Monthly Archives: September 2018

Politics and Human Nature

Politics is the means we have developed to deal with the complexities of Human Nature.

Tory values are based on: — from an editorial by Fraser Nelson
• The lowering of taxes,
• Being strong on defence and
• Keeping the streets safe

From Michael Fry in the National:
Adam Smith set out 250 years ago what he believed the to be a Governments’ indispensable tasks:
• One was the administration of justice, without which a society could not function.
• Second was the defence of that society against outside attack.
• Third was a function Smith called police, though he did not mean police in the modern sense.

In the West there are two distinct political aspirations:

Capitalism” refers to a political and economic system that was developed in Europe and America during the Enlightenment. It is characterized by private ownership of property, rather than state control. More fundamentally, it rests on the Enlightenment principle of Individual Rights, in which the unit of moral and political value is each individual. As the American philosopher Ayn Rand explains this,
Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.

Socialism is a range of economic and social systems characterised by social ownership and democratic control of the means of production as well as the political theories and movements associated with them. Social ownership may refer to forms of public, collective or cooperative ownership, or to citizen ownership of equity — a sympathetic version, and the following —

Socialism is a political and (derivatively) economic system in which the individual has no independent existence, and morally exists only to serve the collective as represented by an omnipotent state.

The context is the State and the Nation:
• A Nation is an aggregate of people united by descent, history, culture or language, inhabiting a particular country or territory.
• A State is a nation or territory with an organized political community under one government.

Sovereignty is the soul of any state because sovereignty means the ability to rule itself.

The Rule of Law — A state uses its police power to enforce a set of laws while there is no nationwide police force

He notes:– Capitalism is the only system that is capable of delivering mass prosperity — but it tends to go awry.
Once every few decades it veers off track and requires active public policy

Paul Collier advocates ” One-Nation Conservatism”

A brief recent history:

In the 1930s, no political party rose to the challenge of mass unemployment, which was addressed as an inadvertent by-product of rearmament.
During the 1980s, a tempting new eco¬nomic doctrine emerged in America: mar¬kets were sacrosanct, and government regulation was impeding them. High- powered incentives, linked to monitored performance, would be the carrot inducing CEOs to get tough.

So — A competitive product market, combined with a competitive finan¬cial market, would provide the stick, forcing firms to be efficient: only the most profit¬able ones would be able to attract capital, while badly performing firms would face the threat of takeover.

A competitive labour market, combined with reduced access to welfare benefits, would get everyone into a job.
So — Open borders for trade and migration would benefit everyone.

Ethics became redundant: self-interest would drive society upwards. In this brave new world, business became the hero, government the villain.
The Conservatives embraced it with ‘roll back the state!’

In the 1990s, even Labour embraced a diluted version, becom¬ing ‘intensely relaxed’ about people getting filthy rich.

So — The consequences for social division were starting to look ugly well before 2008 when deregulated financial markets blew up the economy.
Reversing long trends, from the 1980s the provinces diverged from the metropolis; the educated from the less-educated. British society, a dense pattern of reciprocal obligations, was being torn apart.

Yet there has been little serious rethinking in either party.

Labour became so intellectually lost that it got hijacked by Marxists (A cheap Retort by Collier) , shunting itself into a cul-de-sac from which it will be difficult to escape.

However, the Conservatives flirted with good ideas:
• David Cameron with the Big Society,
• Theresa May, less specifically, with ‘Burning Injustices’.

However — neither narrative became dominant.

The concept of the Big Society was fatally contaminated because it coincided with reductions in public spend¬ing and, more especially, with the official narrative of ‘austerity’.

Even an incompe¬tent political opposition managed to present the Big Society as a deliberate obfuscation of spending cuts: ‘The government is going to cut taxes on the rich and hit the poor, but we needn’t worry about you because you’re going to help each other.’

As for ‘burning injustices’, it rapidly transmuted into ‘we’ll take your house off you if you get Alzhei¬mer’s’: possibly the most ethically offensive and politically inept message ever proposed during an election campaign.

The intellectual comfort zone of each party retreated into equally unviable nests: the Conservatives wanted nation-without- state; Labour wanted state-without-nation.

Meanwhile, ordinary people facing new anxieties seized their opportunities to muti¬ny.
In Scotland, they voted for the SNP; in England for UKIP, Brexit and Corbyn.

Given the travails of Labour, recovery of the intel¬lectual confidence of the Tory party has become essential for the country.
So what are the options facing the Tories?

