There are some very strange ideas floating round on the interwebs about the cornerstones of all economic debate - goods, services and money. This is an attempt to straighten out some of the more blatant misunderstandings.
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The Three Sectors
Economic theory tends to break economic activity down into three segments, imaginatively named Primary, Secondary and Tertiary. This can a useful distinction when categorizing different economies, more "developed" economies tend towards a higher proportion of activity occurring in the secondary and tertiary sectors, and this has other uses in discussing how particularly industries may rely on others. It was never intended as a measure of how "good" or "useful" a certain industry is. In economic terms an industry (either a particular company or group of companies) is ""better"" (in a huge string of inverted commas) if it produces (adds) more wealth than another industry, regardless of where on the 1 / 2 / 3 scale the industries in question sit.
To briefly clarify;
Primary industries deal directly with natural resources. This therefore covers things like mining, forestry, farming, and oil and gas extraction. Under-developed nations tend to have a lot of primary economic activity because it (generally - oil and gas being the exception) can be undertaken with a labour heavy base rather than a capital intensive one. The "value adding" component of the primary industry is predominately a function of location - iron ore in a warehouse is worth more than iron ore a mile underground even though the object itself hasn't changed.
Secondary industries deal with manufactured goods. This could potentially be broken down further into 2.1 and 2.2; 2.1 industries take the output from the primary industries and create manufactured goods (i.e. take iron ore and turn it into iron bars), while 2.2 industries take manufactured goods and use them to create more complicated manufactured goods (take iron bars and turn them into knives and forks). The value adding component of secondary industries comes from the increased utility the same amount of physical material can have in different forms. (In the example above 10 sets of knives and forks has more value than the pure value of the metal because the form has a function).
Finally the tertiary industry deals with services. An exact definition of what a service industry is can be a little harder, though I'd take a punt that services deal with where and when things are rather than what they are. As an example a transport company provides a service - i.e. moving your 1,000 tonnes of wheat from point A to point B; they haven't changed the product, but they have changed where it is, thus adding value (it has practically speaking very little value in a barn on a farm, but potentially enormous value as the input to a corn-flake factory). The value adding component of the service industry is allowing the utilizing goods.
It should be pointed out that these definitions are a little blurry round the edges - this isn't really that relavent and shouldn't be used to derail the general thrust of this piece, but its something to be aware of. (For example you could argue mining is changing the location of an object and hence a service industry, although intuitively we all accept that a copper mine is doing something different to UPS though on paper they are both moving an object from A to B, likewise the distinction between utilizing a set of goods to add value (service) and manufacturing a new good (secondary) could be blurred).
I'm going to take a slightly tangent here to talk about what value actual means.
Value, Utility and Moneys
In economics the term utility appears, and while sufficient for the purposes of economics-as-maths and as a placeholder word for a general concept in economics-as-social science, it often gets mistranslated into common English. Utility is roughly speaking the benefit we get from consuming a good or service. Somewhat unfortunately this will be different for each individual. While I will derive some benefit (happiness, pleasure, etc) from eating a cake, there will be other people who would have got more or less benefit had they been the ones eating the cake. This conundrum presents all kinds of problems for economists since it undermines the idea that a group of rational agents presented with the same choice will make the same decision. (For example do you want this piece of cake or this piece of banana, I would pick the cake, others would pick the banana, but we are both acting according to the same utility-maximizing principle).
To circumvent this principle economics often equates utility which is person-specific and difficult to quantify (happiness is best seen ordinally rather than cardinally - i.e. you can say you were happier in situation A than in situation B, but not by how many "units") with money. Money is great since it is easily quantifiable, easily observable, and, in the modern market place, easily transferable. The idea is that while there will be specific combinations of items valued at £10,000 that any given person prefers over other 'baskets' worth £10,000, having £11,000 will always allow you to have a higher total level of utility than £10,000. (Fuzzy indifference curves aside). The risk however is that in the world of faux-business that passes as "man down the pub / man on a forum" economic debate money gets seen as the end in and of itself, rather than as a proxy for the consumption of goods and services.
So, to reiterate; money is not value. Value is a measure of utility. Money is a proxy for value only.
In practice this means that when assessing the output of an industry and ultimate question is how does this make people happy - that is, give them utility. Not how does this industry contribute to the circulation of the bits of coloured paper that we use as a medium of exchange.
"Winning" at trade
There have been plenty of people through history (and indeed in the modern world) who have acquired vast fortunes through trade and business. Though to those who cry out against the perceived wealth inequality between the "1%" and the rest in today's world, it may be worth checking out the equivalent in today's money of the fortunes accumulated by the original barons of industry, (whether it be textiles, ironworks, railways or whatever) and historical rulers (wiki has a somewhat dubious claim that the Roman orator, general and politician Crassus may have accumulated a personal fortune equivalent to the annual Budget of the entire Roman Empire. Based on some very dubious extrapolations compared to the gdp of the British Empire (which had a comparable % of global population and technology), this would be equivalent of 1.3 trillion dollars in today's money - that's 17 times more than Bill Gates, or about 2.5 times the combined wealth of today's ten richest billionaires.).
There are two ways you can acquire wealth through business/trade (through all of this I'm ignoring the distinction between you personally, and "you" in the sense of a business you own. It's now a meaningful distinction in this context).
The first is to take some inputs (say iron bars, timber, gravel, nails, and largely unskilled labour), and turn them into something which has more value then the inputs themselves had (i.e. a railway network). Through this process the total aggregate value of all the goods and services in the economy increases, i.e. the total cake gets bigger. A canny owner/businessmen can pocket a significant chunk of that increase for himself, thereby becoming fantastically wealthy. But the point is he has created value. The railway example is very informative - imagine you are a dairy farmer, you sell milk. Without a railway you can only sell to the nearby village and other farms, and you'll end up throwing away a lot of milk you can't sell (particularly since your likely to be surrounded by other dairy farms). Along comes the railway and suddenly you can sell you milk (remember this is fresh milk before refrigeration etc) in the nearby town, which will always have someone looking to buy it. Net result? You get to sell more of your product and make more money. Of course you have to pay to use the railway. So lets say you make an additional £15 a day from selling your goods, and you have to pay £5 of that to the railway. Your still better off, potentially a lot better off. But the guy who owns the railway? He make's £5 of you. And the next farmer, and the next, and the next, and so on, until he's earning hundreds of thousands every single day.
This is capitalism as it's meant to work - you create value, and in doing so you get to keep some of it, and some of it flows out into the economy benefiting others. (Indirectly all that money you keep for yourself still has a benefit, since it means you'll consume more goods and services yourself, thereby creating work for others). The key to the genuinely mega-rich in this process is to come up with something that benefits everyone, so you get a bit of value of everyone. Railway became a service consumed by the entire economy, so the barons got their slice of every cake in the country. Bill Gates made his fortune of Windows - a system which virtually every computer on the planet uses.
"Cheating" at trade
The alternative is to take some inputs (a bank account, an advertising budget, and some fancy linguistics) and create a product with no value ( a ponzi scheme), and then get people to buy it.
The idea here is that you got more for the product then its worth, thereby pocketing the difference. Note - this isn't you got more than the inputs are worth (which is true of any value adding industry), you got more than the finished product is worth.
What should hopefully be apparent is that this system relies on some form of deception, often deliberate - it relies on convincing people things are worth more then they actually are. Going back to our point above about value, at heart this means telling people that products or services will do something that actually they won't.
The ponzi scheme is an example of a financial product / service, that offers to take your money and give you back more money at some future point. Fine, that's the basis of virtually all investments, but the ponzi scheme is predicted on a disparity of information - the person running the scheme knows full well that the "product" has no real value since it will never return any of the money. But the investors don't know this , and therefore complete the purchase.
Cheating at trade does allow you to get rich, but the overall size of the economy hasn't changed. Blank DVDs don't gain "real" value (i.e. they don't add more utility when consumed) by being packaged up in movie boxes and sold as films. Thus this type of trade is about shifting value from one person to another, not creating new wealth.
As an aside, generally you don't get super rich with this approach - why? Because it relies on continually deceiving people and 1.) people are harder to trick as the amount of money involved goes up, and 2.) it gets harder to trick people a second time. A function of a wealth creating industry is that it encourages repeat use. In the example of the dairy farmer above, having gone to market, sold your milk, and got home with a profit, you are more inclined to do it again, i.e. when you get some more product you will make use of the railway to again increase its value by taking it somewhere you can sell it. On the other hand if the railway were a "cheating at trade" idea - (i.e. if there were no trains so you can't actually move things, or maybe you can't get out at the other end ??), then you won't do it a second time.
Value is Perceptive
A clarification is required here, to distinguish two different concepts.
1.) Promoting and advertising a value adding product
2.) A cheating at trade (value-reallocating) product.
Having created a product (iphone, Imperial Knight titan, chocolate cake), you naturally want people to part with money in exchange for the product. Advertising lets people know your product exists, and promotes its benefits and features. The price you set will be as high as you think people will pay. However we have a concept of "fair" or "honest" advertising. It is considered an institution of trade that you can't flat out lie about your product to encourage people to buy it, and if you do consumers have various rights of recourse to get their money back.
Examples flash by on a fairly regular basis, though they are generally on the grey areas round the edge - yes the product will do what's advertised, but only in certain, unlikely circumstances. Hence we have the term "misleading" advertising. This is promotion taken the extremes, with the positives stressed unreasonably, and the negatives covered up. Personally I may dislike the extent to which this occurs, but it is still (just) in the realms of "winning at trade" - your product does have advantages and does create value. You've just exaggerated to what extent and for whom.
"False" advertising on the other hand is the precursor to "cheating" at trade. Adverts for a color TV that is actually black and white, for a 3 for 2 offer that actually only includes 1 product, or books that turn out to be full of blank pages, would all quickly fall foul of "cheating" at trade. The distinction here is you are advertising a benefit that doesn't exist.
A few points then;
Banking and Financial Services
I often come across claims that the Banking sector doesn't add value, it just re-allocates value from customers to bankers. In effect the claim that it is part of the cheating camp. To begin I'm going to split off the fantasy world of derivatives trading and investment banking. Yes, I can quite accept that the trading world is focused on exploiting knowledge inequalities to sell things for more than they are worth by apparently offering benefits which you full well know don't exist. However the people in this world know the "rules of the game" and are not part of the regular consumer/producer market. This is not unlike going to a poker tournament and then complaining all the people there were trying to win your money off you.
"Retail" i.e. everyday, banking, adds value in a huge range of ways;
1.) It provides a safe, secure, easily accessible way to keep your money. Imagine if you had to keep all your money as notes under the bed, and your life savings as either gold or coin in your house.
2.) It allows access to the electronic payment world - direct debits, standing orders, debit and credit cards and so on are all services that allow you to easily manipulate when and where your money is.
3.) It provides a method of borrowing money to bring forward future consumption. On the whole I would conjecture banks are pretty clear in their advertising of how much you will borrow and how much you will pay back. It is then up to you to decide if that cost (i.e. the interest) is worth the value (whatever it is your planning on using the money to acquire and consume).
4.) In climes more typical than today's 0.5% BoE base rate world, it provides a low return, ultra-low risk investment (bank deposits are liquid investments in the bank. But they are incredibly safe since it would require an insolvent government before regular deposits were lost).
One of the points I raised in the "value adding vs value stealing" sections was that a value-adding industry attracts repeat (or ongoing) business, while a value-stealing one finds it difficult to get people to re-use or re-purchase a product once they know what they are really getting.
So, if banking is such a huge scam, with no benefit to the regular user, why does everyone have a bank account? Why do people still want to take out mortgages and credit cards? Why is the complaint not so much "we don't want banking" but "we don't want to pay for banking?".
The PPI scandal bears some consideration here since it appears to meet the above criteria for cheating ("having found out what it is I don't want it anymore"). Without risking an entirely new topic, I would suggest the consideration is not so much the product itself, but how it was sold. A mismatch can occur when a customer doesn't realize they are in a sales conversation.
Two examples:
1.) You go to a used car salesman and he tells you XYZ car is brilliant. You know this is a sales pitch (advertising) and therefore to be careful to check the product is what you expect. Its unlikely your being directly lied to (i.e. car has a year's MOT when in fact it failed its MOT), but your probably getting the best possible version of the truth.
