måndag 20 november 2017

UK's persistent low productivity

There is talk yet again about the need to improve productivity in the UK. The country's low productivity is curious and apparently persistent, assuming that the figures are not affected by recording errors or other systematic mistake. This problem is not going to be solved until the reasons are discovered. It raises some obvious questions, of which these are just a few:
  • What are people doing when they are at work?
  • How much time are workers actually at their work?
  • How much time is wasted doing nothing, waiting for other people to finish things?
  • How much time is wasted on abortive activities?
  • How much time is wasted in putting right what has been done wrongly?
  • How much time is wasted due to design not made for efficient assembly ie poor production engineering?
  • How many firms are operating inefficiently due to being in unsuitable premises?
  • How many firms are operating inefficiently due to being in an unsuitable location?
  • Are there geographical factors here eg transport costs?
  • How much resources are wasted due to logistical problems eg transport delays?

torsdag 16 november 2017

Super Express - how super?

The new Hitachi bi-mode trains are now coming into service; after the embarrassing maiden trip, it is possible to make a more balanced judgement. It will be a while before I get an opportunity to travel in them, but the verdict seems to be that the underfloor engines are not too bothersome and the main complaints are about the hardness of the  seats. The air conditioning problem on the inaugural run was due to the failure of the pump which removes the condensed water, but one wonders why the system was designed to need one, when previous air conditioning systems relied on gravity to drain away the condensate. What became of the principle of keeping things simple?

Ian Walmsley, writing in Modern Railways, said that the Great Western ones so far running are all right as commuter trains, but not much better than that. The big question mark concerns performance. The engines were supposed to have been de-rated to improve reliability, but this will have a detrimental effect on timekeeping, especially now that so much of the electrification is uncompleted and likely to remain so for a long time to come. There are also unsolved issues such as the bridge over the main line at Steventon; until it is resolved, there will be a break in the electrification. Given the problems with changeover from diesel to electric on the first journey, having to carry out the operation is going to create a long-term risk to reliability. This saga is going to run for a few years yet.

In 1985 I was the co-author of an article that was published in the Railway Magazine, written slightly tongue-in-cheek, suggesting that the Great Western Main Line should be electrified on the third rail system. Perhaps the idea was not so daft.

Tunnel of steel not needed after all


It now turns out that the Great Western Main Line's "Tunnel of Steel" was not necessary after all. It seems, as Roger Ford explains in "Informed Sources", that there were design errors which went unnoticed.

There have indeed been problems with overhead electrification on the East Coast Main line, which was carried out to super-economical standards, but the West Coast route, electrified in the 1970s, has performed reliably even though it passes through some of the most exposed uplands in the country; in comparison, it looks like gossamer.

Useless talking shop



Gothenburg is in chaos this week, with roads closed, tram routes cut and buses being sent on long diversions because the city is the choice of location for an EU talking shop, under the title "Social Summit for fair jobs and Growth"

"Together with President of the European Commission Jean-Claude Juncker, Sweden’s Prime Minister Stefan Löfven will host a Social Summit in Gothenburg on 17 November 2017, focusing on promoting fair jobs and growth. The Social Summit for Fair Jobs and Growth will gather heads of state or government, the social partners and other key players to work together on a more social Europe and to promote fair jobs and growth. 

"Well-functioning and fair European labour markets, effective and sustainable social protection systems and the promotion of social dialogue at all levels will be at the heart of the summit agenda."

Given the absence of a coherent theory of how the economy works, this expensive talking shop - with a lunch bill of £60 per head - can amount to little more than an exercise in virtue signalling.

Every EU country runs a tax system where the bulk of public revenue is raised through jobs taxes in one form or another. Sweden is one of the worst of all, with high a tax on income, starting at a negligible threshold, and a hefty payroll tax and value added tax at 25% (VAT - in Sweden, MOMS), with no threshold for registration and no exemption from food or other essentials.

