journeys.
-September 2013
Wednesday, 28 August 2013
Post War Welfare
Welfare is big business in the modern world. The British government spends somewhere around £250 billion a year and that figure is only set to rise forever. A rather random documentary (Benefits Britain 1949) I found buried in the 4od archive approaches this issue from a different direction - what was the original welfare state like?
**
I'm not going to regurgitate 3 hours of pseudo-documentary in written format, but the sake of the comparison I do want to draw I'm going to touch on a couple of key points;
1.) The focus on getting people working is overwhelming - pretty much without exception. Even the cash benefits that were provided are focused on working.
2.) The system is probably just as biased as the modern welfare state, but in the opposite direction. Traditional family unit with problems? - lots of support and guidance, single mother? Pretty much discarded. Although the conclusion from the program itself was that the modern system is 'fairer' it doesn't seem objectively any difference to prioritize single mothers over family units or vice versa, there is still a bias in the system.
3.) Pensioners fell through the cracks - this is probably inevitable given that when the welfare state was first introduced life expectancies meant most pensioners could expect to survive a handful of years, paid for by family and savings. In the modern world where you can expect thirty plus years post retirement a different solution is no doubt required.
4.) The terminology and language is different. In today's world we have "benefit" "entitlements" both of these are very inclusive, positive terms. A 'benefit' is, almost by definition a good thing, while an 'entitlement' does not imply any stigma or obligation. Under the 1949 system you made a "claim" on for "assistance". First off it was something you had to ask for (and might not get) and secondly it was a stop gap measure while you got back on your feet.
5.) Not directly related, but since this crops up all over the place it bears reminding - the common misconception that in the modern world you somehow pay for your benefits by paying tax and national insurance. This is flat out wrong. Under the original format National Insurance was exactly that - Insurance. You paid a premium (your contributions) and then when you needed it you could make a claim. Under this system you really could make an argument for "I paid in, so now I want something back." In the modern world all taxes are soaked by paying for current spending, there is no contributory or savings principle. When you worked your taxes paid for the benefits of those claiming at the time. When your claiming benefits you are expecting others to support you.
6.) The 1949 system does have an inbuilt assumption that if you could work then there is work to be had. In the aftermath of the second world war a combination of vast infrastructure projects and a decimated workforce meant there was always a job going. Is this still true today?
Following on from this final point you can do an interesting thought experiment over the cost of providing employment.
Let's say you want to hire someone to work in your business - what are the costs?
(For the sake of this I'm ignoring things like the cost of advertisements, and the theoretical time cost of interviews etc).
Salary - the minimum hourly rate in the UK is £6.31 (over 21s). Assuming you want someone for 35 hours a week that's £11484.20 a year, you would also need to pay employers national insurance (£522). For the sake of convenience this adds up to pretty much £12,000.
Overheads - This is harder to judge since it depends in part on what the role is, and how much equipment it requires. During my stint working in a slot machine arcade my only overheads to the business were a couple of cheap shirts and a tacky waistcoat (£50 tops). On the other hand overheads for a full office set up can easily run for £5-6,000 a year.
Leaning on the pessimistic side here (since the service sector accounts for such a large chunk of the unskilled economy through call centers and 'admin') that gives total of £18,000.
So, if your new employee can generate £18,000 of value for the company everything is good right?
Well no - first off if they earned you can extra £18,000 then you've broken even, plus you have all the hassle of hiring and manager people. If you want a decent return on your investment (say 15%) then that person actually needs to be bringing in £20,700. Unfortunately even that figure is a bit low because your also going to have to pay corporate tax at 20%, which bumps the figure up again to £24,840 (say £25,000 for ease).
Going back to our 1949 example the combination of lower taxes, a bigger 'cash in hand' economy, and lower wages (the example being a labourer may expect to earn, accounting for inflation, £15 a day, compared with a minimum of £50.48 for an 8 hour shift), means that figure is going to be a lot lower. Lower costs to business of taking on new staff means more potential recruitment, while laxer employment laws also make it less of a risk since its easier to get rid of people.
In today's wold though you need to be generating £25,000 of revenue for a business for them to justify a single minimum wage job. How many people can actually do that? What skills and abilities are required to achieve that level?
Unfortunately these are questions somewhat out of the scope of a single blog entry, but it opens the way nicely for a topic I keep trying to discuss and can never find a good way of tackling - productivity. For a long time I've been arguing government spending in Britain is out of control, as is our benefits system. A client state of voters has been created, in a world designed for the benefit of politicians. The equation is brutally simple - tax the minority to provide handouts to the majority, who will then vote you back into office. But if you (theoretically) wanted to escape from this mess what has to happen? Simply put spending has to come down, and income has to go up.
The current attempt at this is the 'growth and stagnation' approach. IF the economy can be poked into growth, while holding spending levels steady in absolute terms, then the combination of increasing revenue, inflation, and static spending should begin to close the deficit gap. The alternative is to actively smash large chunks of government spending, while actively encouraging a more inclusive workforce. The key to this second part is productivity.
Businesses are profit seeking entities, if you cost a business £25,000 and earn them £50,000 then you should be employable. Regardless of the trade, craft or sector this holds true. The unemployable are unemployable because, in the most basic terms, a business doesn't think you earn them more than it costs to hire you (accounting for discounted risk and so forth). 1949 appears to have been successful in getting people into work by keeping the cost side of that equation down; yes you may be unskilled, inexperienced and part time, but it only costs a third of the 21st century price to hire you, so you only have to be a third as productive.
The modern welfare and employment system has created a trap for itself - rising costs of employment in the form of employers national insurance, business taxes, stringent hiring and firing laws, and minimum wages have all combined to make it more expensive for businesses to hire people. At the same time a generous welfare system has made it economically viable to simply not work, this in turn leads to those who do work to demand higher minimum wages (so they are actually earning more than those who don't work), and so the cost of employment goes up, and the whole thing spirals.
Productivity itself is a fleeting beast in economics. Training, skills, experience and ability all play a part, as does social conventions and attitudes. But its unfortunately not something that can be conjured out of thin air by waving money about. Education certainly plays a part, and so that will be my starting point next time.
Happy Trails,
/Z
**
I'm not going to regurgitate 3 hours of pseudo-documentary in written format, but the sake of the comparison I do want to draw I'm going to touch on a couple of key points;
1.) The focus on getting people working is overwhelming - pretty much without exception. Even the cash benefits that were provided are focused on working.