2.) You go to the dentist and they tell you you need XYZ treatment. Here you expect your being informed as to what would be best for you, not being given the spiel on a particular product. We expect medical professionals (and legal, mechanics etc), to be acting in an advisory capacity not a sales capacity.
Now imagine the problem that arises when the customer thinks they are in situation 2.) and the salesman thinks its situation 1.). The general public, who until recently, largely saw the banks as social institutions, if not an extension of government, would have sat down with a customer service rep, and probably assumed that if they were offered a product it was a good idea to take it, in the same way that if your dentist says you need a filling, you assume he's acting in your best interests. On the other hand, the CSR, who has sales targets, sales coaching and a sales focused job description, sits down to the same meeting with the intention of shedding the best possible light on his products, and assumes the customer knows they are being sold to - in the same way that the salesman in PC World or Currys knows that the customers knows its a sales pitch.
This then leads to "mis-selling" scandals.
Do I have much sympathy for people who were given the details of a product, read them, decided they wanted it, then changed their mind? - No. This is a straight case of your making a judgement on the value you get from different baskets of goods then changing your mind.
Do I have sympathy with people who thought they were being advised, but were in fact being sold to? Yes - to some extent. Though ultimately you still bought a product, and you probably weren't actually lied to about what it did.
Finally, do I have sympathy with people who sought financial advice and were told to buy a product they didn't need? Absolutely - this is a cut and dried case of "value by cheating". If the service you sell is financial advise, and your giving people bad advice driven by your own targets or commissions, then your being misleading when you advertise "advice".
All hail Manufacturing
I was going to end with a comparison between the German and UK economies in response to the perennial racket that we should shift back towards manufacturing because somehow manufacturing is more holy than financial services. However, this is probably a topic that justifies its own post, so a few observations only;
1.) Yes Germany has both a bigger manufacturing base, and is the worlds top exporter.
2.) Yes there does seem to be a trend that western countries export pretty much all of their manufactured goods.
3.) The causation on the above is not clear. This could simply be saying we've shifted labour and capital out of manufacturing to higher value-adding industries and used the money to buy cheap manufactured goods from other people (China, Taiwan etc). The manufacturing that has remained is the capital and skill intensive industries which are primarily exporters by nature (automotive, aerospace etc). Therefore pivotting back to semi and low skilled manufacturing will not add a great deal of value, though it might improve the balance of trade position.
4.) Germany has an artificially low exchange rate thanks to the Euro, which boosts its export capacity.
5.) German work and investment ethics are far superior to those in the UK. It doesn't really matter whether your in manufacturing or servicing, a culture which promotes skills, training, experience, and inwards investment will have solid fundamentals. Germany excels in these areas. The UK does not.
6.) We could focus on making our services an exportable commodity. If we are good at financial services then specialize in that and sell it globally. Someone once said "not everyone can sell insurance" - this is true. But there is no reason why one person/country can't sell everyone's insurance. Maybe we should be looking at how to sell what we do have, not what we may theoritically have if we re-build the whole economy.
Conclusion (the TL;DR version)
You can either dig stuff up, turn stuff into other stuff, or make people's lives easier. They are all value adding. Proper capitalists create value and get rich by getting a slice of a growing cake. You can cheat by misleading people over your products, but this isn't how stable, ongoing industries operate. And no, everyone making chairs isn't a superior position to everyone selling insurance.
Happy Trails,
/Z
Sunday, 13 April 2014
Walk Softly...
The original purpose of this blog was to give me an outlet for the various thoughts, conclusions, revelations, insights and rationalizations (that is, lies I tell myself), that pass through my mind. It was a means of emptying out completed considerations to free up mental capacity for new challenges, a way of ensuring my observations were not lost to me in the same way as nearly 10 years of musings were due to a technical fault on a removable hard drive. It has, however, become more of a forum for me to preach my eco-political views to a readership who are now the target audience of what was once a virtual monologue.
I return herewith to my original intentions, this post is deliberately not linked on social media, and I would appreciate a degree of discretion on the part of those who choose to read it.
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A friend of mine has recently suffered the traumatic, and unexpected, end to a long term relationship. This has therefore caused me to dust off a hat that has sat dormant for almost a decade, that of a guide to the unexpectedly single. I've seen a lot of relationships end, some mutual, some not, some from the point of view of the dumpeé and some from the dumper. Those circumstances, plus my own laundry list of ill-timed, ill-conceived or flat out implausible relationships, has given me ample opportunity to build some understanding of why certain pairings do, or more often, don't, work out.
That is not actually the purpose of this post however, merely a precursor. In conversing with aforesaid friend, I was required to articulate and verbalize various aspects of my own personality and outlook on life which up until now have gone largely unspoken. It seemed fitting to record this observations and considerations..
Unilateral Decision Making
It appeals to those of a libertarian or democratic bent to believe that if a decision impacts them they have some right to be consulted. It is a principle that underpins how we elect our governments, and how we claim adult affairs are conducted. Yet from a logical point of view it makes no sense where any other party's consent is required for a state of affairs to continue.
The choice to give, or withhold, consent is made by each individual, based on their own considerations, and is not open to judicial (i.e. external) review. If I choose to leave my job, my employer has no method for requiring me to change that decision (they may be able to give me a bad reference or stop paying me, but they can't require me to come back to work). If I choose to hold a particular political opinion or support a particular group then others with differing opinions can't require me to change my views.
By the same token a relationship exists because both people in that relationship choose to be part of the pairing. And should either of them choose to leave, the other has no recourse for requiring them to come back. As has been quoted in more than one TV show or film (in various styles) "you can't rationalize someone into loving you".
This facet of reality stands in stark contrast to the world many of us experience in working life where the topic of 'stakeholder management' (or "politics" as it is often dubbed (pejoratively)), consumes a significant portion of our day. In the working would you can rationalize/argue people into doing things they may not agree with - why? Because ultimately the aims of your project or the principles underpinning your analysis are not a function of your consent or opinions, they are a function of the opinions and views of those with authority within the hierarchy of your institution. My job does not require me to agree with the current medium term goals of my business, only that I accept them as the agreed target and work accordingly. My retort in this scenario is to remove my consent from working at all should I feel the situation warrants it, or more bluntly "if you don't like it, you can quit."
The world viewed through the lens of bilateral decision making is one in which rationality, articulate presentation of facts, well grounded opinions and a flair for minor dramatics dominate, it is a place where decisions can be planned and managed, where our skills in presentation and technicalities can provide us a fair degree of control over our future. It is also a place where we are entitled to be consulted, to 'make our case', and where a powerful argument can win over a reticent cohabitant. For those of us with the experiences and skills to thrive in this environment it can feel like a relatively safe place, secure in our linguistics and statistics.
But as a said above, the majority of the time we do not inhabit the world of bilateral decisions. We live in a world of unilateral decisions; where there is no appeals process, where decisions do not rest with an authority figure that can be swayed by reasoned debate, and where emotion, the lure of money, power, sex, the unknown, or simply blue oceans and warm beaches, carry more weight than all the fantastic constructions of logic and maths that can be constructed. This is a world where our continuity is held hostage to the ongoing, minute by minute, renewal of commitment from those who have formed the foundations of our lives. It is a world where the darkness behind another eyes can, apparently without warning, topple even the most fundamental assumptions by which we build our lives. For those who crave a degree of security and consistency this is a scary proposition, and it is therefore not surprising that we try to cloak with world in the mantel of bilateral decision-ism, but it is ultimately just a covering, a rationalization in the House sense ( a lie we tell ourselves). By accepting this, by accepting that many of the decisions that impact our lives are made without our input, we move a step closer to tranquility.
Framing the Issue
To dip into the huge bag of quotes that is Boston Legal, one in particular seemed relevant recently; "never let the other guy frame the issue." In its original context this was about winning court cases, in effect ensure your arguing the point where your client is in the right. However there is a wider applicability to this concept, how we frame issues to ourselves.
In talking with the aforesaid friend from work, the topic of how you view problems came up, initially in the context of being the "competent" one in a social group. Any given group of friends usually has at least one "competent" individual - they're the ones who everyone implicitly relies on to ensure everyone gets home, that will take charge if a serious problem emerges, and who is generally relied on to follow the Guide's main lesson "Don't Panic." What makes someone 'competent' then, and how does this relate to the wider issue? At heart the matter is one of framing the issue, or rather, framing the problem.
Seen through a rational, calm, perspective most of the problems that arise in daily life are not actually that big a deal. Barring the scenario of "drunk bar fight results in death," which, thankfully, I have not had to experience, there is not much that can happen in the normal run of events that is that big a problem.
A credit card, and ability to act relatively sober, and a mobile with a map function can solve most problems, or at least defer them until the morning. There is a simple thought experiment that illustrates this point; imagine you are dropped on a random street, in a random town, somewhere in the country. Could you get home using just what you normally carry with you? In my case the answer is a fairly simple yes. From a phone I can find either a train station or a hotel, and from there I can get back to wherever I need to be. It's not even that big a deal. And to some extent both myself, and aforementioned friend, have found ourselves in this situation and successfully got home, with, at most, the loss of a Sunday morning and the cost of a few taxis.
((As an aside, I know someone else who found themselves in a similar situation, but with the added problem of he's had his wallet and phone stolen. However, he was still back home by the next day. Having had your stuff stolen does make it harder to deal with things on your own, but also adds a new option of "call the police," - in his particular case via the first pub he came across, and the police and pretty good at dealing with people who have had their stuff nicked and need to get home)).
So, in somewhat circuitous fashion this brings us back to the "Framing the Issue". What do all "competent" people have in common? Is it some stoic ability to face adversity borne out of genetic stubbornness and panache? No - its a mindset that looks at the world from the point of view of "What can I control?" Virtually any issue can be rephrased to something which you control, and once seen through that lens, it is simply a choice between the various options currently available. The exact application of this in the context of an unexpected break-up is to re-frame the issue from "Why did she leave?" to "Given that she has left, what will I do about it?". The first is a somewhat existential question to which a coherent, fulfilling answer is likely never-coming. It will lead into endless, inwardly looking circles of "but that" and "what if this". You did not control her decision to leave (unilateral decision making) and the reasons for that decision would not necessarily convince you even if you were given them. Seeing the issue from this angle is therefore inviting a destructive tailspin of introspection and a mash-up of several of the well known stages of grief (especially negotiation; "If I do X or make Y argument she will come back). Re-framed to the issue of "how am I going to react to this situation" sheds a very different light on the subject; "Am I going to be an depressed emotional wreck" or "am I going to move on with my life". This is something you control because it only relates to decisions about yourself. This is a decision over which you have unilateral decision making power. This is not to say you will just be able to flick a switch and move on with a nonchalant swish of the hair (psychopaths have it easy), but rather having made the decision to move on there is now a goal you control, and progress can be made towards it.
(As an aside, this "How am I going to react?" is actually a way to rephrase virtually any issue to one you control. You can't control the world, but you always at some level have control over how you intellectually, if not always emotionally, react).
Why Relationships?
This is a broad topic, but it perhaps bears touching on here since it had relevance to the original conversation. Why do people form relationships (in the traditional pair-bond sense, rather than a more general "sustained interaction between two people" sense)? Of the dozen or score of couples where I know both partners, the overriding consideration is usually practicality.
The world is built on the assumption that by the time your late-twenties to early thirties you'll be married, (while this may have moved slightly over the last twenty years to a broader definition of 'married' the general ideal hasn't changed). Supermarkets sell food on the assumption your feeding two people, holidays and social events are sold on the basis of 'two sharing,' even in general conversation 'no I'm single' tends to get an odd look at work functions.
(The Departed perhaps has something to say on this topic; “Marriage is an important part of getting ahead. It lets people know you’re not a homo. A married guy seems more stable. People see the ring, they think ‘at least somebody can stand the son of a bitch.’ Ladies see the ring, they know immediately that you must have some cash, and your cock must work.” )
And perhaps if you aspire to the middle (I realize that sounds harsh, but ultimately the majority of people are about average - that's what average on a normal distribution means (EDIT: *no pun intended*)) then the practicality factor is sufficiently overriding. If you expect to earn the £25k type salary that is the middle of the band in this country then maybe you need 2 salaries to buy a house, go on holiday or raise a family. Perhaps if you do 'mainstream' things every evening (watch the Simpson's, pretend to care about each others office gossip), then you need someone else to vindicate that this is a 'normal' life.