The American right was lured by libertarianism: ‘neither state nor nation’.
This is manifestly ridiculous: I tell my libertarian friends that they do not need to wait in America pining for nirvana.

They can breathe the air of freedom from govern¬ment right now by moving to Somalia.

The libertarian agenda
• Appealed to Silicon Val¬ley,
• Naively enthused by Bitcoin’s promise of money without government, and
• Facebook’s mission of connecting everybody to every¬body.
• Bitcoin is a Ponzi scheme burning the less-educated latecomers;
• Facebook is pro¬ducing echo-chambers and abuse.
• The agen¬da is irrelevant to the anxieties of ordinary people. For them, ‘stand on your own feet’ sounds more like ‘fall on your own face’.

As with Labour’s ‘intensely relaxed’ narrative, it left the Republican party vul¬nerable to hijack.

The GOP response was a populist. ‘Neither state nor nation’ that could never be a serious agenda for the Conservative party, despite its appeal with¬in the regulation-averse City, and Sajid Javid’s admiration for Ayn Rand and tax cuts.

Turning the Conservative party into the Libertarian party would be the royal road to political suicide.

So — The remaining choice is state-and-nation.

Human Needs are complex, explored in Literature, TV, etc, giving understanding, as well as entertainment.
In simple terms they are::

These are (Reference) —
1. Biological and Physiological needs – air, food, drink, shelter, warmth, sex, sleep.
2. Safety needs – protection from elements, security, order, law, limits, stability, and freedom from fear.
3. Social Needs – belongingness, affection and love, – from work group, family, friends, romantic relationships.
4. Esteem needs – achievement, mastery, independence, status, dominance, prestige, self-respect, and respect from others.
5. Self-Actualization needs – realizing personal potential, self-fulfilment, seeking personal growth and peak experiences.

Clearly many are Complex Needs, and many also particularly apply to certain individuals and in certain circumstances.

In his book, “Hardwiring Happiness”, by Rick Hanson re-grouped these Needs, and related them to brain functions, as follows:
As the brain evolved, so did its capability to meet our three Core Needs, each with an operating system to realise the Need , which are —
• Safety — Avoiding harms
• Satisfaction — Yielding Rewards,
• Connection –. Attachment to others

Each of these brain operating systems has alternative modes of operation:-
• Responsive — If the Core Need is basically being met = the Green Setting
• Reactive — If the Core Need is at risk — the Red Setting

See Blog on Human Nature

Unintended Consequences – number 1

Theresa May announced £1.7bn extra investment in transport links outside London – but the entire fund will focus on boosting the UK’s city regions — Boosting only the Cities

The result is that New service jobs increase in the cities; old manufacturing jobs decline in the towns. Shiny new shopping centres drive city centre regeneration — but neighbouring small town markets, shops and banks close or move online

When Crisis!

The Lehman Brothers’ bankruptcy “unleashed chaos”, but it also changed the financial system.

The questions now are — did it change it enough — and could it happen again?

Philip Aldrick in The Times:
• The short answer to this question is “No”.
• The one part of the system” that has been fixed is the liquidity regime.
• The bad news, though, is that many of the same pre-crisis dynamics are still with us.
• We have spent a decade fixing the system but evading the problem, which was always about cheap credit and too much debt.

Tommy Stubbington in The Sunday Times:
• A reckoning is coming
• The crisis unleashed an unprecedented response from central banks and policymakers, who slashed interest rates to near zero and pumped out trillions of dollars in quantitative easing to stave off meltdown
• Most experts agree these efforts were successful — in the short-term.
• But after ten years — with bucket-loads of cheap cash inflating asset prices and fuelling risky borrowing — there are worries that the response to the last crisis might trigger the next.
• Developing countries have gorged so freely on cheap credit that the Bank for International Settlements estimates that US dollar debt in emerging markets doubled to more than $ll trn in the decade to 2017
• Now central banks have reverted to shrinking their collective balance sheet
• It is no coincidence that emerging-markets currencies and bonds have gone into free fall

Will Hutton in The Observer:
• Even the limited reforms set in train since 2010 have not been fully implemented.
• Worse, the essential moral bargain remains in place.
• Finance can do more or less what it likes.
• We’re told that regulators are “more alert” and that banks are better cushioned by capital.
• Yet a cursory glance at markets shows how febrile they are – and how rich the pickings for those prepared to take risks.
• Note, too, the “shaky foundations” of the new wave of financial products, notably exchange-traded funds offering risk diversification
• All that is required is for, say, Turkey or Italy to default on their debts, an ETF to become distressed, or a sequence of Chinese banks to fail (all too imaginable).
• The impact would radiate across the network as it did in 2008.