2.) The system is probably just as biased as the modern welfare state, but in the opposite direction. Traditional family unit with problems? - lots of support and guidance, single mother? Pretty much discarded. Although the conclusion from the program itself was that the modern system is 'fairer' it doesn't seem objectively any difference to prioritize single mothers over family units or vice versa, there is still a bias in the system.
3.) Pensioners fell through the cracks - this is probably inevitable given that when the welfare state was first introduced life expectancies meant most pensioners could expect to survive a handful of years, paid for by family and savings. In the modern world where you can expect thirty plus years post retirement a different solution is no doubt required.
4.) The terminology and language is different. In today's world we have "benefit" "entitlements" both of these are very inclusive, positive terms. A 'benefit' is, almost by definition a good thing, while an 'entitlement' does not imply any stigma or obligation. Under the 1949 system you made a "claim" on for "assistance". First off it was something you had to ask for (and might not get) and secondly it was a stop gap measure while you got back on your feet.
5.) Not directly related, but since this crops up all over the place it bears reminding - the common misconception that in the modern world you somehow pay for your benefits by paying tax and national insurance. This is flat out wrong. Under the original format National Insurance was exactly that - Insurance. You paid a premium (your contributions) and then when you needed it you could make a claim. Under this system you really could make an argument for "I paid in, so now I want something back." In the modern world all taxes are soaked by paying for current spending, there is no contributory or savings principle. When you worked your taxes paid for the benefits of those claiming at the time. When your claiming benefits you are expecting others to support you.
6.) The 1949 system does have an inbuilt assumption that if you could work then there is work to be had. In the aftermath of the second world war a combination of vast infrastructure projects and a decimated workforce meant there was always a job going. Is this still true today?
Following on from this final point you can do an interesting thought experiment over the cost of providing employment.
Let's say you want to hire someone to work in your business - what are the costs?
(For the sake of this I'm ignoring things like the cost of advertisements, and the theoretical time cost of interviews etc).
Salary - the minimum hourly rate in the UK is £6.31 (over 21s). Assuming you want someone for 35 hours a week that's £11484.20 a year, you would also need to pay employers national insurance (£522). For the sake of convenience this adds up to pretty much £12,000.
Overheads - This is harder to judge since it depends in part on what the role is, and how much equipment it requires. During my stint working in a slot machine arcade my only overheads to the business were a couple of cheap shirts and a tacky waistcoat (£50 tops). On the other hand overheads for a full office set up can easily run for £5-6,000 a year.
Leaning on the pessimistic side here (since the service sector accounts for such a large chunk of the unskilled economy through call centers and 'admin') that gives total of £18,000.
So, if your new employee can generate £18,000 of value for the company everything is good right?
Well no - first off if they earned you can extra £18,000 then you've broken even, plus you have all the hassle of hiring and manager people. If you want a decent return on your investment (say 15%) then that person actually needs to be bringing in £20,700. Unfortunately even that figure is a bit low because your also going to have to pay corporate tax at 20%, which bumps the figure up again to £24,840 (say £25,000 for ease).
Going back to our 1949 example the combination of lower taxes, a bigger 'cash in hand' economy, and lower wages (the example being a labourer may expect to earn, accounting for inflation, £15 a day, compared with a minimum of £50.48 for an 8 hour shift), means that figure is going to be a lot lower. Lower costs to business of taking on new staff means more potential recruitment, while laxer employment laws also make it less of a risk since its easier to get rid of people.
In today's wold though you need to be generating £25,000 of revenue for a business for them to justify a single minimum wage job. How many people can actually do that? What skills and abilities are required to achieve that level?
Unfortunately these are questions somewhat out of the scope of a single blog entry, but it opens the way nicely for a topic I keep trying to discuss and can never find a good way of tackling - productivity. For a long time I've been arguing government spending in Britain is out of control, as is our benefits system. A client state of voters has been created, in a world designed for the benefit of politicians. The equation is brutally simple - tax the minority to provide handouts to the majority, who will then vote you back into office. But if you (theoretically) wanted to escape from this mess what has to happen? Simply put spending has to come down, and income has to go up.
The current attempt at this is the 'growth and stagnation' approach. IF the economy can be poked into growth, while holding spending levels steady in absolute terms, then the combination of increasing revenue, inflation, and static spending should begin to close the deficit gap. The alternative is to actively smash large chunks of government spending, while actively encouraging a more inclusive workforce. The key to this second part is productivity.
Businesses are profit seeking entities, if you cost a business £25,000 and earn them £50,000 then you should be employable. Regardless of the trade, craft or sector this holds true. The unemployable are unemployable because, in the most basic terms, a business doesn't think you earn them more than it costs to hire you (accounting for discounted risk and so forth). 1949 appears to have been successful in getting people into work by keeping the cost side of that equation down; yes you may be unskilled, inexperienced and part time, but it only costs a third of the 21st century price to hire you, so you only have to be a third as productive.
The modern welfare and employment system has created a trap for itself - rising costs of employment in the form of employers national insurance, business taxes, stringent hiring and firing laws, and minimum wages have all combined to make it more expensive for businesses to hire people. At the same time a generous welfare system has made it economically viable to simply not work, this in turn leads to those who do work to demand higher minimum wages (so they are actually earning more than those who don't work), and so the cost of employment goes up, and the whole thing spirals.
Productivity itself is a fleeting beast in economics. Training, skills, experience and ability all play a part, as does social conventions and attitudes. But its unfortunately not something that can be conjured out of thin air by waving money about. Education certainly plays a part, and so that will be my starting point next time.
Happy Trails,
/Z
Wednesday, 14 August 2013
Unnecessary Violence
Torture seems to be the in-thing in media these days. Whether its film, TV or literature everything now has a 'torture' scene. It maybe says a lot about the 21st century that sex scenes are now considered boring and have pretty much been replaced with an obligatory ten minute scene involves electrodes, bolt croppers, scalpels or the common yo-yo. Increasingly the question is becoming "why?".
...
The precipitating factor for this piece is the 4od 'drama' Utopia.
To spare the wrath of the Fire God, Knife Missile and Angel of Vengeance Upon Those Who Spoil I will at this point insert:
** SPOILER ALERT**
Episode I of Utopia has, as expected, a torture scene. Without going into the details it is: a.) somewhat nauseating to watch, b.) no doubt effective, and c.) arguably has what will now become a cult threat: "Wilson.. Wilson I've got... the spoon now.." .
My problem with torture scenes is pretty much the same objection I have to torture in real life - its largely pointless. As any number of police forces through the ages have proven people will agree to anything and implicate anyone in anything once you start bolt croppering parts of their anatomy off. But, as military intelligence has also found over the years, the quality of the intelligence you gain by this method is only marginally better than the intelligence provided by psychics, astrology and random guesswork.