But what about the cohort that has pick up the mantel of the yuppies (I did find an acronym that made YOSHI that was something to do with ultra-high savings and investment, but can't find it again)? If you aspire to a 50, 80, or even 100,000 salary by your mid-30s, don't have much time for "pop" culture (whether that's the X-factor, glossy magazines, or increasingly football), and have a fairly wide social group that has been reinforced by the growth in social media that means university cliques never feel away and you can talk to someone 24/7?
There isn't a ringing conclusion to this particular section - when I put it to a few people that the foundation of their relationship (indeed their marriage) was a combination of practicality and social norms, they agreed. Does the admission of such a prosaic function necessarily invalidate those relationships? - No I don't think so. They serve a purpose in helping people live stable, secure lives. Does it hold a great deal of appeal to someone who is financially and emotionally stable without outside input? Also No.
Here's a random metaphor to end things on... standard, stable relationships are annuities. You know what your putting in, and what you get out is predictable and unexciting. But its also stable, predictable and lets you live your life comfortably. Relationships built on dreams and passions and wild intellectual fantasies is playing the lottery with your entire salary - probably not a good idea on a regular basis, hugely risky and painful if it goes wrong, but with the potential to be completely life-changing if you get lucky.
/Z
I return herewith to my original intentions, this post is deliberately not linked on social media, and I would appreciate a degree of discretion on the part of those who choose to read it.
**
A friend of mine has recently suffered the traumatic, and unexpected, end to a long term relationship. This has therefore caused me to dust off a hat that has sat dormant for almost a decade, that of a guide to the unexpectedly single. I've seen a lot of relationships end, some mutual, some not, some from the point of view of the dumpeé and some from the dumper. Those circumstances, plus my own laundry list of ill-timed, ill-conceived or flat out implausible relationships, has given me ample opportunity to build some understanding of why certain pairings do, or more often, don't, work out.
That is not actually the purpose of this post however, merely a precursor. In conversing with aforesaid friend, I was required to articulate and verbalize various aspects of my own personality and outlook on life which up until now have gone largely unspoken. It seemed fitting to record this observations and considerations..
Unilateral Decision Making
It appeals to those of a libertarian or democratic bent to believe that if a decision impacts them they have some right to be consulted. It is a principle that underpins how we elect our governments, and how we claim adult affairs are conducted. Yet from a logical point of view it makes no sense where any other party's consent is required for a state of affairs to continue.
The choice to give, or withhold, consent is made by each individual, based on their own considerations, and is not open to judicial (i.e. external) review. If I choose to leave my job, my employer has no method for requiring me to change that decision (they may be able to give me a bad reference or stop paying me, but they can't require me to come back to work). If I choose to hold a particular political opinion or support a particular group then others with differing opinions can't require me to change my views.
By the same token a relationship exists because both people in that relationship choose to be part of the pairing. And should either of them choose to leave, the other has no recourse for requiring them to come back. As has been quoted in more than one TV show or film (in various styles) "you can't rationalize someone into loving you".
This facet of reality stands in stark contrast to the world many of us experience in working life where the topic of 'stakeholder management' (or "politics" as it is often dubbed (pejoratively)), consumes a significant portion of our day. In the working would you can rationalize/argue people into doing things they may not agree with - why? Because ultimately the aims of your project or the principles underpinning your analysis are not a function of your consent or opinions, they are a function of the opinions and views of those with authority within the hierarchy of your institution. My job does not require me to agree with the current medium term goals of my business, only that I accept them as the agreed target and work accordingly. My retort in this scenario is to remove my consent from working at all should I feel the situation warrants it, or more bluntly "if you don't like it, you can quit."
The world viewed through the lens of bilateral decision making is one in which rationality, articulate presentation of facts, well grounded opinions and a flair for minor dramatics dominate, it is a place where decisions can be planned and managed, where our skills in presentation and technicalities can provide us a fair degree of control over our future. It is also a place where we are entitled to be consulted, to 'make our case', and where a powerful argument can win over a reticent cohabitant. For those of us with the experiences and skills to thrive in this environment it can feel like a relatively safe place, secure in our linguistics and statistics.
But as a said above, the majority of the time we do not inhabit the world of bilateral decisions. We live in a world of unilateral decisions; where there is no appeals process, where decisions do not rest with an authority figure that can be swayed by reasoned debate, and where emotion, the lure of money, power, sex, the unknown, or simply blue oceans and warm beaches, carry more weight than all the fantastic constructions of logic and maths that can be constructed. This is a world where our continuity is held hostage to the ongoing, minute by minute, renewal of commitment from those who have formed the foundations of our lives. It is a world where the darkness behind another eyes can, apparently without warning, topple even the most fundamental assumptions by which we build our lives. For those who crave a degree of security and consistency this is a scary proposition, and it is therefore not surprising that we try to cloak with world in the mantel of bilateral decision-ism, but it is ultimately just a covering, a rationalization in the House sense ( a lie we tell ourselves). By accepting this, by accepting that many of the decisions that impact our lives are made without our input, we move a step closer to tranquility.
Framing the Issue
To dip into the huge bag of quotes that is Boston Legal, one in particular seemed relevant recently; "never let the other guy frame the issue." In its original context this was about winning court cases, in effect ensure your arguing the point where your client is in the right. However there is a wider applicability to this concept, how we frame issues to ourselves.
In talking with the aforesaid friend from work, the topic of how you view problems came up, initially in the context of being the "competent" one in a social group. Any given group of friends usually has at least one "competent" individual - they're the ones who everyone implicitly relies on to ensure everyone gets home, that will take charge if a serious problem emerges, and who is generally relied on to follow the Guide's main lesson "Don't Panic." What makes someone 'competent' then, and how does this relate to the wider issue? At heart the matter is one of framing the issue, or rather, framing the problem.
Seen through a rational, calm, perspective most of the problems that arise in daily life are not actually that big a deal. Barring the scenario of "drunk bar fight results in death," which, thankfully, I have not had to experience, there is not much that can happen in the normal run of events that is that big a problem.
A credit card, and ability to act relatively sober, and a mobile with a map function can solve most problems, or at least defer them until the morning. There is a simple thought experiment that illustrates this point; imagine you are dropped on a random street, in a random town, somewhere in the country. Could you get home using just what you normally carry with you? In my case the answer is a fairly simple yes. From a phone I can find either a train station or a hotel, and from there I can get back to wherever I need to be. It's not even that big a deal. And to some extent both myself, and aforementioned friend, have found ourselves in this situation and successfully got home, with, at most, the loss of a Sunday morning and the cost of a few taxis.
((As an aside, I know someone else who found themselves in a similar situation, but with the added problem of he's had his wallet and phone stolen. However, he was still back home by the next day. Having had your stuff stolen does make it harder to deal with things on your own, but also adds a new option of "call the police," - in his particular case via the first pub he came across, and the police and pretty good at dealing with people who have had their stuff nicked and need to get home)).
So, in somewhat circuitous fashion this brings us back to the "Framing the Issue". What do all "competent" people have in common? Is it some stoic ability to face adversity borne out of genetic stubbornness and panache? No - its a mindset that looks at the world from the point of view of "What can I control?" Virtually any issue can be rephrased to something which you control, and once seen through that lens, it is simply a choice between the various options currently available. The exact application of this in the context of an unexpected break-up is to re-frame the issue from "Why did she leave?" to "Given that she has left, what will I do about it?". The first is a somewhat existential question to which a coherent, fulfilling answer is likely never-coming. It will lead into endless, inwardly looking circles of "but that" and "what if this". You did not control her decision to leave (unilateral decision making) and the reasons for that decision would not necessarily convince you even if you were given them. Seeing the issue from this angle is therefore inviting a destructive tailspin of introspection and a mash-up of several of the well known stages of grief (especially negotiation; "If I do X or make Y argument she will come back). Re-framed to the issue of "how am I going to react to this situation" sheds a very different light on the subject; "Am I going to be an depressed emotional wreck" or "am I going to move on with my life". This is something you control because it only relates to decisions about yourself. This is a decision over which you have unilateral decision making power. This is not to say you will just be able to flick a switch and move on with a nonchalant swish of the hair (psychopaths have it easy), but rather having made the decision to move on there is now a goal you control, and progress can be made towards it.
(As an aside, this "How am I going to react?" is actually a way to rephrase virtually any issue to one you control. You can't control the world, but you always at some level have control over how you intellectually, if not always emotionally, react).
Why Relationships?
This is a broad topic, but it perhaps bears touching on here since it had relevance to the original conversation. Why do people form relationships (in the traditional pair-bond sense, rather than a more general "sustained interaction between two people" sense)? Of the dozen or score of couples where I know both partners, the overriding consideration is usually practicality.
The world is built on the assumption that by the time your late-twenties to early thirties you'll be married, (while this may have moved slightly over the last twenty years to a broader definition of 'married' the general ideal hasn't changed). Supermarkets sell food on the assumption your feeding two people, holidays and social events are sold on the basis of 'two sharing,' even in general conversation 'no I'm single' tends to get an odd look at work functions.
(The Departed perhaps has something to say on this topic; “Marriage is an important part of getting ahead. It lets people know you’re not a homo. A married guy seems more stable. People see the ring, they think ‘at least somebody can stand the son of a bitch.’ Ladies see the ring, they know immediately that you must have some cash, and your cock must work.” )
And perhaps if you aspire to the middle (I realize that sounds harsh, but ultimately the majority of people are about average - that's what average on a normal distribution means (EDIT: *no pun intended*)) then the practicality factor is sufficiently overriding. If you expect to earn the £25k type salary that is the middle of the band in this country then maybe you need 2 salaries to buy a house, go on holiday or raise a family. Perhaps if you do 'mainstream' things every evening (watch the Simpson's, pretend to care about each others office gossip), then you need someone else to vindicate that this is a 'normal' life.
But what about the cohort that has pick up the mantel of the yuppies (I did find an acronym that made YOSHI that was something to do with ultra-high savings and investment, but can't find it again)? If you aspire to a 50, 80, or even 100,000 salary by your mid-30s, don't have much time for "pop" culture (whether that's the X-factor, glossy magazines, or increasingly football), and have a fairly wide social group that has been reinforced by the growth in social media that means university cliques never feel away and you can talk to someone 24/7?
There isn't a ringing conclusion to this particular section - when I put it to a few people that the foundation of their relationship (indeed their marriage) was a combination of practicality and social norms, they agreed. Does the admission of such a prosaic function necessarily invalidate those relationships? - No I don't think so. They serve a purpose in helping people live stable, secure lives. Does it hold a great deal of appeal to someone who is financially and emotionally stable without outside input? Also No.
Here's a random metaphor to end things on... standard, stable relationships are annuities. You know what your putting in, and what you get out is predictable and unexciting. But its also stable, predictable and lets you live your life comfortably. Relationships built on dreams and passions and wild intellectual fantasies is playing the lottery with your entire salary - probably not a good idea on a regular basis, hugely risky and painful if it goes wrong, but with the potential to be completely life-changing if you get lucky.
/Z
Sunday, 2 March 2014
The 100 Year Old Buccaneer, Responses
Thanks to the character limit of the comments section below, I once again find it necessary to provide a response in post rather than comment format.
Please see the comment section of "The 100 Year Old Buccaneer" for the questions to which this is the answer:
***
Hi Alex,
Thanks for taking the time to read and comment, always interesting to hear people's responses. As mentioned in the main post the exact nature of how a "welfare in kind" system would work is a topic that really deserves a series of posts to adequately cover, however, with that said I've given some "broad strokes" responses below.
Expense:
The biggest problem I came across in trying to assess the cost of the current system on a per head basis is that most households receiving welfare also have income from other sources. Although around 2/3rds of households receive some kind of state support, only a third are "dependent" on welfare (over half of their income), and I could find no figures for households which only had welfare as an income means.
Coming at this from a different direction, £250 billion is, at present exchange rates, worth around $420 billion, which deflated to 2012 prices (for ease of comparison using wiki) is roughly $415 billion. If a country had a GDP of $415 USD(2012) it would be the 27th largest economy in the world - slightly bigger than Austria but smaller than Argentina. Without some detailed budgeting I can't categorically say that the provision of "university hall" style accommodation and basic sustenance for the poorest households in the country would cost more then buying Austria, but it seems unlikely. The second point on this is that even if the system is (somehow) more expensive per head the expectation is that it would reduce the welfare-claiming population by providing significant incentives to work, coupled with far less autonomy and a far lower standard of living for those on welfare.