VAT at a minimum rate of 15% is a condition of membership of the EU. It would be difficult to think of a worse tax, since it applies precisely at the point where supply meets demand. It is also subject to evasion and fraud on an industrial scale, as the EU is the first to admit.

One might have thought that EU leaders would be sitting down and discussing how to relieve their half-billion people of the burdens which they have imposed for the past half-century, and which stand in the way of fair jobs and growth.

The conference was a security headache and meant that those attending were effectively prisoners in the hotel compound and the conference area a couple of miles apart from each other. What made the news was a complaint on Twitter by the police on duty, which were handed lunch bags containing baguettes described as "inedible", while the politicians were sitting in the warm and getting lunches at over £60 per head. All of which has done nothing to enhance the image of the EU among the local populace.

The choice of Gothenburg was bizarre, as Sweden has dozens of suitable rural and island locations which would have been easy to secure, and would have given the politicians a chance to relax and enjoy the scenery during their breaks.

onsdag 15 november 2017

Has it worked, or is it the end of the road?

My former Parish Priest at Brighton, has written another depressing blog this week, lamenting the state of the Catholic Church.

The real question is whether the Latin church can recover? Some people point out that it has been through these crises before. But that was before liturgical reforms weakened the sacramental signs to the point of confusing Catholics as to the very meaning of the liturgy, and split the church into language groups so that it was hardly recognisable as catholic (with a small "C").

The problems also raise ancient issues such as the role of the Papacy, post-schism theology and dogma, and even the Filioque clause, which influences people's concept of the Trinity in a fundamental way.

The Latin church might recover. On the other hand, and it is difficult to see major changes of this kind when one is living inside them, it could be coming to the end of the road it has travelled for almost 1000 years.

If I were Chancellor...

I would be thinking along the following lines.
  • All import tariffs to be removed on B-day. The UK should not waste energy on trying to negotiate trade agreements. People abroad do not buy UK goods as an act of charity but because they want them or need them. It is up to them to put pressure on their own governments to get out of the way and stop preventing them from purchasing what they want. 
  • VAT to be phased out in two stages; it may result in no loss at all to the Exchequer. (this is the reason for the surprising conclusion)
  • Corporation tax to be scrapped on B-day. 
  • Additional revenue can be raised if required from the UBR (commercial rents will go through the roof if CT is scrapped, giving the Chancellor a juicy tax base). However, upwards-only rent revision clauses must be banned so that commercial rents can find their market level.
  • A national Council Tax to be raised on top Bands and G and H properties. 
  • Income Tax and NI thresholds to be raised substantially for people living and working in regions with depressed economies - at least £15,000.

tisdag 14 november 2017

Free trade case in a nutshell

That, "Industry and agriculture should be protected, for as long as we need people to have jobs", is a fallacy based on popular/populist economic misconceptions. Trump is following the line. The EEC/EU has followed the same line for sixty years.

The misconception ignores the principle of competitive advantage. You would not fry your own fish and chips if there was a perfectly good fish and chip shop across the road. Human progress has been built on division of tasks so that each does that which they are best at; the big strong guys went out hunting, while the weedy short-sighted ones stayed in the camp and made spear tips and fish hooks. Trade arises through the exchange of skills. Without specialisation, the little group of hunter-gatherers would have blunt spears and the weedy guys would have got eaten while out foraging.

The same principle scales up. A single family of homesteaders has to do everything for themselves. When a few more arrive, they can share out their tasks, take advantage of economy of scale and use their special skills to the advantage of the whole community. These benefits continue to accrue until a network of exchange relationships encompasses the whole of mankind.

Tariffs and trade restrictions get in the way of the development of the network. At the crudest level, they have the same effect as transport costs and are functionally equivalent to sanctions imposed by a hostile power. If trade restrictions were beneficial, one would expect islands, and countries like North Korea, to be more than averagely prosperous. It would also be advantageous to restrict trade between, for example, Oxford and Reading.