Economist

Who was to blame?
• Primarily, the financiers
• Deregulation was also to blame.
• In 1999, the US Congress had demolished the barriers between investment and commercial banking, allowing high-risk investment with deposited money.
• Regulators also allowed banks to set aside too little capital to absorb losses.
• But the wider econo¬mic backdrop lulled nearly everyone into a false sense of security.
• The Great Moderation – the period of low inflation and stable growth that began in the 1980s – made the financial world seem less risky.
• The global savings glut — the surfeit of savings in, for instance, China and Germany – meant too much cash was chasing too few investment opportunities. All this encouraged risk-taking.Primarily, the financiers

What were the long-term effects of the financial crisis?:
• They were almost incalculable. Assets worth more than $2trn were written down as a result
• The value of growth lost was much greater

Tory Values

Tory Values — from editorial by Fraser Nelson — Spectator 14Sep2018

Loyalty, it used to be said, was the Tories’ secret weapon.
No longer.

Self-discipline has been discarded —-

Along with commitments
• To lowering taxes,
• Being strong on defence and
• Keeping the streets safe

Our UK Social Contract & Taxes

Our UK Social Contract & Taxes

From an  article by — Michael Fry — Sept 2018

Governments spend money, and raise the money through taxes!.

Adam Smith of Kirkcaldy set out 250 years ago what he believed theGovernments’  indispensable tasks should be.

• One was the administration of justice, without which a society could not function.
• Second  was the defence of that society against outside attack.
• Third was a function Smith called police, though he did not mean police in the modern sense.

He was instead concerned with what we would call infrastructure: roads and bridges figured among specifics he mentioned.

When Glasgow got a Police Act passed for itself at Westminster in 1800, it covered such matters as street lighting and clearing the pavements of snow.   Overall, what the term then signified was anything it would not pay an individual to provide, because he could not stop others from making use of it.

The modern term for these things is Public Goods.

They are often tricky to define, and we continue to argue about what is properly a public good even today.

Privatisation pruned the list of what the UK once defined as such.   British Telecom, for example, has flourished ever since, mainly because it needs to compete against commercial rivals that have entered its previously closed market.   We can conclude telephones are not a public good. On the other hand, private railways have proved to be pretty much of a disaster – otherwise, why should a Tory government have just renationalised the East Coast line? Maybe we should conclude railways are a public good.

At the margins, it is better not to be too dogmatic about what properly belongs in the public and in the private sphere.   It is a matter we should judge on experience, not on political ideology, whether socialist or capitalist.   Part of that experience should be financial experience.   If industries are run in such a way as to match their customers’ wishes and expectations, then they will pay for themselves.

It’s a practical matter, in other words, where moral posturing is unlikely to help.   That’s why I always suspect advice in this field from clergymen, among whom the Archbishop of Canterbury is more misguided than most.   He wants higher taxes not so we can apply the money to making the country function better, but because the UK has an “unjust economy”.   How very different from the rest of the world! Different especially from socialist countries such as Venezuela and Cuba and, even more so, from former socialist countries such as Russia and China.

Last week, at the end of my paean of praise to Scotland’s Nobel laureate in economics, Sir James Mirrlees, I wrote that he was a man whose ideas I would want to return to again and again. I had not expected to return to him quite so quickly, but it is worth recalling that the actual citation for his prize awarded it for his work on optimal income taxes.

Optimal taxation is the theory of designing and implementing taxes that reduce inefficiency or distortion in the market, so affecting how much revenue the government can collect.

For example, if we tax people at a level they consider excessive, “till the pips squeak”, they may start evading their taxes or else just stop working because it is no longer worthwhile. Mirrlees thought about how to avoid such undesirable results.

Though Nicola Sturgeon (First Minister of Scotland), in her tribute to the Nobel prizewinner, praised him for his sound advice, she has been less eager to take it.   As her government exercises its new power to tax, it hits that part of the workforce earning over £41,000 a year – including, therefore, bloodsucking plutocrats such as train-drivers, computer programmers and waste disposal managers who on average bring home about that much.

With this change our system becomes more progressive than the English one, taxing the rich harder than the poor.

But Mirrlees argued that flatter taxes, with most people paying at the same rate, brought in higher revenue, because they would be happier to hand over their dough.

Flat taxes are what governments need to go for if they want more money to spend.

It is a lesson our cash-strapped Scottish government has yet to learn as it pursues its ill-defined notions of equality.