As you mention a combination of social housing and existing programs are going to be fundamental building blocks, but I feel we should be looking to the universities and the military for the basic approach. Both successfully house (and in the case of the latter feed and clothe) large populations in relatively small geographic areas and provide facilities perhaps beyond the level I would be proposing.
Free Riders:
The lazy/mediocre is a problem unfortunately all welfare systems of any kind suffer from. Ultimately the effort of working will always be outweighed by freebies for some people, regardless of the level of living the freebies allow. The hope with the welfare-in-kind system is that it allows such a basic standard of living that this problem is minimized as far as possible. It may not the be most enlightened position but I also feel there would be less resentment/tension between those who pay for the system and those who are seen to be free-riding when the free-riders have none of the luxuries enjoyed by the working population. From my experience its not necessarily people receiving some support while unemployed that drives resentment, its those same people affording £100 trainers, plasma TVs and foreign holidays - all the things the low income tax payers can't afford.
(An aside here - this to some extent funded with a degree of petty criminality the welfare-in-kind system could take a much harsher view towards.)
Foreign Nationals
There are a few different scenarios I can see arising here; UK national lives abroad and retires back here - The question inevitably has to be: what have you been doing overseas? If you've been working and accumulating an income of some kind before retiring then you are unlikely to be 'caught' by this level of safety net. If you've been largely unemployed overseas, or spent all your money, before coming back, its not massively different to if you'd stayed in this country all your life and done the same thing. The only difference is we haven't had to pay to support you during the unemployed years in the middle (so a net saving).
Foreign nationals moving to the UK presents more of an issue, and I think the real challenge here is around immigration policy in general. The majority of economic migrants to the UK do become employed (though there is an issue with the UK becoming a low-wage low-income nation driven by hiring ever more people with ever lower skill-sets; a trend that unlimited migration has certainly contributed towards). For the remainder there is very little we can do under current EU directives. Even if you do deport unemployed migrants there is nothing to stop them coming back, so this seems to be a cost you have to lump regardless. At least the "in kind" system reduces the potential for fraud or abuse, and can, to some extent, be used to more forcibly require a degree of cultural assimilation (particularly language and laws).
Incapacitated
Sickness and disability is a controversial subject - since it can certainly be seen as falling into the "unlucky" camp. The first point here is that with increasing technology we should be seeing a decrease in the number of people unable to work - when your only employment options are physically demanding then any kind of physical disability potentially renders you unable to work. Is the same true in a world where many jobs take place via laptop, phone and video conference? I work from home one day a week so it takes no extra physical abilities that day-to-day living wouldn't. As an insight to this I'd suggest tracking down a BBC document about the post-WW2 welfare system. From memory both of the people followed who were signed off as unable to work ended up with jobs by the end of the program by taking advantage of employment opportunities that had very low physical requirements. The NHS still covers those with injuries or illness at a "critical" level so that wouldn't change.
The best solution I can come up with on the fly is some kind of "second stage" or "premium" welfare system, where the individual contributes some funds and the state provides slightly more. Those who have worked could potential build up entitlements to this higher level of support, while those in certain situations (disability/illness) could be assessed as being entitled directly. This may also give a way of people moving back into working life through part time or temporary work by removing the income-trap created when cash benefits are withdrawn at the same time tax is added. To your point about insurance it would be easy to see how an insurance market could exist to provide an income sufficient to met the requirements for this "contributory" level of welfare-in-kind in the event of sickness/illness/unemployment and so on. There also isn't any particular reason why this premium level is more costly to run per head, since the expectation is that the individuals involved are now contributing towards costs themselves
Thanks,
/Z
Please see the comment section of "The 100 Year Old Buccaneer" for the questions to which this is the answer:
***
Hi Alex,
Thanks for taking the time to read and comment, always interesting to hear people's responses. As mentioned in the main post the exact nature of how a "welfare in kind" system would work is a topic that really deserves a series of posts to adequately cover, however, with that said I've given some "broad strokes" responses below.
Expense:
The biggest problem I came across in trying to assess the cost of the current system on a per head basis is that most households receiving welfare also have income from other sources. Although around 2/3rds of households receive some kind of state support, only a third are "dependent" on welfare (over half of their income), and I could find no figures for households which only had welfare as an income means.
Coming at this from a different direction, £250 billion is, at present exchange rates, worth around $420 billion, which deflated to 2012 prices (for ease of comparison using wiki) is roughly $415 billion. If a country had a GDP of $415 USD(2012) it would be the 27th largest economy in the world - slightly bigger than Austria but smaller than Argentina. Without some detailed budgeting I can't categorically say that the provision of "university hall" style accommodation and basic sustenance for the poorest households in the country would cost more then buying Austria, but it seems unlikely. The second point on this is that even if the system is (somehow) more expensive per head the expectation is that it would reduce the welfare-claiming population by providing significant incentives to work, coupled with far less autonomy and a far lower standard of living for those on welfare.
As you mention a combination of social housing and existing programs are going to be fundamental building blocks, but I feel we should be looking to the universities and the military for the basic approach. Both successfully house (and in the case of the latter feed and clothe) large populations in relatively small geographic areas and provide facilities perhaps beyond the level I would be proposing.
Free Riders:
The lazy/mediocre is a problem unfortunately all welfare systems of any kind suffer from. Ultimately the effort of working will always be outweighed by freebies for some people, regardless of the level of living the freebies allow. The hope with the welfare-in-kind system is that it allows such a basic standard of living that this problem is minimized as far as possible. It may not the be most enlightened position but I also feel there would be less resentment/tension between those who pay for the system and those who are seen to be free-riding when the free-riders have none of the luxuries enjoyed by the working population. From my experience its not necessarily people receiving some support while unemployed that drives resentment, its those same people affording £100 trainers, plasma TVs and foreign holidays - all the things the low income tax payers can't afford.
(An aside here - this to some extent funded with a degree of petty criminality the welfare-in-kind system could take a much harsher view towards.)
Foreign Nationals
There are a few different scenarios I can see arising here; UK national lives abroad and retires back here - The question inevitably has to be: what have you been doing overseas? If you've been working and accumulating an income of some kind before retiring then you are unlikely to be 'caught' by this level of safety net. If you've been largely unemployed overseas, or spent all your money, before coming back, its not massively different to if you'd stayed in this country all your life and done the same thing. The only difference is we haven't had to pay to support you during the unemployed years in the middle (so a net saving).
Foreign nationals moving to the UK presents more of an issue, and I think the real challenge here is around immigration policy in general. The majority of economic migrants to the UK do become employed (though there is an issue with the UK becoming a low-wage low-income nation driven by hiring ever more people with ever lower skill-sets; a trend that unlimited migration has certainly contributed towards). For the remainder there is very little we can do under current EU directives. Even if you do deport unemployed migrants there is nothing to stop them coming back, so this seems to be a cost you have to lump regardless. At least the "in kind" system reduces the potential for fraud or abuse, and can, to some extent, be used to more forcibly require a degree of cultural assimilation (particularly language and laws).
Incapacitated
Sickness and disability is a controversial subject - since it can certainly be seen as falling into the "unlucky" camp. The first point here is that with increasing technology we should be seeing a decrease in the number of people unable to work - when your only employment options are physically demanding then any kind of physical disability potentially renders you unable to work. Is the same true in a world where many jobs take place via laptop, phone and video conference? I work from home one day a week so it takes no extra physical abilities that day-to-day living wouldn't. As an insight to this I'd suggest tracking down a BBC document about the post-WW2 welfare system. From memory both of the people followed who were signed off as unable to work ended up with jobs by the end of the program by taking advantage of employment opportunities that had very low physical requirements. The NHS still covers those with injuries or illness at a "critical" level so that wouldn't change.
The best solution I can come up with on the fly is some kind of "second stage" or "premium" welfare system, where the individual contributes some funds and the state provides slightly more. Those who have worked could potential build up entitlements to this higher level of support, while those in certain situations (disability/illness) could be assessed as being entitled directly. This may also give a way of people moving back into working life through part time or temporary work by removing the income-trap created when cash benefits are withdrawn at the same time tax is added. To your point about insurance it would be easy to see how an insurance market could exist to provide an income sufficient to met the requirements for this "contributory" level of welfare-in-kind in the event of sickness/illness/unemployment and so on. There also isn't any particular reason why this premium level is more costly to run per head, since the expectation is that the individuals involved are now contributing towards costs themselves
Thanks,
/Z
Thursday, 27 February 2014
The 100 Year Old Buccaneer
The Daily Telegraph has recently launched a campaign to review and update the country's ISA regulations to try and improve on the current outdated, and rather creaky system. As someone with a more than passing knowledge of the intricacies and foibles of the ISA landscape, I largely agree with the aim. However, in passing, the Telegraph ISA champion has unfortunately dismissed a key question in the debate about moving away from pensions and towards ISAs. What do you do when people spend all their money in Vegas?
**
Governments like pensions because they "lock in" someone's savings, and, upon retirement, force the purchase of an annuity which then provides a rest-of-life income. Its a way of forcing responsibility on to a population that, on the whole, is pretty irresponsible when it comes to spending decisions.
The moves to update the ISA rules to make them appropriate vehicles for retirement saving are, in part, being resisted because of concerns by those in the Treasury about people spending their retirement pot early. While those running the Telegraph campaign dismiss this as unlikely, I feel it is almost inevitable.
To build a healthy retirement income you really need to be saving throughout your working life; a lesson I, and many in my generation, who anticipate the state pension being abolished due to cost issues long before we ever get to claim it, base much of our financial planning around. Saving is something you do month in, month out, and not just to pay for holidays, cars or 80" plasma TVs, but so that thirty years down the line we have sufficient capital to be self-supporting.
A move away from forced pension contributions at work and through lower taxes, would therefore be welcomed by those who would channel the unlocked funds into their own nest eggs, earning both interest and dividends during their working life, and then in time being able to use a combination of income and capital erosion to pay for their retirement. It would also be welcomed by those who could use the extra money to buy a fifty-first pair of shoes and a bottle of vodka red bull.
What's the downside then?
In a harsh, lassie-faire type world the answer may be 'very little'. The government abdicates the need to provide a pension, slashes taxation by a comparable amount, and provides tax breaks equivalent to the cost of running the present system. Individuals then have the choice to spend now and suffer later, or flatten their income over their lifetime, perhaps forfeit some of the highs now, in exchange for a more comfortable old age.
Sadly we do not live in such a responsible society, in our world many and more will simply spend all their income as they get it and then rely on government hand outs in old age. Any government which lets people die in the winters and on the streets because they spent all their money 30 years ago will quickly find itself vilified in the media and out of office, regardless of how self-inflicted the potential misfortunes are. A truly "open" system, such as the one presented by the Telegraph, where savers are free to make their own choices, with their money, and shoulder the consequences, seems remarkably unlikely.
In trying to resolve this issue my first thought was to advance some kind of National Pension Fund. The premise seemed reasonable, replace the ponzi scheme of the current system with a structured investment pot, and allow it too accumulate to the point where the interest and earnings can pay for pensions.
Pensions in the UK currently cost the government approximately £74billion, so to pay out this amount, plus reinvestment of around 2% to keep up with inflation, the National Fund would need capital of around £1,480 billion. (£1.4 trillion, or the equivalent of about 3 years total government spending). This assumes a rather generous return of 5% a year, at a more practical 3% the capital requirements soar to over £7 trillion. (In this instance you would need to reinvest 2% of your 3% to keep up with inflation, leaving only 1% to pay the pension costs). This of course also assumes you dump the triple lock which sees pensions rising at 2.5% even if inflation is lower.
While the first figure isn't entirely ludicrous (if you assumed you could accumulate funds for 35 years before you begin to pay out the Fund would need to gain around £42 billion a year in funding while it grew - possibly doable with significant reforms, debt reduction and cost cutting). The later - £7 trillion would be the work of generations to amass.
There are also political problems with a National Fund - who administers it, who gets the cheque book and how long would it before an enterprising chancellor decided the Fund had to lend to government at rock bottom gilt prices? And on a practical note how would you go about bringing this scheme into being? Even if today's taxpayers were moved over to a new accumulative scheme someone still has to pay for those who claim their pensions today.