But it is worse than that. If you fry your own fish and chips, you have to pay retail prices for your ingredients and clean up the mess afterwards. It is an inefficient use of your time. Thus is it with protected industry. If they are less efficient than the foreign competition, they draw resources from the rest of the economy and make the whole less efficient, and indeed less competitive. Protection draws an economy into a vicious circle of decline. Even worse: if consumers are forced to pay more than necessary for some things, then they have less over to spend into the economy elsewhere, which then suffers from artificially reduced demand. Protection of one sector causes unemployment everywhere less. It is a lose-lose situation.

And that is just at consumer level. Where imports are components or raw materials used by other industries, those industries are forced to pay more than they would otherwise have done and become less competitive. The anti-dumping measures against Chinese steel are a good example. European manufacturers were deprived of access to a low-cost raw material. That did not make the low-cost steel go away. It was bought and used by manufacturers elsewhere, who were then in an advantageous position to out-compete the Europeans.

The rational response would have been to encourage European businesses to purchase and stockpile as much of the cheap steel as the Chinese would let them purchase. It is counter-intuitive, though not so very different from the way we manage our own household affairs.

EU protectionism has a particularly damaging effect at the borders of the tariff wall, as those who will be affected by the situation in Ireland have realised. But this is no different from what has been happening at the eastern boundary of the EU, on both sides. It has a particularly damaging effect in eastern Poland, Latvia, and Slovakia, where a natural trading region with ancient cultural and economic ties has been arbitrarily divided.

The situation with agriculture is slightly different. Foreign competition means lower food prices (again to the benefit of the rest of the economy), and therefore lower farm-gate prices. Marginal farms go out of business and the land is put to other uses. In the case of upland hill farms, this would be advantageous as they need to be managed for, among other things, water retention to prevent regular flooding of urban areas within the catchment zone.

Elsewhere, farmland rents drop and farmers go over to other productions. Given the terror of a wave of chlorinated chicken coming into the country, free entry of imports creates a marketing opportunity for producers of the wholesome alternative.

The idea that agriculture would cease is based on a lack of understanding of a basic principle of land economics.

måndag 13 november 2017

The terror of chlorinated chicken

I came across this in the Guardian comments section today

Will "The terror of American chlorine washed chicken" beat “Britain is stronger, safer and better off in Europe” for first prize in the post-referendum decider?

The most recent study by the Agency showed that 65% of raw shop-bought chicken was contaminated with campylobacter. An estimated 300,000 cases of food poisoning are attributed to the bug every year in England and Wales alone.

The Food Standards Agency, Defra, the UK poultry industry, and major retailers have agreed a new target that will measure efforts to reduce the levels of the food bug campylobacter in chickens. There are three categories of contamination levels and, currently, 27% of birds are in the highest category.

The Agency's proposed action on campylobacter includes:
  • working closely with the UK food industry to trial new intervention measures on the farm, in slaughterhouses and at retail level.
  • setting a new target for reducing the levels of campylobacter on chicken.
  • helping to ensure people can protect themselves from infection with campylobacter by making sure they are aware of the need to avoid cross-contamination when handling raw chicken and to cook chicken thoroughly.
In addition to the fight against campylobacter, the Foodborne Disease Strategy outlines a full five-year programme for the reduction of food poisoning cases from all sources.

In the UK every year, around one million people suffer a foodborne illness, leading to 20,000 needing hospital care and around 500 deaths. Given the inability of so many not to poison themselves should the chicken eaters not be demanding chlorine washed chicken?

http://www.food.gov.uk/science/microbiology/campylobacterevidenceprogramme

fredag 10 november 2017

Irish border headache

One of the disputes that has bubbled up over Brexit is what to do about the border between Northern Ireland and the Republic.

It seems that the UK government has not a clue about what to do over import tariffs. WTO rules mean that it will be difficult to do the really stupid thing and impose them, even if it wants to. The chlorinated chicken will be on the shelves and if people don't want, that is where it will stay until it is sold off as cat food. That means in turn that the Republic would have no problems with getting imports across Great Britain.