In practice for torture to be an effective information extraction tool you need know, in advance:
1.) That the victim really does know what you want to know,
2.) Have some way of checking whether what they've told you is true before you let them go.
3.) There not to be some kind of 'duress' code that renders the whole activity pointless.
Utopia fails resoundingly on this; torturing people who don't know what your on about will just result in a.) meaningless garbage (she's dead, the address is in my computer), or worse yet intelligible garbage (Easy enough to see how the scene in Inglorious Bastards just ends up with the German soldier in the ditch picking a random spot on the map). Why then do supposedly super-skilled, Illuminati-esque intelligence agents persist in these ridiculous scenes??
The answer of course is depressingly obvious - its a cheap way to introduce tension and ""drama"" for a production without the writing, directing or acting to produce genuine suspense. This is where the threat of torture is far more intellectually satisfy and often leads to far better scenes. One can quite believe that when confronted with Michael from the first Godfather film calmly, quietly, explaining to you what will happen if you do not immediately tell him what he wants to know that people buckle. But to pull that off the writer has to have created a character who is fearsome and awe inspiring, the actors need to pull off both dread and ruthless confidence, and the director needs to make the whole thing work. Alternatively you get a B-list actor with a tub of chillies...
(A note here about the episode of Sherlock in which Mycroft is attempting to persuade Irene Adler to give up her phone. As Sherlock rather directly points out torturing Adler is pointless because of point 3 above, and once the phone is fried any further expenditure of effort is futile).
To add to the stupidity of the whole torture theme, the only scenes where the hero does get tortured and does know something they never tell it anyway - Scarface, Lethal Weapon, various Bond films, at least one of the Under Siege franchise, Stargate (film and TV series) etc etc etc.
Its time for film and TV to move past the obligatory torture scene, and maybe time for some fairly serious introspection if, as a society, we now see people getting their eyes cut out with a spoon as a selling point of a series.
/Z
...
The precipitating factor for this piece is the 4od 'drama' Utopia.
To spare the wrath of the Fire God, Knife Missile and Angel of Vengeance Upon Those Who Spoil I will at this point insert:
** SPOILER ALERT**
Episode I of Utopia has, as expected, a torture scene. Without going into the details it is: a.) somewhat nauseating to watch, b.) no doubt effective, and c.) arguably has what will now become a cult threat: "Wilson.. Wilson I've got... the spoon now.." .
My problem with torture scenes is pretty much the same objection I have to torture in real life - its largely pointless. As any number of police forces through the ages have proven people will agree to anything and implicate anyone in anything once you start bolt croppering parts of their anatomy off. But, as military intelligence has also found over the years, the quality of the intelligence you gain by this method is only marginally better than the intelligence provided by psychics, astrology and random guesswork.
In practice for torture to be an effective information extraction tool you need know, in advance:
1.) That the victim really does know what you want to know,
2.) Have some way of checking whether what they've told you is true before you let them go.
3.) There not to be some kind of 'duress' code that renders the whole activity pointless.
Utopia fails resoundingly on this; torturing people who don't know what your on about will just result in a.) meaningless garbage (she's dead, the address is in my computer), or worse yet intelligible garbage (Easy enough to see how the scene in Inglorious Bastards just ends up with the German soldier in the ditch picking a random spot on the map). Why then do supposedly super-skilled, Illuminati-esque intelligence agents persist in these ridiculous scenes??
The answer of course is depressingly obvious - its a cheap way to introduce tension and ""drama"" for a production without the writing, directing or acting to produce genuine suspense. This is where the threat of torture is far more intellectually satisfy and often leads to far better scenes. One can quite believe that when confronted with Michael from the first Godfather film calmly, quietly, explaining to you what will happen if you do not immediately tell him what he wants to know that people buckle. But to pull that off the writer has to have created a character who is fearsome and awe inspiring, the actors need to pull off both dread and ruthless confidence, and the director needs to make the whole thing work. Alternatively you get a B-list actor with a tub of chillies...
(A note here about the episode of Sherlock in which Mycroft is attempting to persuade Irene Adler to give up her phone. As Sherlock rather directly points out torturing Adler is pointless because of point 3 above, and once the phone is fried any further expenditure of effort is futile).
To add to the stupidity of the whole torture theme, the only scenes where the hero does get tortured and does know something they never tell it anyway - Scarface, Lethal Weapon, various Bond films, at least one of the Under Siege franchise, Stargate (film and TV series) etc etc etc.
Its time for film and TV to move past the obligatory torture scene, and maybe time for some fairly serious introspection if, as a society, we now see people getting their eyes cut out with a spoon as a selling point of a series.
/Z
Sunday, 11 August 2013
Judgmental Hypocrisy
It virtually always annoys me when my counterpart in a conversation, discussion or debate wheels out a conversational device which is guaranteed to end any further meaningful exchange. This linguistic H-bomb is nothing more than the apparently innocuous phrase "Everyone is entitled to their opinion," or something similar. I've finally worked out what it is that annoys me so much about this approach...
..
To prevent myself falling into the very faux-pas I've just described (and I am going to skirt very close to it at times), I'm going to get some key points out first;
1.) I have a set of values, principles and ethics, and I judge others on their actions and motivations, based at least in part on my own sense of morality. This is my right (in the sense of an innate ability) as a sentient, free-willed individual.
2.) I'm willing to listen to people's justifications for their actions, and even where those actions don't coincide with my own morality, I may still agree with them if they follow on from others' own first principles.
3.) If you are presented with an action which stems logically or naturally from a first principle you either agree with, or can not disagree with (not the same thing), you can not reasonably then condemn the action.
4.) Once you've established someone holds irrational (defined below) opinions and isn't willing to change them once the logical fallacy is pointed out, then any further discussion is pointless, and their judgement on the related subject is valueless. An "irrational" opinion in this sense is one which is logically impossible given the same person's stated, un-waivable first principles. As an example using current events -
Q1. "Do you think that it should be up to the inhabitants of a region/area to decide their sovereign affliations?"
A. "Yes,"
Q2. "Do you agree that the people of the Falklands/Gibraltar voted overwhelming to remain a British Overseas Territory?"
A. "Yes"
Q3. "So what do you think should happen with Gibraltar,"
A. "It should become part of Spain."
(I've actually had a version of this conversation three times over the last couple of weeks.)