..
A brief derailment is required here to lay to bed a re-occurring comment about the nature of state pensions and how they are financed, the below is a fact:
"If you are currently receiving state pension, you did not pay for it."
More precisely - I and all current taxpayers like me, are paying for it, every month, when we get our salary, minus income tax, national insurance and so on.
The tax contributions that you made through your working life went towards the current spending of the governments elected while you were in office. This included, albeit on a much smaller scale, pensions for the previous generation of taxpayers to yourselves. None of it, ever, in any way, went towards investments, savings or projects designed to provide a means of funding your pensions.
This is because the state pension system is a ponzi-scheme of the grandest proportions, and it only works as long as people at the bottom keep paying in faster than the people at the top take the money out.
..
An alternative seems to be to reduce the number of people claiming pensions. This then reduces the overall tax burden and may allow for some relaxation of the taxation of savings and investments, opening the door for those who want to save to do so, while still maintaining some level of safety net.
To put the numbers into perspective when the national pension was first launched at the beginning of the 1900s, the qualifying age was 70 (against an average life expectancy in the mid 50s). Most people never claimed state pension, they died too soon. And on top of that it was at a far lower level (equivalent to about £33 / week in today's money for a married couple). As such it wasn't an unreasonable assumption that pensions could be seen as a minor cost, spread across a wide base of tax payers.
Today's world however is very different; life expectancy is in the 80's, and in fact in some of the wealthiest parts of the country has topped 100. On top of that the pension itself has risen to as much as £110 / week per person - 6 and a half times the cost of the original pension, and paid for decades to whole swathes of the population (today there are about 10 million pensioners in the UK - or around 14% of the population. At the end of 1908 there were 600,000 pensioners out of a population of 38 million or 1.5% (Its also worth pointing that the Empire was still alive and well in this time, so those 600,000 pensioners were not just 1% of the 38 million British, but 0.1% of the Empire's 420 million people) ).
Combining these two factors (6.5x more cost, and 10x more people claiming) and you have a pension system costing, conservatively, 65 times more than its originator; a number that only climbs higher every year as the population ages and the political death trap of the pension-triple lock ensures no chancellor has a hope of reigning in this particular item of spending.
If the number of people claiming pensions were reduced back to nearer its original level, some of the balance would be restored, and with it the potential for a more generous savings and investment regime. The easiest way to do this is to extend the retirement age, and indeed this particular idea has been floated. The retirement age in the UK is due to increase to 68 over the next decade or so, potentially delivering a saving in the £100s of billions. Yet this is still too little, too late. To rebalance an economy back to 1% or less of the population claiming pensions would need a pension age of around 85 or even 90. (2.3% of the population is currently 85+, though only 0.8% has reached 90). Some (very) cursory maths suggests such a move would save the Exchequer as much as £69 billion per year. Given that the cost-to-government of ISA tax relief is flagged at around £2.2 billion per year such a windfall would be more than enough to super-charge the ISA system into a tax-free whole-of-life savings vehicle, suitable for average investors looking to accumulate a tax-free income to fund the mid-late period of their life between wishing to finish work in the mid-60s, and starting to receive a pension in the mid-80s.
A similar outcome could be obtained by reducing the value of the pension from its current level of £100-odd per week back to its initial level of around £30 / week. While not as dramatic this could still potential save nearly 60% of the cost of pensions, or £44 billion per year. Again more than enough to fund a radical overhaul of personal savings.
Unfortunately both of these options, while working on a purely financial level, suffer from the same problem as the Telegraph's more general calls for a wider, more powerful, savings vehicle - what do you do with the people who don't save? If the pension age rises to 85 what does the state do with all the 65-80 year old's who are going to struggle to find employment, and didn't accumulate capital (for whatever reason)?
This leads on to a more general point about the extent to which the government should support people. I, genuinely, don't think we should have people starving on the streets or dying of the cold in their houses because they can't afford heating. On the other hand, just because I would willingly reach into my pocket to fund a warm room and three basic meals a day, doesn't mean I think you should be able to enjoy the benefits of consumerism (whether that be TV's, computers, smart-phones, cars or anything else) at the expense of others having to forfeit those same benefits due to the burden of taxation.
My proposal on this issue is therefore one that has been hinted at elsewhere, but never explicitly stated - we should move to a non-cash welfare system. Welfare of all kinds (unemployment benefit, low income benefits, pensions) should all be in the form of services and goods not cash. If you really don't have the funds to put clothes on your back and food on your plate, the state will, after all your assets have been used up, provide you with a warm room, three meals a day, and basic amenities, in the fashion of a retirement home (though more basic since this is state funded). This applies regardless of your demographic, if your 20 and can't afford rent and food then fine, again I don't begrudge you a roof over your head, soup on your plate and access to the kind of basic training which should enable anyone to get entry level jobs (or at least make up for the debacle of your education system to some extent).
This isn't the time or place to expand on this system in its entirety, however I will make a few final points in passing -
Firstly, even if the cost is not incomparable to the modern system it provides an incentive to save. If you want to live in your own house, have nice things and travel to interesting places in your retirement you have to save for them. The state will step in to stop death, and that's about it.
Secondly, it means work will always pay. In cash terms money comes from working (or investing), if you don't work you don't have money, full stop. You can't go down the pub, you can't bet on the grand national, you can't smoke, drink, play bingo or anything else.
Thirdly, this is not a charity, and the state does not have a requirement to support those who don't play ball. Any kind of state-funded accommodation has the potential to descend into ghetto-ism and petty crime, this must be rigorously and forcibly resisted. While I may feel some sympathy for the plight of those who find themselves homeless, friendless and penniless through poor (but legal) choices, or plain bad luck, I have no sympathy with those who try to bend the rules or take liabilities while existing on the state's support. In a very real way you are under the collective roof of every taxpayer and supporter of the British state, and as the saying goes "my roof, my rules".
Happy Trails,
/Z
Saturday, 22 February 2014
The Chicken / Sunset Exchange Rate
I did mention previously that I would do a part 2 to the previous post regarding Scot's Independence, looking at the viability of an independent state in the north. This has not been forgotten, but may take slightly more digging to find all the relevant figures (not helped by the Government not producing regional budgets). This particular piece is also tangentially relevant to the independence debate. So, with European elections pending and the spectacle of Msrs Clegg and Farage about to do metaphorical battle, the issue once again needs to be addressed: how many chickens is a pretty sunset worth?
**
Clearly I am not actually about to launch into the logic and equations required to equate fowl and orbital phenomena (though for those interested the answer is 60), instead the point is to illustrate the difficulty, or perhaps impossibility of comparing things that come in wildly different units or contexts. It's easy to say which of two objects if more expensive, or which of 2 films if longer, because the unit of comparison is consistent (GBP and Minutes respectively). Likewise it can sometimes be possible to equate two things a third object to produce a comparison (in the example about the figure of 60 is based on the GBP cost of a chicken and the cost of renting a chalet on the Isle of Skye - apparently the best place to watch a sunset in the world). But what do you do when the two just aren't comparable at all?
The particular issue at hand is the pro's and con's of EU membership.
The pro-EU camp then to lean towards arguments around the economic situation Britain would find itself in were it to leave, compared with retaining membership. Whether or not you agree with the figures provided, or the arguments advanced, the debate itself seems to make sense - if we (as a nation) lose money by being outside the EU then we should stay inside.
The problem is that the anti-EU camp has a second road of attack, and one that the (largely pro-EU) media do their best to downplay - that of sovereignty, national identity, and shared culture (for the sake of ease through the rest of this piece, I'm going to refer to this as the "cultural" route). The point many (myself included) make is that even if we will suffer economically from being outside the EU (a point I don't concede), it is still preferable to be sovereign. As the say goes, better a poor free man than a rich slave. This therefore raises the inevitable question: How many jobs, or what % of GDP, is being a sovereign nation worth?
Unfortunately I can see no way of answering this question - the two concepts exist in such different contexts as to be incomparable. Instead the two have to be considered independently, leading to a few possible outcomes if you wished to rationally compare the inside/outside scenarios:
Firstly you may consider that on both the economic and cultural strands one of the two options is preferable, thereby becoming a clear winner. This is the "better in every way" style of outcome, there is no trade off, no advantage parred with a disadvantage. In a sense if one of two options is superior in all relevant aspects it is the "correct" choice, and all others can be dropped.
Secondly, and far more likely, you get a scenario of one option is superior in one regard, and weaker in another. (The whole idea of economics is to understand this kind of choice, where different options present different advantages and disadvantages). In fact this is the scenario that occurs in virtually every interaction we ever undertake; do you prefer the tasty £4 sandwich or the acceptable £2 sandwich, do you prefer a three door or a five door car; do you want a safe, low return investment, or a risky, high return one.
How do we resolve this issue in real life then (i.e. outside of politics)? Usually by considering which of the various strands is the most important, and which of the various aspects are "must haves" and which are "nice to haves."
If money is the most important thing then the £3 sandwich beats the £5, the cheaper car beats the nicer car, and so on. If pleasure in the experience is more important than you get luxury sandwiches and sports cars. Just to reiterate its not that one is "better," in the sense of having an absolute advantage, rather you have chosen to rank the advantages of the preferred option as more important than its disadvantages.
We can, in fact, apply exactly the same logic to the matter of EU membership - do "we" (national We now), care more about the economic impacts of EU membership, or the political/cultural implications?
If we choose the economic thread as the dominant one then the matter becomes purely academic. Undertake some serious, detailed, independent, research into the most likely scenarios for a Britain inside, or outside the EU, and pick the option with the best prospects for growth in the UK economy. If the results are close (i.e. more akin to the safe low return investment or the risky high return one) have a referendum to see if the people think the potential risk is worth the potential pay off.
Likewise if we have a predominately cultural concern, lets have that same level of research into the impacts on British life in the case of an in or out scenario. To what extent will our Parliament lose its powers? To what extent will British votes and influence in various international bodies be subsumed into an EU voting block? What is the genuine, unbiased research into the impacts of significant immigration into a largely homogenous community? What are the likely changes in population make up, size and skill set, and what impacts will this have?
As above again if a clear winner emerges, all good, and the economic costs can be disregarded, and if the case is close put it to a national vote.
Why will this not happen? Simple - the current situation gives both camps a counter-argument to whatever the other side is pushing. Either group can give an economic answer to a cultural point and vice versa. This suits everyone in the political world, and guarantees the answer will never get resolved.
Would it be possible to resolve with less politicians and more realists in charge? - Maybe.
If we look at the two strands it is clear that a research consensus could never be reached on the cultural front because you have ranking systems (or 2 sources of authority in ethics speak). Those who style themselves Europeans would see the breakdown of national identities and boundaries and the creation of a new homogenous European cultural group as a positive. An enlightened move onto the next stage of civilization, just as the nation state was the successor to the feudal barony. On the other hand nationalists will say exactly the same thing is bad, a loss of history, place and identity into the grey gloop of institutionalized bureaucracies.
On the other hand it should be possible to deliver an answer with regard to the economic strand. Generally the measures of economic success only go in one direction; more wealth is good. A higher GDP/capita is better than a lower one, a higher growth rate is preferable to a lower one and so on. Hence if one of the options in the EU debate could be shown to deliver an absolutely superior economic output (i.e. higher GDP, higher GDP/capita and a higher growth rate), then this strand can be definitively "closed." Its possible you will get a multi-strand situation again, i.e. a higher GDP but lower GDP/capita, in which case you have to put the main debate on hold and have a sub-debate on which metrics are deemed the most important. However, this point aside it still seems more probable an economic argument could be resolved in a way the cultural one can not.
So, having got an economic answer, what comes next?
This is actually the easy part, if a vote shows that people find the economic arguments more important then the cultural ones then your research provides the final answer. If people say the cultural issues are more important than the economic factors can be set aside as a "known known" and issue addressed via a vote purely on cultural grounds.
I doubt we will ever have an electorate that is well enough informed, or a voting system sufficiently response to have this kind of "decision tree" voting structure. Therefore I feel we will just have the same argument repeated ad nauseum until the election. In essence; how many UK jobs is an independent seat in the WTO worth?