It also means that that since the UK government is not proposing retaliatory tariffs so there is no reason why farm produce from the Republic should not enter the UK as now. What would be the point of making people pay more for their Kerrygold?

All the obstructionism is on the EU side as the single market rules kick in. This will cause the same trouble as is already experienced in places close to the EU's eastern border, on both sides; at Kaliningrad, Narva, Daugavpils, Bialystock, Vyborg, Pskov, Minsk, Lviv, etc.

From this point of view, a sensible option for the Republic would be to join Britain in leaving. The Republic's trade is not particularly focussed on the rest of the EU - its exports consist substantially of high value products like pharmaceuticals, which can be sent as air freight.

Fear of what would happen is largely based on a warped view of what the economy is for. Behind nearly all the comments on both sides of the debate is an assumption that the purpose of the economy is to keep people busy, that work is a good thing and as much of it as possible should be created.

We all know from personal experience that the economy exists to provide our wants and needs, whilst doing as little work as possible. There is a disconnection somewhere.  From this follows the received view is that exports are good, that imports are bad, that countries must have balance of payments surpluses and that the economy is a supply-push system.

Thus, on this view, access to markets is a privilege to be negotiated for. All of this is to forget that the worst punishment one country can inflict on another is to prevent imports from getting into that country, by sanctions, blockades and other hostile actions. If the received view were correct, North Korea would be among the world's most flourishing economies.

The reality is that the economy is driven by demand. Smuggling is an indicator of repressed demand. The idea of negotiating "trade deals" is based on a bluff. If the UK government puts a blockage on the import of Kerrygold and all the other Irish dairy produce that fills the shelves of Britain's supermarkets, the public and the trade will start to kick up a fuss.

What would be the effect of unilateral free trade? Sterling deposits would build up in the supplier countries. The value of sterling would drop, making UK goods relatively more attractive, at which point the demand for the UK goods would start to creep up again. If it did not, due to import tariffs, the supplier countries would experience a dwindling demand for their products from UK customers as the value of sterling continued to drop and imports were replaced by home-produced goods. Sooner or later the bluff would be called. The whole silly edifice then starts to fall apart as it is seen for what it is.

torsdag 9 november 2017

Nothing to celebrate

The 1989 Brighton Festival celebrated the bicentenary of the French Revolution, under the theme "A Taste of Freedom". I thought at the time that it was not the sort of thing that anyone should celebrate - mass murder and two decades of war were the consequence.

2017 marks 500 years of the Reformation and 100 years since the Russian Revolution, which took place on 8 November 1917. The first was a catastrophe for Europe, the second for the world. The death tolls in each amounted to millions. The Reformation has been the occasion of "ecumenical" services, consisting mostly of the singing of some Protestant hymns and sermons by representatives of different denominations, such as this one last Sunday at Uppsala; a dreary affair apart from an excellent sermon, by Cardinal Arborelius.

BBC Radio has filled up the week with commemorative programmes of the Russian Revolution, so that is best avoided. The Russians themselves have had more sense, having been on the receiving end of it, the event is being marked, if at all, by memorial services for the victims of Communism. President Putin, who once lamented the dissolution of the Soviet Union as “the greatest geopolitical catastrophe of the century” deems the October Revolution itself, the USSR’s foundational event, no cause for celebration.

onsdag 8 november 2017

The Brexit tragedy

Brexit has been described as a "tragedy." That is a limited view. The EU was the tragedy. Brexit is just one of the consequences.

The seeds were sown when the the EEC was founded. Its leaders ignored a founding principle, that of "subsidiarity". Subsidiarity is a principle that first came to public attention in the Catholic Social Teaching encyclical Quadragesimo Anno, issued by Pope Pius XI in 1931. It holds that social and political issues should be dealt with at the most immediate (or local) level that is consistent with their resolution.