Note: importantly the final answer here isn't the result of some unspoken additional principle I've omitted, it's a function of the opinion (Q3) being formed before considering the principles (Q1 and Q2), and then people being disinterested in changing their opinion in the face of evidence or constructed arguments.
5.) I don't believe in objective morals.
(Objective in this sense means independent of the people making the actions and judgements. If an action is objectively 'wrong' than it would be condemned by people from all cultures and backgrounds, aliens, dolphins, and so on. The main basis for objectively morality is some form of deity. If you accept the existence of a religious God, and said God has stated idolatry is wrong, then that's that, its not up to humans to argue the point).
..
Given all this then, allow me to present what I'm going to term "Judgmental Hypocrisy."
The situation isn't that unusual, something has come up in conversation which is part of the social institution to which getting smashed and screaming at the top of your voice, football hooliganism, Ibiza and glossy magazines are all part of. The response (usually from me) is to query why people choose to do this kind of thing; its inelegant, uncivilized, expensive and going off the number of people who subsequently end up sick, unconscious, or regretful also doesn't seem to have much to recommend it.
What I want at this point is for someone who has done this kind of thing (the latest example being 18-30s holidays), to explain and defend the motivations behind doing whatever it is I'm condemning. Maybe it's about inclusion into a social group, maybe its a right of passage, maybe it's to distract people from the humdrum of their normal lives by consuming so much alcohol they lose the ability to think, maybe its about easy sex or escapism. All of these are things I can at least appreciate, even if I don't agree with them.
The response I get instead is usually "Well everyone's entitled to do what they think is fun - they probably don't think reading a book or watching cricket is fun."
On the face of it this seems like an unassailable position, a short extension of the right to action or speech that everyone has by the fact of their existence, and, from some people (genuine traditional Liberals of the camp who agreed you shouldn't tell someone they were about to accidently kill themselves since that would be intruding on their freedom of action) I might even accept it. Unfortunately however this position is also shipped with a dripping of condescending sarcasm which adds the unspoken additional line "and since what you enjoying doing isn't really fun then your just wrong."
And herein comes the Judgmental part; what the people making the "yes but not everyone agrees with you," approach are actually saying is "You can't disagree with us because everyone has their own opinion, but your opinion is wrong," and it's this that really infuriates me. As soon as you want to criticize my position, you have to accept my criticism of your position, and this brings me back to the points above.
In the example under point 4.) I explained that in these type of cases the thought process has gone: This is what I do (i.e. talk about celeb magazines) > Someone doesn't think this is a great use of time (opposing opinion) > Everyone has their own opinion, and I'm right (Judgmental Hypocrisy (JH)) > End of conversation.
This loop is both unbreakable and can not be broken down or analysised. There is no basis for the opinions or actions being discussed, and there is no continuation possible after the JH moment. Therefore any attempt at return criticism is impossible because there isn't an argument or logic chain to criticize. One of my precepts has always been that actions and motivations should be founded on well thought out first principles. This doesn't have to be massively technical, but someone asks you "Why?" you should be able to answer, and that answer should be coherent. The approach adopted by the JH-es is the exact opposite- you don't need a reason or an explanation, because no one is entitled to question your opinion.
I doubt this is ever going to change, but at least next time someone tells you "Everyone's entitled to their opinion," you can think to yourself, "Ah, what you mean is you don't know why your doing what your doing, and you don't care."
If that makes you depressed, haughty or resigned I leave up to you!
/Happy Trails
Z
..
To prevent myself falling into the very faux-pas I've just described (and I am going to skirt very close to it at times), I'm going to get some key points out first;
1.) I have a set of values, principles and ethics, and I judge others on their actions and motivations, based at least in part on my own sense of morality. This is my right (in the sense of an innate ability) as a sentient, free-willed individual.
2.) I'm willing to listen to people's justifications for their actions, and even where those actions don't coincide with my own morality, I may still agree with them if they follow on from others' own first principles.
3.) If you are presented with an action which stems logically or naturally from a first principle you either agree with, or can not disagree with (not the same thing), you can not reasonably then condemn the action.
4.) Once you've established someone holds irrational (defined below) opinions and isn't willing to change them once the logical fallacy is pointed out, then any further discussion is pointless, and their judgement on the related subject is valueless. An "irrational" opinion in this sense is one which is logically impossible given the same person's stated, un-waivable first principles. As an example using current events -
Q1. "Do you think that it should be up to the inhabitants of a region/area to decide their sovereign affliations?"
A. "Yes,"
Q2. "Do you agree that the people of the Falklands/Gibraltar voted overwhelming to remain a British Overseas Territory?"
A. "Yes"
Q3. "So what do you think should happen with Gibraltar,"
A. "It should become part of Spain."
(I've actually had a version of this conversation three times over the last couple of weeks.)
Note: importantly the final answer here isn't the result of some unspoken additional principle I've omitted, it's a function of the opinion (Q3) being formed before considering the principles (Q1 and Q2), and then people being disinterested in changing their opinion in the face of evidence or constructed arguments.
5.) I don't believe in objective morals.
(Objective in this sense means independent of the people making the actions and judgements. If an action is objectively 'wrong' than it would be condemned by people from all cultures and backgrounds, aliens, dolphins, and so on. The main basis for objectively morality is some form of deity. If you accept the existence of a religious God, and said God has stated idolatry is wrong, then that's that, its not up to humans to argue the point).
..
Given all this then, allow me to present what I'm going to term "Judgmental Hypocrisy."
The situation isn't that unusual, something has come up in conversation which is part of the social institution to which getting smashed and screaming at the top of your voice, football hooliganism, Ibiza and glossy magazines are all part of. The response (usually from me) is to query why people choose to do this kind of thing; its inelegant, uncivilized, expensive and going off the number of people who subsequently end up sick, unconscious, or regretful also doesn't seem to have much to recommend it.
What I want at this point is for someone who has done this kind of thing (the latest example being 18-30s holidays), to explain and defend the motivations behind doing whatever it is I'm condemning. Maybe it's about inclusion into a social group, maybe its a right of passage, maybe it's to distract people from the humdrum of their normal lives by consuming so much alcohol they lose the ability to think, maybe its about easy sex or escapism. All of these are things I can at least appreciate, even if I don't agree with them.
The response I get instead is usually "Well everyone's entitled to do what they think is fun - they probably don't think reading a book or watching cricket is fun."
On the face of it this seems like an unassailable position, a short extension of the right to action or speech that everyone has by the fact of their existence, and, from some people (genuine traditional Liberals of the camp who agreed you shouldn't tell someone they were about to accidently kill themselves since that would be intruding on their freedom of action) I might even accept it. Unfortunately however this position is also shipped with a dripping of condescending sarcasm which adds the unspoken additional line "and since what you enjoying doing isn't really fun then your just wrong."