//
I'd like to end with a completely unrelated note about Darwinism, and the extent to which it is misunderstood. The phrase "survival of the fittest" should, in common parlance, probably be rendered "growth of the most suitable". Fittest in this context is not about speed, strength, intelligence, ability to earn wealth and so on. It is about fitting into your environment - the creature or population most "suitable" to its environment will thrive and reproduce faster than those less suited. As far as I'm aware there is no evidence that this process can go into reverse.
The exact example I found today was about wolves and dogs. Yes wolves are faster, stronger, better hunters and so on. But dogs are more suitable to a world dominated by humans. Thus, the dog is more "suitable" or "fitter" to their environment then the wolf. It is not "reverse" Darwinism that lead to dogs being less physically capable than wolves, it was real Darwinism leading to an adaption to a new environment .
This is also a point worth barring in mind next time you see any of the studies about changing intelligence in various populations. One study I found (and which was widely reported) concluded the average Victorian was 14 IQ points above today's average.
//
Happy Trails.
/Z
**
Clearly I am not actually about to launch into the logic and equations required to equate fowl and orbital phenomena (though for those interested the answer is 60), instead the point is to illustrate the difficulty, or perhaps impossibility of comparing things that come in wildly different units or contexts. It's easy to say which of two objects if more expensive, or which of 2 films if longer, because the unit of comparison is consistent (GBP and Minutes respectively). Likewise it can sometimes be possible to equate two things a third object to produce a comparison (in the example about the figure of 60 is based on the GBP cost of a chicken and the cost of renting a chalet on the Isle of Skye - apparently the best place to watch a sunset in the world). But what do you do when the two just aren't comparable at all?
The particular issue at hand is the pro's and con's of EU membership.
The pro-EU camp then to lean towards arguments around the economic situation Britain would find itself in were it to leave, compared with retaining membership. Whether or not you agree with the figures provided, or the arguments advanced, the debate itself seems to make sense - if we (as a nation) lose money by being outside the EU then we should stay inside.
The problem is that the anti-EU camp has a second road of attack, and one that the (largely pro-EU) media do their best to downplay - that of sovereignty, national identity, and shared culture (for the sake of ease through the rest of this piece, I'm going to refer to this as the "cultural" route). The point many (myself included) make is that even if we will suffer economically from being outside the EU (a point I don't concede), it is still preferable to be sovereign. As the say goes, better a poor free man than a rich slave. This therefore raises the inevitable question: How many jobs, or what % of GDP, is being a sovereign nation worth?
Unfortunately I can see no way of answering this question - the two concepts exist in such different contexts as to be incomparable. Instead the two have to be considered independently, leading to a few possible outcomes if you wished to rationally compare the inside/outside scenarios:
Firstly you may consider that on both the economic and cultural strands one of the two options is preferable, thereby becoming a clear winner. This is the "better in every way" style of outcome, there is no trade off, no advantage parred with a disadvantage. In a sense if one of two options is superior in all relevant aspects it is the "correct" choice, and all others can be dropped.
Secondly, and far more likely, you get a scenario of one option is superior in one regard, and weaker in another. (The whole idea of economics is to understand this kind of choice, where different options present different advantages and disadvantages). In fact this is the scenario that occurs in virtually every interaction we ever undertake; do you prefer the tasty £4 sandwich or the acceptable £2 sandwich, do you prefer a three door or a five door car; do you want a safe, low return investment, or a risky, high return one.
How do we resolve this issue in real life then (i.e. outside of politics)? Usually by considering which of the various strands is the most important, and which of the various aspects are "must haves" and which are "nice to haves."
If money is the most important thing then the £3 sandwich beats the £5, the cheaper car beats the nicer car, and so on. If pleasure in the experience is more important than you get luxury sandwiches and sports cars. Just to reiterate its not that one is "better," in the sense of having an absolute advantage, rather you have chosen to rank the advantages of the preferred option as more important than its disadvantages.
We can, in fact, apply exactly the same logic to the matter of EU membership - do "we" (national We now), care more about the economic impacts of EU membership, or the political/cultural implications?
If we choose the economic thread as the dominant one then the matter becomes purely academic. Undertake some serious, detailed, independent, research into the most likely scenarios for a Britain inside, or outside the EU, and pick the option with the best prospects for growth in the UK economy. If the results are close (i.e. more akin to the safe low return investment or the risky high return one) have a referendum to see if the people think the potential risk is worth the potential pay off.
Likewise if we have a predominately cultural concern, lets have that same level of research into the impacts on British life in the case of an in or out scenario. To what extent will our Parliament lose its powers? To what extent will British votes and influence in various international bodies be subsumed into an EU voting block? What is the genuine, unbiased research into the impacts of significant immigration into a largely homogenous community? What are the likely changes in population make up, size and skill set, and what impacts will this have?
As above again if a clear winner emerges, all good, and the economic costs can be disregarded, and if the case is close put it to a national vote.
Why will this not happen? Simple - the current situation gives both camps a counter-argument to whatever the other side is pushing. Either group can give an economic answer to a cultural point and vice versa. This suits everyone in the political world, and guarantees the answer will never get resolved.
Would it be possible to resolve with less politicians and more realists in charge? - Maybe.
If we look at the two strands it is clear that a research consensus could never be reached on the cultural front because you have ranking systems (or 2 sources of authority in ethics speak). Those who style themselves Europeans would see the breakdown of national identities and boundaries and the creation of a new homogenous European cultural group as a positive. An enlightened move onto the next stage of civilization, just as the nation state was the successor to the feudal barony. On the other hand nationalists will say exactly the same thing is bad, a loss of history, place and identity into the grey gloop of institutionalized bureaucracies.
On the other hand it should be possible to deliver an answer with regard to the economic strand. Generally the measures of economic success only go in one direction; more wealth is good. A higher GDP/capita is better than a lower one, a higher growth rate is preferable to a lower one and so on. Hence if one of the options in the EU debate could be shown to deliver an absolutely superior economic output (i.e. higher GDP, higher GDP/capita and a higher growth rate), then this strand can be definitively "closed." Its possible you will get a multi-strand situation again, i.e. a higher GDP but lower GDP/capita, in which case you have to put the main debate on hold and have a sub-debate on which metrics are deemed the most important. However, this point aside it still seems more probable an economic argument could be resolved in a way the cultural one can not.
So, having got an economic answer, what comes next?
This is actually the easy part, if a vote shows that people find the economic arguments more important then the cultural ones then your research provides the final answer. If people say the cultural issues are more important than the economic factors can be set aside as a "known known" and issue addressed via a vote purely on cultural grounds.
I doubt we will ever have an electorate that is well enough informed, or a voting system sufficiently response to have this kind of "decision tree" voting structure. Therefore I feel we will just have the same argument repeated ad nauseum until the election. In essence; how many UK jobs is an independent seat in the WTO worth?
//
I'd like to end with a completely unrelated note about Darwinism, and the extent to which it is misunderstood. The phrase "survival of the fittest" should, in common parlance, probably be rendered "growth of the most suitable". Fittest in this context is not about speed, strength, intelligence, ability to earn wealth and so on. It is about fitting into your environment - the creature or population most "suitable" to its environment will thrive and reproduce faster than those less suited. As far as I'm aware there is no evidence that this process can go into reverse.
The exact example I found today was about wolves and dogs. Yes wolves are faster, stronger, better hunters and so on. But dogs are more suitable to a world dominated by humans. Thus, the dog is more "suitable" or "fitter" to their environment then the wolf. It is not "reverse" Darwinism that lead to dogs being less physically capable than wolves, it was real Darwinism leading to an adaption to a new environment .
This is also a point worth barring in mind next time you see any of the studies about changing intelligence in various populations. One study I found (and which was widely reported) concluded the average Victorian was 14 IQ points above today's average.
//
Happy Trails.
/Z
Thursday, 20 February 2014
Freedom?!
So in a scant few months the Union of the Kingdoms of England and Scotland may come crashing down, ending 300 years of successful partnership (albeit with the usual neighborly bickering from time to time). Is this right? Is it proper? Why is it happening now? What will happen should this event come about? And perhaps most importantly... can we invade if it does?
**
I should begin by pointing out I am a shining example of practical double-think when it comes to the issue of Scottish independence. One the one hand I am with Mr Denny Crane in considering the idea that part of my country could just break away as both treason and heresy. On the other hand I'm of the view that if you don't want to be part of the group then the sooner you leave the better. As with many things (education, gaming groups or anything else), if you don't want to take part, fine, leave. Just don't hang around and whinge while incurring costs to everyone and yourself.
Thus in the interests of this not descending (more than necessary) into a string of rants on the topic of nationalist heresy, I'm going to focus more on my expectations for probable outcomes of the referendum and some of the conceptual and political challenges they face.
From current situations it seems there are four possible outcomes in September; a minor yes vote or a minor no vote on a small turnout (55% either way, maybe 50% turnout), or a strong no vote on a minor or moderate turn out (65%+ on a 55%+ turnout). I'd be willing to expressly rule-out a strong "yes" vote - all the main polls conducted so far show a roughly 2-1 slant in favor of retaining the Union in representative and sensibly sized samples. The challenge for the "Yes" camp is to mobilize a biased enough voting population to overcome the underlying splits, and to make full use of the likelihood that those in favor of a split are more likely to be engaged and enthusiastic (and therefore more likely to vote). It is in furtherance of this agenda that the voting age has been lowered to 16, and any Scots living outside Scotland have been removed from the electoral role. The former group (young people; no real economic awareness, limited, or no, experience of the job market, and easier to bribe with things like university tuition fees) are generally more pro-independence, while the latter (older, probably worked and lived in a variety of roles and regions etc) are generally more pro-union.
In turn then;
Cry "Freedom!"
-A minor yes on a small turnout
This is possibly the worst outcome for almost all concerned. Contrary to media image the SNP do not necessarily want an independent Scotland- it opens the door on months (years) of messy negotiations, transfers responsibilities for all the ills in Scotland from Westminster to Holyrood, and robs them of the main plank of their political agenda (the Scotland / England tension). Instead the true objective here is some form of "Devo-Max" where the Scottish Parliament gains the powers to raise tax in Scotland and set things such as welfare levels, but continues to receive additional financial support from the rest of the UK, and Westminster picks up the bill for foreign and defense policy. Independence is simply a ploy to push for this increase in power for the Scottish politicians .It will be a bitter blow to those who consider themselves British (and will therefore be saddened to see nearly a tenth of our country break away), and will no doubt be exceptional difficult for those with businesses, jobs, and families which will now exist in a foreign country.
I say "almost" all concerned because there is one group that benefits from a Scottish breakaway - the Conservative party. With the Conservatives all but wiped out in Scotland, and Labour holding a number of seats, simply removing the Scottish MPs presents an opportunity for the Conservatives to counteract the bias in constituency boundaries by effectively eliminating 40-50 Labour MPs. The cynical may wonder to what extend this consideration has played on the minds of senior conservative ministers and party mandarins, maybe the splitting of the country would, for them, be seen as a political coup rather than damning indictment of failed governance.
There are also significant democratic issues with this outcome. A 55% yes vote on a 50% turn out means only 27.5% of the population actively voting to dissolve the Union, amongst them potentially a high proportion of 16-17 year olds, whose opinions will have generational consequences in terms of diplomacy, politics, macro-economics, foreign policy and military affairs. While we may assume that apathy with general elections is a consequence of many people not caring for any of the main parties and thereby accepting any outcome as equally awful, it requires a certain sangfroid to consider that 75% of the Scottish population don't care whether they are an independent country or part of the UK. IF this is indeed the case the question should (but won't) be raised as to why people are so uncaring, and if they are why it is being portrayed as such a huge political issue in Scotland.
Sorry I didn't hear you
- A minor No on a small turnout
This is possibly shaping up to be the most likely outcome, a 55 / 45 type outcome in favor of retaining the Union ("No"), on a relatively low turnout (around 50% again). While this has slightly less democratic issues than the yes vote - effectively your maintaining the status quo so a low level of support suggests most people don't care enough to vote for change though the issue of why people don't care is still reasonable.
The biggest problem with this is the question of what happens now. The independence-campaigners will come up with an excuse as to why the result isn't binding and begin calling for a repeat referendum. A no vote with anything less than a shattering majority does nothing to resolve the issues, and potentially gives the SNP another route to making noise (by claiming the referendum was won by threats, bullying or outright cheating). There is also the potential controversy around whether a Westminister government with only a few months to run before a general election will want to cede significant new powers to Holyrood, even with the Union intact, as has been mooted.