Subsidiarity was formulated thus: "It is a fundamental principle of social philosophy, fixed and unchangeable, that one should not withdraw from individuals and commit to the community what they can accomplish by their own enterprise and industry." (Pope Pius XI, Quadragesimo anno, 79)

Had this principle been followed, there would have been no Common Agricultural Policy, no tariff wall around the customs union, no requirement to levy VAT as a condition of membership, and no common currency. All of those policies have worked to the advantage of those at the core of the continental land mass, and to the disadvantage of those in the western maritime fringe and the Mediterranean south.
  • The CAP in its original form was against the interests of the population of a country which had traditionally imported much of its food from Australia, New Zealand, Canada, the US and Argentina, and which was immediately cut off from this source. 
  • The tariff wall was also against the interests of a country which traditionally traded world-wide. 
  • VAT is one of the worst conceivable of all taxes, one its many ill-effects is to amplify regional geographical disadvantage. 
  • A common currency is impractical without political unity; worse still, it is damaging when interest rates are used as the primary means of economic regulation, as there is no interest rate which suits both the core regions with strong economies and the peripheral regions with weak economies.

It was not coincidental that the vote for Brexit was strong in those parts of the country which received most funds under the EU's structural fund under its cohesion policy for peripheral regions. The people in those areas received no perceived benefit. The money ended up the pockets of the large infrastructure companies and their mobile workforces, and enriched landowners in those peripheral regions. There was no trickle-down.

The real tragedy is that the founding principle of subsidiarity was betrayed and that the damage being done is not acknowledged, or even noticed by EU leaders and supporters.

fredag 3 november 2017

Digital barrier will stop terror trucks

An article in today's Metro explains that whilst not much has been done so far to prevent acts of terror with heavy goods vehicles in Sweden's largest cities, next year there are plans to introduce a digital technology which will limit access by HGVs, or restrict their speed.

One is left wondering who might randomly drive vehicles into crowds of people with the intention of killing as many as possible? The Irish Republicans have no quarrel with Sweden. As far as I know there is no radical organisation committed to independence for the Sami, or for Skåne. Nor is there any history of radicalisation among Jehovah's Witnessess or Christian Scientists. The article leaves the readers guessing. Who could the terrorists possibly be?


onsdag 1 november 2017

Let them export jam

Boris Johnson has been endlessly ridiculed for saying that Brexit Britain can live by exporting home-made jam.

I am not sure what his exact words were, but the those who ridicule have missed the point. "Jam" is a shorthand way of referring to specialist, upmarket niche products with a touch of snob appeal. They are something which the UK does very well; many retail products from the UK on sale in Continental Europe fall into this category.

Being in this market segment avoids head-on competition with Germany, where the UK is always at a disadvantage due to the added transport costs, which are a disadvantage of being on an island. Dover and Cheriton are in the extreme bottom right-hand corner of the country, whilst Harwich and Felixtowe, although better placed for Britain's industrial centres, involve a six hour crossing, plus another two or three loading and unloading; the crew of two have to be paid whilst sitting on board the ferry. The German manufacturer can do the delivery in one door-to-door movement.

This is the kind of thing that comes under the heading of "jam", in this shop in Gothenburg. The goods are Spode, Wedgwood, Portmeirion, Royal Doulton, Denby. It is not a trivial business.

Tridentine Mass last night

I went to a Tridentine Mass last night at our local parish. It was the vigil Mass for All Saints and was everything a Mass should be - the Proper sung as in the Liber Usualis, the Ordinary in a polyphonic setting and Credo 1.

I then retired to a pub with a group of friends. The conversation turned, as always in these situations, to the state of the church, and how our local priest has been marginalised and even subjected to harassment for his "conservatism".

He celebrates the Tridentine Mass every Saturday evening, on most feast days and at least one other day a week. That is impressive. However, there is not a single other priest in the locality who will stand in for him when he is away. Requests to other priests meet with a flat refusal; one gave the feeble excuse, that it was "too complicated". Can he warm up a meal in his microwave?