And herein comes the Judgmental part; what the people making the "yes but not everyone agrees with you," approach are actually saying is "You can't disagree with us because everyone has their own opinion, but your opinion is wrong," and it's this that really infuriates me. As soon as you want to criticize my position, you have to accept my criticism of your position, and this brings me back to the points above.
In the example under point 4.) I explained that in these type of cases the thought process has gone: This is what I do (i.e. talk about celeb magazines) > Someone doesn't think this is a great use of time (opposing opinion) > Everyone has their own opinion, and I'm right (Judgmental Hypocrisy (JH)) > End of conversation.
This loop is both unbreakable and can not be broken down or analysised. There is no basis for the opinions or actions being discussed, and there is no continuation possible after the JH moment. Therefore any attempt at return criticism is impossible because there isn't an argument or logic chain to criticize. One of my precepts has always been that actions and motivations should be founded on well thought out first principles. This doesn't have to be massively technical, but someone asks you "Why?" you should be able to answer, and that answer should be coherent. The approach adopted by the JH-es is the exact opposite- you don't need a reason or an explanation, because no one is entitled to question your opinion.
I doubt this is ever going to change, but at least next time someone tells you "Everyone's entitled to their opinion," you can think to yourself, "Ah, what you mean is you don't know why your doing what your doing, and you don't care."
If that makes you depressed, haughty or resigned I leave up to you!
/Happy Trails
Z
Sunday, 4 August 2013
Vive l'Empereur
The French President has just said "non" to a re-negotiation of Britain's settlement with Europe. Queue surprise and anguish from the media. Are we really surprised by this? As was mentioned many years ago in an (as ever) accurate episode of the original Yes Minister series the French are our 'mistrusted allies' and international organizations are 'games played for national benefit.' What then should we be looking for from our ancient faux-friends in Gaul?
**
First off I need to get an important misconception out of the way - the pro, anti and unsure lobbies with regard to EU membership are actually talking about different things, and then therefore all conversation at present is meaningless.
The pro-EU argument is almost always couched in terms of economic impacts. Jobs lost, lack of access to the single market, lack of investment from areas outside Europe and so on. In the more serious articles there is then an attempt to show how these benefits outweigh the £10-12 billion a year cost of actually being in the EU in the first place.
The anti-EU argument is political and ethical - we are a sovereign nation and will remain so. I'm not sure whether it was intended as an insult but in a previous post I was described as a 'romantic nationalist' - a term I have since self-applied with gusto. While I can appreciate the economic impacts of European membership (or exit) these are ultimately a sliding scale which is not fully understood. That our courts are de facto no longer sovereign (despite the de jure claims), and that an entity other than our own elected Parliament can tax us is a situation which is not to be tolerated.
Unhelpfully however, this is not to argument you can factually resolve - just as the utilitarians struggle with the question of how many tubes of toothpaste is a naturally perky demeanor worth, a comparison of job creation vs sovereignty is not one that can be resolved by math alone.
Personally I'm all for common markets - in fact Britain had a larger network of free trade deals before it joined the Union than it has now. (We had to give up all our own trading rights to join the EU). The current deal between the US and EU that is being held up as a shining example of EU benefits only gets us more or less back to where the UK was before it joined the EU in the first place.
The economic objections raised by the likes of the TUC and, recently, Tokyo, would be mitigated by membership of a revamped EEA, and to the nay-sayers who worry that the cost of single market access is comparable to the full on cost of EU membership I say "fine." I'm happy to pay for the economic benefits, I'm not happy to pay for the ECHR to uphold the rights of rapists and murderers to have their living costs indirectly paid by me.
Britain's place in Europe has always been a bit odd. Religious, cultural and eventually historical loathing have lead us into war and conflict with just about every nation in Europe against just about every other nation in Europe. Our current attitude was almost certainly formed during the Long nineteenth century when Britain's global political and economic dominance allowed us to look to the rest of the world for our allies and trading partners, while keeping one boot firmly on the necks of any rising European powers (though admittedly one Frenchman proved to have a fairly boot-resistant neck). The cultural legacy of the world wars no doubt cemented that view, Britain does its own thing and regularly has to trot into Europe to sort things out. It's perhaps a pity our power and wealth stopped keeping up with our self-aggrandizement about a century ago.
This should be contrasted with the French and German views on the EU. Mr Hollande is directly quoted as saying he won't support anything that's not in the French national interest, while Germany has flourished with an artificially low exchange rate, and, increasingly, come to rule the EU nest thanks to its vast wealth and imperturbable constitutional courts (British equivalents take note). Britain needs to get over the view that we are doing everyone else a favor by playing along with the EU - we should be ruthlessly pursuing own our agenda, regardless of what that means to French farmers or Greek wine-merchants. If that means using the ultimatum of withdrawal to get what we want then fine.
While it doesn't really follow on cleanly, I'm just going to throw in a quick bit of maths (as ever). The costs to the UK last year of EU membership was £12billion (what we put in minus what we get back). According to Tokyo's recent lobbying we stand to lose "ten's of thousands" of jobs from a EU-exit. So... 99,999 jobs for £12 billion equals £120,001 per person. How about we just leave the EU and spend the money retraining anyone who lost their job?
And back to cricket...
Happy Trails,
/Z
**
First off I need to get an important misconception out of the way - the pro, anti and unsure lobbies with regard to EU membership are actually talking about different things, and then therefore all conversation at present is meaningless.
The pro-EU argument is almost always couched in terms of economic impacts. Jobs lost, lack of access to the single market, lack of investment from areas outside Europe and so on. In the more serious articles there is then an attempt to show how these benefits outweigh the £10-12 billion a year cost of actually being in the EU in the first place.
The anti-EU argument is political and ethical - we are a sovereign nation and will remain so. I'm not sure whether it was intended as an insult but in a previous post I was described as a 'romantic nationalist' - a term I have since self-applied with gusto. While I can appreciate the economic impacts of European membership (or exit) these are ultimately a sliding scale which is not fully understood. That our courts are de facto no longer sovereign (despite the de jure claims), and that an entity other than our own elected Parliament can tax us is a situation which is not to be tolerated.
Unhelpfully however, this is not to argument you can factually resolve - just as the utilitarians struggle with the question of how many tubes of toothpaste is a naturally perky demeanor worth, a comparison of job creation vs sovereignty is not one that can be resolved by math alone.