In effect a minor-No simply resets us back to a where we were when the referendum was first suggested, and we can go through the whole rigmarole again.
No changes here
- A strong no on a small turnout
In practice this has virtually no differences to the minor no on a small turnout. If the polls are to be believed we may see anything up to a 65/35 split without the outcome being unexpected. However, as with the point above there is nothing to stop the whole cycle being repeated. A strong no will do nothing to dismay the SNP (who are already running fine with the polls 2-1 against independence), and if anything this just gives them slightly more leverage to bully Westminster into handing over more power - "See," they will say, "we want to stay British, but in payment we want more local power."
I would not all be surprised to see this type of result portrayed as a "Vote for Devo-Max" by the SNP, regardless of the fact that that wasn't the question asked. The fact that maybe people want to stay in the Union and have Scotland and England run with similar policies will be ignored, and instead the narrative will be that people don't want to break the union, so they must want more power in Holyrood (see point above about this, conveniently, being the SNPs desired outcome).
United we stand
-Strong no on a high turnout
Almost certainly not going to happen, but included here on a off chance it does. The polls do not support the idea that a high turnout will return a Yes vote. As the size of the voting population goes up, so to does the tendency for the result to reflect the majority views of the populace, which are, in this case, largely against a 'hard' split from the UK.
What will happen with this result then?
My feeling here is a similar spin war to that mentioned above, where the SNP will paint a picture of a call for more powers to be moved from Westminster to Scotland. The only difference is potentially a stronger bargaining hand for Westminster. With a strong vote in favour of the Union on a high turnout (preferably enough to be a solid majority of the total voter population), the SNP have far less leverage to force another referendum, and thus less bargaining power overall.
Most likely the whole issue will be dropped (in the same way as voting reform following the referendum on that issue), and we will continue on as if it had never happened in the first place.
I'll maybe try and pull together something regarding the finances of an independent Scotland, and its political possibilities, though the only point it seems worth mentioning on this at present is that the White Paper produce by Salmond some time ago has increasingly been shown to be full of lies, statistics and huge assumptions. Therefore the logical assumption is that, having reviewed the matter, the SNP analysts concluded the truth was bad for them, and they would need to present an amended version of reality. That maybe says it all.
Happy Trails
/Z
**
I should begin by pointing out I am a shining example of practical double-think when it comes to the issue of Scottish independence. One the one hand I am with Mr Denny Crane in considering the idea that part of my country could just break away as both treason and heresy. On the other hand I'm of the view that if you don't want to be part of the group then the sooner you leave the better. As with many things (education, gaming groups or anything else), if you don't want to take part, fine, leave. Just don't hang around and whinge while incurring costs to everyone and yourself.
Thus in the interests of this not descending (more than necessary) into a string of rants on the topic of nationalist heresy, I'm going to focus more on my expectations for probable outcomes of the referendum and some of the conceptual and political challenges they face.
From current situations it seems there are four possible outcomes in September; a minor yes vote or a minor no vote on a small turnout (55% either way, maybe 50% turnout), or a strong no vote on a minor or moderate turn out (65%+ on a 55%+ turnout). I'd be willing to expressly rule-out a strong "yes" vote - all the main polls conducted so far show a roughly 2-1 slant in favor of retaining the Union in representative and sensibly sized samples. The challenge for the "Yes" camp is to mobilize a biased enough voting population to overcome the underlying splits, and to make full use of the likelihood that those in favor of a split are more likely to be engaged and enthusiastic (and therefore more likely to vote). It is in furtherance of this agenda that the voting age has been lowered to 16, and any Scots living outside Scotland have been removed from the electoral role. The former group (young people; no real economic awareness, limited, or no, experience of the job market, and easier to bribe with things like university tuition fees) are generally more pro-independence, while the latter (older, probably worked and lived in a variety of roles and regions etc) are generally more pro-union.
In turn then;
Cry "Freedom!"
-A minor yes on a small turnout
This is possibly the worst outcome for almost all concerned. Contrary to media image the SNP do not necessarily want an independent Scotland- it opens the door on months (years) of messy negotiations, transfers responsibilities for all the ills in Scotland from Westminster to Holyrood, and robs them of the main plank of their political agenda (the Scotland / England tension). Instead the true objective here is some form of "Devo-Max" where the Scottish Parliament gains the powers to raise tax in Scotland and set things such as welfare levels, but continues to receive additional financial support from the rest of the UK, and Westminster picks up the bill for foreign and defense policy. Independence is simply a ploy to push for this increase in power for the Scottish politicians .It will be a bitter blow to those who consider themselves British (and will therefore be saddened to see nearly a tenth of our country break away), and will no doubt be exceptional difficult for those with businesses, jobs, and families which will now exist in a foreign country.
I say "almost" all concerned because there is one group that benefits from a Scottish breakaway - the Conservative party. With the Conservatives all but wiped out in Scotland, and Labour holding a number of seats, simply removing the Scottish MPs presents an opportunity for the Conservatives to counteract the bias in constituency boundaries by effectively eliminating 40-50 Labour MPs. The cynical may wonder to what extend this consideration has played on the minds of senior conservative ministers and party mandarins, maybe the splitting of the country would, for them, be seen as a political coup rather than damning indictment of failed governance.
There are also significant democratic issues with this outcome. A 55% yes vote on a 50% turn out means only 27.5% of the population actively voting to dissolve the Union, amongst them potentially a high proportion of 16-17 year olds, whose opinions will have generational consequences in terms of diplomacy, politics, macro-economics, foreign policy and military affairs. While we may assume that apathy with general elections is a consequence of many people not caring for any of the main parties and thereby accepting any outcome as equally awful, it requires a certain sangfroid to consider that 75% of the Scottish population don't care whether they are an independent country or part of the UK. IF this is indeed the case the question should (but won't) be raised as to why people are so uncaring, and if they are why it is being portrayed as such a huge political issue in Scotland.
Sorry I didn't hear you
- A minor No on a small turnout
This is possibly shaping up to be the most likely outcome, a 55 / 45 type outcome in favor of retaining the Union ("No"), on a relatively low turnout (around 50% again). While this has slightly less democratic issues than the yes vote - effectively your maintaining the status quo so a low level of support suggests most people don't care enough to vote for change though the issue of why people don't care is still reasonable.
The biggest problem with this is the question of what happens now. The independence-campaigners will come up with an excuse as to why the result isn't binding and begin calling for a repeat referendum. A no vote with anything less than a shattering majority does nothing to resolve the issues, and potentially gives the SNP another route to making noise (by claiming the referendum was won by threats, bullying or outright cheating). There is also the potential controversy around whether a Westminister government with only a few months to run before a general election will want to cede significant new powers to Holyrood, even with the Union intact, as has been mooted.
In effect a minor-No simply resets us back to a where we were when the referendum was first suggested, and we can go through the whole rigmarole again.
No changes here
- A strong no on a small turnout
In practice this has virtually no differences to the minor no on a small turnout. If the polls are to be believed we may see anything up to a 65/35 split without the outcome being unexpected. However, as with the point above there is nothing to stop the whole cycle being repeated. A strong no will do nothing to dismay the SNP (who are already running fine with the polls 2-1 against independence), and if anything this just gives them slightly more leverage to bully Westminster into handing over more power - "See," they will say, "we want to stay British, but in payment we want more local power."
I would not all be surprised to see this type of result portrayed as a "Vote for Devo-Max" by the SNP, regardless of the fact that that wasn't the question asked. The fact that maybe people want to stay in the Union and have Scotland and England run with similar policies will be ignored, and instead the narrative will be that people don't want to break the union, so they must want more power in Holyrood (see point above about this, conveniently, being the SNPs desired outcome).
United we stand
-Strong no on a high turnout
Almost certainly not going to happen, but included here on a off chance it does. The polls do not support the idea that a high turnout will return a Yes vote. As the size of the voting population goes up, so to does the tendency for the result to reflect the majority views of the populace, which are, in this case, largely against a 'hard' split from the UK.
What will happen with this result then?
My feeling here is a similar spin war to that mentioned above, where the SNP will paint a picture of a call for more powers to be moved from Westminster to Scotland. The only difference is potentially a stronger bargaining hand for Westminster. With a strong vote in favour of the Union on a high turnout (preferably enough to be a solid majority of the total voter population), the SNP have far less leverage to force another referendum, and thus less bargaining power overall.
Most likely the whole issue will be dropped (in the same way as voting reform following the referendum on that issue), and we will continue on as if it had never happened in the first place.
I'll maybe try and pull together something regarding the finances of an independent Scotland, and its political possibilities, though the only point it seems worth mentioning on this at present is that the White Paper produce by Salmond some time ago has increasingly been shown to be full of lies, statistics and huge assumptions. Therefore the logical assumption is that, having reviewed the matter, the SNP analysts concluded the truth was bad for them, and they would need to present an amended version of reality. That maybe says it all.
Happy Trails
/Z
Monday, 10 February 2014
Coke or Pepsi?
Its been a far while since I put virtual pen to metaphysical paper. Partly because the various news stories and political meanderings of the last few months have not delivered anything in the way of new insights or considerations, partly because once one falls out of the habit of capturing and recording thoughts it is difficult to get back on the horse.
That said, I did formalize a thought which has been bouncing round for a while now, and may sustain a longer discussion - the effective use of Branding in the modern world.
**
Branding in its commercial sense is the association of positive ideas with a particular brand or make. Once you've established the idea that your trainers are better, your coke tastier, your mortgages cheaper or your bikes speedier, then a huge premium can be charge for what are, objectively, comparable (or even inferior) goods.
The major brands of the world are worth billions on their own, Apple, the world's most powerful brand according to Forbes, is worth $100 billion. In effect you would wipe this amount off Apple's share price if everyone forgot the past and just looked at the facts as they stand today.
And branding has jumped from the commercial and advertising world to the political world. It has become axiomatic that you no longer need to respond to someone's arguments if they can instead brand them a Nazi. This is such a clearly observed phenomenon that is has even been the source of a behavioral law; Godwin's Rule of Nazi Analogies, which states that if you let an internet discussion on any topic run for long enough, someone is going to get called (or at least compared to) a Nazi. The political gains to this approach are clear - rather than engaging with the facts of a matter, or the arguments laid out, you need simply directly, and personally, assault the person with whom you are debated. Once you have successfully hung your pejorative label of choice around their shoulders you can then simply dismiss their arguments. After all, how could anything suggested by such a person be worth considering?
From this I feel there are at least three examples of this behaviour which bear consideration in our current climate;
1.) The Climate Deniers
Contrary to the ever more grandiose claims of various (extremely biased) institutions and individuals, the ""science"" on climate change has not been categorically settled (or more precisely in this context; AGW or Anthropomorphic Global Warming). Climate science does not abide by the most basic of scientific principles; that a testable and disprovable hypothesis must be established, and then should data show your predictions to be in error, your hypothesis is wrong. Instead climate change institutions continue to pronounce ever more certainty in their theories, while simultaneously failing to deliver predictions borne out by data.
While I do not want to derail into an extended debate around the political and financial pressure brought to bear in the interests of the 'green' agenda, I do wish to make the point that there is not consensus in the scientific community around the causes and extent of climate change, in the same way that, for example, the scientific community came to accept the existence of the Higgs Boson after the recent experiments at CERN.
This distinction is used for a reason - the existence of the Higgs particle was not a political matter, and was therefore resolved in the way most scientific matters are - through discussions, experimentation and repeated, independent, interpretation of data. It is interesting to compare this to the way climate debates are handled.
The pro-climate lobby has successfully branded those who oppose them as "deniers" a term, which, however accurate in a grammatical sense, has very clear pejorative overtones. It implies that those who refuse to agree with the "consensus" (second bit of branding - make out that every but some fringe loonies agree with you) are dangerously short sighted or even willfully refusing to accept the clear truth. In the same way that there were those who denied the world was round or that deny the Holocaust took place, climate change "deniers" are painted as wrong by their very nature, with virtually no publicity or response given to the points they make.
Contrast this situation with one in which the branding is reversed and we have climate scientists and climate zealots (or alarmists as the term has slowly begun to seep in). Next time you read an article about global warming replace all instances of "denier" with "scientist" and preference anyone speaking up in favor of the AGW narrative as a "climate alarmist". Even relatively benign articles can be significantly altered through such branding.