There seems to be a reluctance within groups like my friends to accept that parishes where tradition is holding are tiny islands in the ocean. Movements like the Latin Mass Society have put up a brave and determined effort over many decades. New Oratory congregations have been established in England. Summorum Pontificum was an immensely valuable boost; things were looking good ten years ago.

It now looks like a swansong. If one looks at the composition of the College of Cardinals, it is clear that the islands are eventually going to be submerged by the rising ocean. With the disapproval of the diocesan authorities, Our local priest will, sooner or later, be squeezed out (probably promoted into a situation of toothlessness) and the valuable work he has done will be dismantled.

How are the signs of the times to be read? How should one respond?

Free trade argument continues

If you were able to coherently tell us what your point is then I would be happy to answer.

I have but you cannot see it. It is an example of the head-vase illusion; if you are convinced there are two heads you cannot see the vase.

There is an almost universal habit of considering trade relationships through the wrong end of the telescope. It gave rise to the mercantilist principles which dominated in the seventeenth century, and were rebutted in the second half of the eighteenth, when the principles of free trade were established under the influence of Smith and Ricardo . Free trade took hold strongly in Britain in the nineteenth, the high point being the repeal of the hated Corn Laws in 1846, which were reinstated in 1973. Protection dominated in the US throughout the period; the damage done to the US economy was chronicled by Henry George in "Progress and Poverty".

Post 1945, mercantilism has crept back in the guise of populist/nationalist policies promoted by sloganising such as "Buy Home Produce". The British Empire was at it during the inter-war period, the EEC/EU has always been at it, Trump is at it. It exacerbates international tension, as is summed up in the the quote “When goods don’t cross borders, soldiers will”, attributed to the 19th century French Liberal economist Bastiat.

Your beef seems to be the entire notion of a trading block, i.e. it should be open to all and sundry. 

Yes. I am against the entire notion of a trading block. They only happen because of the habit of looking at this the wrong way round. Open to all and sundry implies that importing is inherently a bad thing and must be controlled. That is an interference with a basic human right. People should be free to purchase from whoever they wish, regardless of whether they are on different sides of a national border.

I am afraid they don't work like that. The bull comment was flippant, but I stand by my point - you wilfully ignore the legal framework/current reality.

The current framework is not a divine ordinance. There is nothing to prevent any individual country from opting out of the game and allowing its own people to decide what they want to buy. If it is a good thing to restrict movement of goods across borders, why not have such restrictions around every town in the land, to discourage people in Oxford from bringing in goods from Reading?

And yes for my sins I am a lawyer that works with EU law in their day job.

I am surprised. I would have expected a lawyer of all people to read carefully and ponder what was said. Would you say you are a disinterested party in this debate?

Also you have switched from supply chain parts to seemingly finished products - different arguments. What is your point regarding those specific products? Simply that they are not substitutable? I think cross elasticity of demand would say otherwise given competing products are freely available. 

It is the same problem. Purchasers will have to find alternative sources or adapt to different products. I never said that it was impossible, but there is cost and inconvenience. There is, for instance, a flourishing microbrewing industry in Sweden. The raw materials grown in Kent and Essex need to be handled differently from their German equivalents. The producers will have to spend time fiddling about to get the process to work properly

Never heard of mutual recognition or complying with standards?

Standards exist outside the EU or indeed any particular trading block. Ultimately, trade is driven by demand. Suppliers have a vested interest in keeping their customers satisfied in the long term. The EU's standards are not always guided by sound principles. A few recent examples include the ending of the Esbjerg-Harwich passenger ferry due to fuel regulations which made the service uneconomic, the regulations on electric lamps which created a residue of mercury waste, and railway technical standards which were the reason why further railway electrification in Britain has been cancelled.

Nor are the standards even adequate, which has led to the development of voluntary schemes such as KRAV, Bra Miljöval, covering issues like animal welfare and residues in food.

Swansea Bay barrage dropped

This project sounds like one of those environmentally friendly schemes which is almost certainly just the opposite. Just a few of the doubts...