Personally I'm all for common markets - in fact Britain had a larger network of free trade deals before it joined the Union than it has now. (We had to give up all our own trading rights to join the EU). The current deal between the US and EU that is being held up as a shining example of EU benefits only gets us more or less back to where the UK was before it joined the EU in the first place.
The economic objections raised by the likes of the TUC and, recently, Tokyo, would be mitigated by membership of a revamped EEA, and to the nay-sayers who worry that the cost of single market access is comparable to the full on cost of EU membership I say "fine." I'm happy to pay for the economic benefits, I'm not happy to pay for the ECHR to uphold the rights of rapists and murderers to have their living costs indirectly paid by me.
Britain's place in Europe has always been a bit odd. Religious, cultural and eventually historical loathing have lead us into war and conflict with just about every nation in Europe against just about every other nation in Europe. Our current attitude was almost certainly formed during the Long nineteenth century when Britain's global political and economic dominance allowed us to look to the rest of the world for our allies and trading partners, while keeping one boot firmly on the necks of any rising European powers (though admittedly one Frenchman proved to have a fairly boot-resistant neck). The cultural legacy of the world wars no doubt cemented that view, Britain does its own thing and regularly has to trot into Europe to sort things out. It's perhaps a pity our power and wealth stopped keeping up with our self-aggrandizement about a century ago.
This should be contrasted with the French and German views on the EU. Mr Hollande is directly quoted as saying he won't support anything that's not in the French national interest, while Germany has flourished with an artificially low exchange rate, and, increasingly, come to rule the EU nest thanks to its vast wealth and imperturbable constitutional courts (British equivalents take note). Britain needs to get over the view that we are doing everyone else a favor by playing along with the EU - we should be ruthlessly pursuing own our agenda, regardless of what that means to French farmers or Greek wine-merchants. If that means using the ultimatum of withdrawal to get what we want then fine.
While it doesn't really follow on cleanly, I'm just going to throw in a quick bit of maths (as ever). The costs to the UK last year of EU membership was £12billion (what we put in minus what we get back). According to Tokyo's recent lobbying we stand to lose "ten's of thousands" of jobs from a EU-exit. So... 99,999 jobs for £12 billion equals £120,001 per person. How about we just leave the EU and spend the money retraining anyone who lost their job?
And back to cricket...
Happy Trails,
/Z
Tuesday, 16 July 2013
Apparently I'm Destitute
It continually amazes me what various campaigners consider "Minimum" as in 'minimum wage," and "minimum" benefit levels. While attempting to write something completely separate about the potential benefits to abolishing business rates I came across an article about how much benefits are worth, and how (to quote the website) little this actually is. After a cursory glance, and a second, slightly longer one, it seems I should be claiming I'm a member of the downtrodden poor living below the poverty line. This is something of news to me.
..
The offending statistic was this: "The Minimum Income Standard of living in the UK is estimated to be around £161 per week, excluding rent and council tax, for a single person." A little digging suggests that the Minimum Income Standard is the level required for an 'acceptable' standard of living, as determined by a policy unit at York University (who in turn are funded by the Joseph Rowntree Foundation). Although I didn't do much investigation into the Foundation itself, it wasn't immediately obvious from the website whether they have a political bias.
So.. if we work backward we find that:
£161 a week net is £8,372 a year. Not much? Well yes and no...
Rent is usually the largest component of most people's expenditure, so simply excluding it gives a very biased statistic. Average rents in my region for a flat are £523. If we add this in we get:
£523 x 12 = £6,276 + £8,372 = £14,648
Now add in Council Tax (also not included above), assuming a rough average of Band B for my area;
£1,400 + £14,648 = £16,048.
£16,000 a year doesn't sound too extraordinary surely? Well again that isn't the whole story. If you want to earn a take home pay of £16,048 you need to account for income tax, national insurance, and for my demographic, student loans.
Add all this in and you get:
£16,048 + £2,097 income tax + £321 student loan + £1,461 NI = £19,927 Gross Salary
(This isn't accurate to the penny, but it is to pound).
A salary at this level would mean you were pretty much in the middle of the income bracket (i.e. on median salary). (Retrospectively I have a sneaking suspicion this is where the figure of 161 ultimately came from).
I accept that there is probably a standard below which we shouldn't let people fall, even if they make some seriously poor choices. I object to this being the same standard of living I manage to obtain by working a 35 hour week in a supposedly graduate level job, and while paying nearly £4,000 in tax!
Just to try and end on this on a slightly more macro-economic point. You can extend the logic of this type of statistic fairly easily. Let's say that the Rowntree Foundations own 'Minimum Income' level of £200/week is adopted as government policy. Widespread applause from lefties, the unemployable, and so on. That £200 a week (using the same figures as above) is about the same as a gross salary of £23,450. So, if you earn this amount or less (which is true for about 60% of the workforce), you might as well not work. What happens now? The cost of supporting the 20 million people no longer working is in the hundreds of billions; okay the tax take doesn't drop anything like as sharply as you'd expect because most of the tax comes from the top few %, but even so, no government could hope to borrow enough to cover the difference. Not to mention the number of industries and business which would just collapse because they had no workforce.
For anyone looking for a genuine minimum wage I suggest reading my previous article on this subject (working to live I believe),
Happy Trials,
/Z
..
The offending statistic was this: "The Minimum Income Standard of living in the UK is estimated to be around £161 per week, excluding rent and council tax, for a single person." A little digging suggests that the Minimum Income Standard is the level required for an 'acceptable' standard of living, as determined by a policy unit at York University (who in turn are funded by the Joseph Rowntree Foundation). Although I didn't do much investigation into the Foundation itself, it wasn't immediately obvious from the website whether they have a political bias.
So.. if we work backward we find that:
£161 a week net is £8,372 a year. Not much? Well yes and no...
Rent is usually the largest component of most people's expenditure, so simply excluding it gives a very biased statistic. Average rents in my region for a flat are £523. If we add this in we get:
£523 x 12 = £6,276 + £8,372 = £14,648
Now add in Council Tax (also not included above), assuming a rough average of Band B for my area;
£1,400 + £14,648 = £16,048.
£16,000 a year doesn't sound too extraordinary surely? Well again that isn't the whole story. If you want to earn a take home pay of £16,048 you need to account for income tax, national insurance, and for my demographic, student loans.
Add all this in and you get:
£16,048 + £2,097 income tax + £321 student loan + £1,461 NI = £19,927 Gross Salary
(This isn't accurate to the penny, but it is to pound).