2.) Welfare Entitlement
There has been a consistent attempt over the last sixty years to normalize the act of receiving state benefits. Why this is is open to debate. The cynical (me included) will say that if you wish to build a client state of those dependent on state handouts you have to first make it socially acceptable to take those handouts. Those of a more liberal bent may say that its necessary to ensure that the most vulnerable are able to receive support without becoming an underclass and being permanently locked out of society. The more extreme brand of socialists may even say that the successful have no right to their wealth, and so redistributing it should be applauded. Wherever you sit on this scale of explanatory tribalism, the fact remains that the language around welfare has changed, and with this new branding has come a different view on similar practices.
Welfare support was once called "National Assistance" for which you had to apply, and be judged worthy. It was just what it said - help provided by the country as a whole, to support those in situations deemed not necessarily of their own devising, but for which the majority of people would probably agree a helping hand may be in order. The wording is important here "Assistance" is clearly something extra not the whole of it. Assistance helps you do something you could do anyway a little bit easier, or make something impossible merely difficult. By the same extension when you applied for National Assistance you were, sometimes literally, going cap in hand to the representatives of your society and asking for help. It was humbling, it may even have been a embarrassing for those with a stubborn or proud streak. It was something done because you had no alternative.
Today we have Benefit Entitlements - although the system is broadly the same - the state provides financial support to those in various situations (unemployment etc etc), the terminology is completely different. Entitlement is a remarkably powerful term, in the private sector or normal day-to-day living the only things we can claim "entitlement" to are debts - things we are owed under law and which have, for whatever reason, been withheld. As citizens we are entitled to vote for our representatives and to be treated equally under the law - rights which a great many men have fought and died for over the centuries since the English first began to replace limits on a King's God-given entitlement to rule. Yet today we talk of entitlements not as the implementation of divine will, or as the foundations of our democratic system, today, we talk of entitlements to have money handed out to you for not wanting to work, money taken from others through taxation.
Tell someone they are entitled to something and you set a remarkably different expectation compared to telling someone they can apply to your for assistance. Yet that is exactly how successive governments have branded welfare payments. As such it is remarkably difficult to suggest even limiting the growth in welfare before a howling cry is sent up - after all you are suggesting taking away people's entitlements under god and law. How would the current welfare debate be shaping up if we still called it "National Assistance?" or even "Taxpayer Funded Assistance?" (My personal choice of nomenclature). It would certainly make it easier for a minister to stand up in the House and state "We are looking for ways to reduce the costs of Taxpayer Funded Assistance" rather than the daunting task now before him (or her!) "This government will reduce people's welfare entitlements."
3.) Communists and Fascists
This one is a little more generic than the two above, but it bears thinking about. As I mentioned at the beginning of this piece, Nazism (and fascism in general) are so engrained in our national psyche as purveyors of evil that we almost instinctively accept the premise that those with radical right wing beliefs must also be homicidal (or genocidal) maniacs intent on global domination. Yet we have no such horror when confronted with the extremes of the Left. Why?
Branding is again the answer here, Marxism has been portrayed in the liberal West as the older and maybe a little eccentric cousin of socialism. Largely harmless, and the kind of thing you expect from university ethics professors or bumbling house of lords representatives. By branding Marxism (and extreme left wing views in general) as the abode of the eccentric academic they have been accepted in the main in a way that their right wing mirrors could never be.
Yes there is the matter of WW2, in which, for various geopolitical reasons, the communists were on our side, and fought against the fascists. Objectively however the communist regimes in Russia, China, Cambodia and so on have inflicted death and economic misery on a scale at least as great of that as the fascists, and in the name of ideologies no more compatible with small c conservative, liberal capitalism then the regimes of Germany or Italy.
As could be done with either of the examples above I'd challenge anyone to read an article in which some is referred to as a communist (or Marxist) and replace those terms with fascist or even Nazi. How much of a difference does that make to the article, even when the content hasn't actually changed at all?
So... closing thoughts?
Most people don't want the facts, they don't even want the executive summary. Stereotypes emerge because we like the little colored boxes you can drop people, things and concepts into, because they make the world easy. Thought, decision making, and understand consequences isn't required if you can just read the label and know the answer - Liberals? Good, Deniers? Bad, Healthy - Good, Fat - Bad, and so on.
I doubt there is much that can be done to change this, the human condition is to mired in an eternal battle of "us" vs "them" for facts to ever come tribalism and its conceptual cousin Branding, but at least if people start being aware of the impact , maybe the odd person will actually make a decision based on the facts , rather than the insulting label applied to the speaker.
Happy Trails
/Z
That said, I did formalize a thought which has been bouncing round for a while now, and may sustain a longer discussion - the effective use of Branding in the modern world.
**
Branding in its commercial sense is the association of positive ideas with a particular brand or make. Once you've established the idea that your trainers are better, your coke tastier, your mortgages cheaper or your bikes speedier, then a huge premium can be charge for what are, objectively, comparable (or even inferior) goods.
The major brands of the world are worth billions on their own, Apple, the world's most powerful brand according to Forbes, is worth $100 billion. In effect you would wipe this amount off Apple's share price if everyone forgot the past and just looked at the facts as they stand today.
And branding has jumped from the commercial and advertising world to the political world. It has become axiomatic that you no longer need to respond to someone's arguments if they can instead brand them a Nazi. This is such a clearly observed phenomenon that is has even been the source of a behavioral law; Godwin's Rule of Nazi Analogies, which states that if you let an internet discussion on any topic run for long enough, someone is going to get called (or at least compared to) a Nazi. The political gains to this approach are clear - rather than engaging with the facts of a matter, or the arguments laid out, you need simply directly, and personally, assault the person with whom you are debated. Once you have successfully hung your pejorative label of choice around their shoulders you can then simply dismiss their arguments. After all, how could anything suggested by such a person be worth considering?
From this I feel there are at least three examples of this behaviour which bear consideration in our current climate;
1.) The Climate Deniers
Contrary to the ever more grandiose claims of various (extremely biased) institutions and individuals, the ""science"" on climate change has not been categorically settled (or more precisely in this context; AGW or Anthropomorphic Global Warming). Climate science does not abide by the most basic of scientific principles; that a testable and disprovable hypothesis must be established, and then should data show your predictions to be in error, your hypothesis is wrong. Instead climate change institutions continue to pronounce ever more certainty in their theories, while simultaneously failing to deliver predictions borne out by data.
While I do not want to derail into an extended debate around the political and financial pressure brought to bear in the interests of the 'green' agenda, I do wish to make the point that there is not consensus in the scientific community around the causes and extent of climate change, in the same way that, for example, the scientific community came to accept the existence of the Higgs Boson after the recent experiments at CERN.
This distinction is used for a reason - the existence of the Higgs particle was not a political matter, and was therefore resolved in the way most scientific matters are - through discussions, experimentation and repeated, independent, interpretation of data. It is interesting to compare this to the way climate debates are handled.
The pro-climate lobby has successfully branded those who oppose them as "deniers" a term, which, however accurate in a grammatical sense, has very clear pejorative overtones. It implies that those who refuse to agree with the "consensus" (second bit of branding - make out that every but some fringe loonies agree with you) are dangerously short sighted or even willfully refusing to accept the clear truth. In the same way that there were those who denied the world was round or that deny the Holocaust took place, climate change "deniers" are painted as wrong by their very nature, with virtually no publicity or response given to the points they make.
Contrast this situation with one in which the branding is reversed and we have climate scientists and climate zealots (or alarmists as the term has slowly begun to seep in). Next time you read an article about global warming replace all instances of "denier" with "scientist" and preference anyone speaking up in favor of the AGW narrative as a "climate alarmist". Even relatively benign articles can be significantly altered through such branding.
2.) Welfare Entitlement
There has been a consistent attempt over the last sixty years to normalize the act of receiving state benefits. Why this is is open to debate. The cynical (me included) will say that if you wish to build a client state of those dependent on state handouts you have to first make it socially acceptable to take those handouts. Those of a more liberal bent may say that its necessary to ensure that the most vulnerable are able to receive support without becoming an underclass and being permanently locked out of society. The more extreme brand of socialists may even say that the successful have no right to their wealth, and so redistributing it should be applauded. Wherever you sit on this scale of explanatory tribalism, the fact remains that the language around welfare has changed, and with this new branding has come a different view on similar practices.
Welfare support was once called "National Assistance" for which you had to apply, and be judged worthy. It was just what it said - help provided by the country as a whole, to support those in situations deemed not necessarily of their own devising, but for which the majority of people would probably agree a helping hand may be in order. The wording is important here "Assistance" is clearly something extra not the whole of it. Assistance helps you do something you could do anyway a little bit easier, or make something impossible merely difficult. By the same extension when you applied for National Assistance you were, sometimes literally, going cap in hand to the representatives of your society and asking for help. It was humbling, it may even have been a embarrassing for those with a stubborn or proud streak. It was something done because you had no alternative.
Today we have Benefit Entitlements - although the system is broadly the same - the state provides financial support to those in various situations (unemployment etc etc), the terminology is completely different. Entitlement is a remarkably powerful term, in the private sector or normal day-to-day living the only things we can claim "entitlement" to are debts - things we are owed under law and which have, for whatever reason, been withheld. As citizens we are entitled to vote for our representatives and to be treated equally under the law - rights which a great many men have fought and died for over the centuries since the English first began to replace limits on a King's God-given entitlement to rule. Yet today we talk of entitlements not as the implementation of divine will, or as the foundations of our democratic system, today, we talk of entitlements to have money handed out to you for not wanting to work, money taken from others through taxation.
Tell someone they are entitled to something and you set a remarkably different expectation compared to telling someone they can apply to your for assistance. Yet that is exactly how successive governments have branded welfare payments. As such it is remarkably difficult to suggest even limiting the growth in welfare before a howling cry is sent up - after all you are suggesting taking away people's entitlements under god and law. How would the current welfare debate be shaping up if we still called it "National Assistance?" or even "Taxpayer Funded Assistance?" (My personal choice of nomenclature). It would certainly make it easier for a minister to stand up in the House and state "We are looking for ways to reduce the costs of Taxpayer Funded Assistance" rather than the daunting task now before him (or her!) "This government will reduce people's welfare entitlements."
3.) Communists and Fascists
This one is a little more generic than the two above, but it bears thinking about. As I mentioned at the beginning of this piece, Nazism (and fascism in general) are so engrained in our national psyche as purveyors of evil that we almost instinctively accept the premise that those with radical right wing beliefs must also be homicidal (or genocidal) maniacs intent on global domination. Yet we have no such horror when confronted with the extremes of the Left. Why?
Branding is again the answer here, Marxism has been portrayed in the liberal West as the older and maybe a little eccentric cousin of socialism. Largely harmless, and the kind of thing you expect from university ethics professors or bumbling house of lords representatives. By branding Marxism (and extreme left wing views in general) as the abode of the eccentric academic they have been accepted in the main in a way that their right wing mirrors could never be.
Yes there is the matter of WW2, in which, for various geopolitical reasons, the communists were on our side, and fought against the fascists. Objectively however the communist regimes in Russia, China, Cambodia and so on have inflicted death and economic misery on a scale at least as great of that as the fascists, and in the name of ideologies no more compatible with small c conservative, liberal capitalism then the regimes of Germany or Italy.
As could be done with either of the examples above I'd challenge anyone to read an article in which some is referred to as a communist (or Marxist) and replace those terms with fascist or even Nazi. How much of a difference does that make to the article, even when the content hasn't actually changed at all?
So... closing thoughts?
Most people don't want the facts, they don't even want the executive summary. Stereotypes emerge because we like the little colored boxes you can drop people, things and concepts into, because they make the world easy. Thought, decision making, and understand consequences isn't required if you can just read the label and know the answer - Liberals? Good, Deniers? Bad, Healthy - Good, Fat - Bad, and so on.
I doubt there is much that can be done to change this, the human condition is to mired in an eternal battle of "us" vs "them" for facts to ever come tribalism and its conceptual cousin Branding, but at least if people start being aware of the impact , maybe the odd person will actually make a decision based on the facts , rather than the insulting label applied to the speaker.
Happy Trails
/Z
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