A salary at this level would mean you were pretty much in the middle of the income bracket (i.e. on median salary). (Retrospectively I have a sneaking suspicion this is where the figure of 161 ultimately came from).
I accept that there is probably a standard below which we shouldn't let people fall, even if they make some seriously poor choices. I object to this being the same standard of living I manage to obtain by working a 35 hour week in a supposedly graduate level job, and while paying nearly £4,000 in tax!
Just to try and end on this on a slightly more macro-economic point. You can extend the logic of this type of statistic fairly easily. Let's say that the Rowntree Foundations own 'Minimum Income' level of £200/week is adopted as government policy. Widespread applause from lefties, the unemployable, and so on. That £200 a week (using the same figures as above) is about the same as a gross salary of £23,450. So, if you earn this amount or less (which is true for about 60% of the workforce), you might as well not work. What happens now? The cost of supporting the 20 million people no longer working is in the hundreds of billions; okay the tax take doesn't drop anything like as sharply as you'd expect because most of the tax comes from the top few %, but even so, no government could hope to borrow enough to cover the difference. Not to mention the number of industries and business which would just collapse because they had no workforce.
For anyone looking for a genuine minimum wage I suggest reading my previous article on this subject (working to live I believe),
Happy Trials,
/Z
Sunday, 14 July 2013
Out of Time
So, in usual style I've struggled to find anything to write about recently. While various ideas have come and gone (a Defense of Politicians, Walking in Test Match Cricket, Education Education Education), I'm going to revert back to more or less where this blog started - reviews. I just finished watching the movie "In Time", and, as expected, it wasn't that good. However, it is a prime example of a film which 'could' have done some very interesting things...
--
A good sci-fi film needs a good premise. This is where we (the audience) buy into the rules of the internal universe. The Premise needs to set out what, in this world, the characters can, and can't do, and what their motivations and cultural norms are.
"In Time's" Premise is that Money = Time has actually been made true. You buy things with time, you get paid in Time, and, barring violent intervention, you die when you run out of time.
Herein is our first problem. Where does the Time come from in the first place? In the modern world money comes from two sources, firstly the banks conjure it out of thin air by fractional reserve banking, and secondly governments (or central banks) print it. As long as the amount of actual money roughly matches up with the value people place on the goods and services in the economy everything is fine (and if its out of sync slightly you get inflation or deflation). However... if Time = Money how does this work? Unfortunately the film doesn't ever give us an answer to this question, and even less so about how the super rich have accumulated their millions of stored years.
(A second point here - because everyone's personal Time is ticking down all the (pardon the word) time the economy is constantly losing value. This is comparable to you only being able to use money once before it lost value - pretty soon you'd run out of money).
In-universe the time=money premise also generates problems. It costs 2 hours to buy bus ride that covers a 2 hour walk. Why would I pay for the bus?? If the bus ride lasts 20 minutes then taking the bus costs me 2 hours 20 minutes, and walking costs me 20 minutes less. In a very real way (in this setting) taking the bus brings me 20 minutes nearer to death then walking does.
Next problem in the premise is how you transfer time (apparently you just hold hands with people and 'will'?? it to happen) - this is just way to easy to exploit. Probably a useful plot mechanic, but would seem to make sleeping borderline suicide unless your in a triple locked room with someone you really trust pointing a shotgun at the door.
Character-wise we also have some problems. The central character is a factory worker who also happens to be a pro-wrestling champion, pro-poker player, crack-shot with a gun, special agent level evasive driver and Olympic long distance runner. He also managed to acquire all of these skills while working 2 shifts a day in a factory to earn 4 hours to keep his mother alive. Again the question how arises... There are few things more annoying in films then central characters who acquire miracle level skill-sets with no real explanation.
I'm not even going to mention the scene where the limo survives four vans worth of guys open up on it with machine guns, suffering nothing more than some scratched windows.
Ideas
What then, could have been done better? What scenes flirted with brilliance and then damp squipped?
Where Time comes from - this should have been answered, or at least hinted at.How about a nice dystopian view that the government really can just create Time? But since not everyone can live for ever (population, resources etc) then the world is broken down into tiers. The inner tier of Immortals really are just that, and can create Time out of nowhere. The tiers then filter down - the 'party' magnates, and super-officials who deal in millions of years, the national leaders, and so on all the way down to the plebs. You get your 25 years, plus whatever the next tier up decide to pass on in exchange for goods and services and then you die. And the whole thing kind of works as long as the people at the top don't splash the cash so to speak (or let anyone know you can just conjure it out of thin air). Hence; Timekeepers.
The Timekeepers should have been done better. Cillian Murphy did a heroic job at playing that most feared of alignments; Lawful Neutral, but you can't help feeling that with 50 years of training, experience, marksmanship practice and so on, that the Timekeepers should have little trouble running people to ground and or just shooting them dead. The ending in particular was a joke. Yay I ran down the fugitives... damn I ran out of time and died. Seriously? If your that forgetful how do you reach 70 years old?? The premise that he came from the ghetto so kept his clock low is completely undercut by the assumption that when one lives in hours and minutes one has an extremely good sense of remaining time. Or one is dead.
The twist I was really hoping for here is that the Timekeepers didn't actually need Time at all. (Hey I've got a leather trench coat and a glock - hence I must be immune to SOME rules). If they're the agents of the immortals running the whole system, and their job is to make sure no one realises just how short the stick they got given was, then it would make sense that they are de facto outside the rat race. They can't be bribed, bought, slowed down or in any other way deflected (apart from death - being shot didn't seem to stop Leon for long). In this world the final scene plays out as it did, apart from Raymond Leon (somehow) loses his gun. They have the discussion about Time. They all watch his clock. It ticks down to 0. They continue to stare, and then both get shot because you've missed that while watching the clock you've stopped watching what else he's doing. Aside from the irony of Mr "I'm a pro arm-wrestler" losing to his own trick, this would also do a much nicer job of tying in the "resistance is futile" line. You really can't win, because they aren't playing by the same rules.
On that note after Timberlake and girlfriend have met their end to Leon the closing scenes should have been consequence to a society when the workers stop working. The rich continue as normal, oh they import food from different regions and some of them fly off while the interruptions are resolved, but all the people in the ghetto suddenly find out that having a month rather than a day is great, but not having food because the guy who runs the shop, or drives the transport lorries, or workings in the process plant, have all bummed off because they got given freebies.
So that's my suggestion - Murphy kills Timberlake and arrests his plus one if killing faux-teenage girl bank-robbers isn't done in cinema these days (she didn't have blue or even red hair so no plot immunity from me). The proles riot, loot and die because the system has been screwed with. The rich survive, and the end? The bureaucrats who run the world note down some loss of Time in Region 21 due to disturbances, and just adjust the numbers to bring everything back into alignment.
If I were immortal, and had an immortal secret police/special forces unit to keep things running, I would not be derailed by a factory worker with a stub nose stuck in his socks.
Happy trails,
/Z
--
A good sci-fi film needs a good premise. This is where we (the audience) buy into the rules of the internal universe. The Premise needs to set out what, in this world, the characters can, and can't do, and what their motivations and cultural norms are.
"In Time's" Premise is that Money = Time has actually been made true. You buy things with time, you get paid in Time, and, barring violent intervention, you die when you run out of time.
Herein is our first problem. Where does the Time come from in the first place? In the modern world money comes from two sources, firstly the banks conjure it out of thin air by fractional reserve banking, and secondly governments (or central banks) print it. As long as the amount of actual money roughly matches up with the value people place on the goods and services in the economy everything is fine (and if its out of sync slightly you get inflation or deflation). However... if Time = Money how does this work? Unfortunately the film doesn't ever give us an answer to this question, and even less so about how the super rich have accumulated their millions of stored years.
(A second point here - because everyone's personal Time is ticking down all the (pardon the word) time the economy is constantly losing value. This is comparable to you only being able to use money once before it lost value - pretty soon you'd run out of money).
In-universe the time=money premise also generates problems. It costs 2 hours to buy bus ride that covers a 2 hour walk. Why would I pay for the bus?? If the bus ride lasts 20 minutes then taking the bus costs me 2 hours 20 minutes, and walking costs me 20 minutes less. In a very real way (in this setting) taking the bus brings me 20 minutes nearer to death then walking does.
Next problem in the premise is how you transfer time (apparently you just hold hands with people and 'will'?? it to happen) - this is just way to easy to exploit. Probably a useful plot mechanic, but would seem to make sleeping borderline suicide unless your in a triple locked room with someone you really trust pointing a shotgun at the door.
Character-wise we also have some problems. The central character is a factory worker who also happens to be a pro-wrestling champion, pro-poker player, crack-shot with a gun, special agent level evasive driver and Olympic long distance runner. He also managed to acquire all of these skills while working 2 shifts a day in a factory to earn 4 hours to keep his mother alive. Again the question how arises... There are few things more annoying in films then central characters who acquire miracle level skill-sets with no real explanation.
I'm not even going to mention the scene where the limo survives four vans worth of guys open up on it with machine guns, suffering nothing more than some scratched windows.
Ideas
What then, could have been done better? What scenes flirted with brilliance and then damp squipped?
Where Time comes from - this should have been answered, or at least hinted at.How about a nice dystopian view that the government really can just create Time? But since not everyone can live for ever (population, resources etc) then the world is broken down into tiers. The inner tier of Immortals really are just that, and can create Time out of nowhere. The tiers then filter down - the 'party' magnates, and super-officials who deal in millions of years, the national leaders, and so on all the way down to the plebs. You get your 25 years, plus whatever the next tier up decide to pass on in exchange for goods and services and then you die. And the whole thing kind of works as long as the people at the top don't splash the cash so to speak (or let anyone know you can just conjure it out of thin air). Hence; Timekeepers.
The Timekeepers should have been done better. Cillian Murphy did a heroic job at playing that most feared of alignments; Lawful Neutral, but you can't help feeling that with 50 years of training, experience, marksmanship practice and so on, that the Timekeepers should have little trouble running people to ground and or just shooting them dead. The ending in particular was a joke. Yay I ran down the fugitives... damn I ran out of time and died. Seriously? If your that forgetful how do you reach 70 years old?? The premise that he came from the ghetto so kept his clock low is completely undercut by the assumption that when one lives in hours and minutes one has an extremely good sense of remaining time. Or one is dead.
The twist I was really hoping for here is that the Timekeepers didn't actually need Time at all. (Hey I've got a leather trench coat and a glock - hence I must be immune to SOME rules). If they're the agents of the immortals running the whole system, and their job is to make sure no one realises just how short the stick they got given was, then it would make sense that they are de facto outside the rat race. They can't be bribed, bought, slowed down or in any other way deflected (apart from death - being shot didn't seem to stop Leon for long). In this world the final scene plays out as it did, apart from Raymond Leon (somehow) loses his gun. They have the discussion about Time. They all watch his clock. It ticks down to 0. They continue to stare, and then both get shot because you've missed that while watching the clock you've stopped watching what else he's doing. Aside from the irony of Mr "I'm a pro arm-wrestler" losing to his own trick, this would also do a much nicer job of tying in the "resistance is futile" line. You really can't win, because they aren't playing by the same rules.
On that note after Timberlake and girlfriend have met their end to Leon the closing scenes should have been consequence to a society when the workers stop working. The rich continue as normal, oh they import food from different regions and some of them fly off while the interruptions are resolved, but all the people in the ghetto suddenly find out that having a month rather than a day is great, but not having food because the guy who runs the shop, or drives the transport lorries, or workings in the process plant, have all bummed off because they got given freebies.
So that's my suggestion - Murphy kills Timberlake and arrests his plus one if killing faux-teenage girl bank-robbers isn't done in cinema these days (she didn't have blue or even red hair so no plot immunity from me). The proles riot, loot and die because the system has been screwed with. The rich survive, and the end? The bureaucrats who run the world note down some loss of Time in Region 21 due to disturbances, and just adjust the numbers to bring everything back into alignment.
If I were immortal, and had an immortal secret police/special forces unit to keep things running, I would not be derailed by a factory worker with a stub nose stuck in his socks.
Happy trails,
/Z
Wednesday, 8 May 2013
Writ In Water
Today's headlines are all remarkably uninteresting. Hence, in vague acknowledgement that I am not living up to the various mantles I make liberty of, here is something a little different.
In memory of an article in Blackwood's Magazine, 1818.
How wrong you were.
**
In memory of an article in Blackwood's Magazine, 1818.
How wrong you were.
**
Given without hope,
For hope implies expectation,
Given in memory,
Of a thought never
told.
Rose that never fades,
Petal that never
opens,
Thorn that never softened,
Stem that never broke.
Given freely,
In a world of indebted
gifts,
Given in honour,
Of a code never known.
Seeded in a yellow river,
Dreamed in a silver
bar,
Budded in red vines,
Flowered in white
rain.
Given without hope,
For hope requires
acceptance,
Given in memory,
A thought never told.
May 08, 2013
/Z
Subscribe to:
Posts (Atom)