Thursday, March 23, 2006

The Fluffy Economist is wrong

The Fluffy Economist has some comment on the budget. As predicted, I disagree with him entirely about a number of things (how is it that we tend to agree (vaguely) in the pub but disagree so violently on paper?).
Firstly, I do wish Brown would stop distinguishing between 'public sector borrowing' and 'borrowing for investment', it's plainly fraudulent.

Quite so. They are the same thing because—and I cannot stress this enough—the government has no money of its own: it only has what money it can extort from taxpayers. Paying for the public sector is the only justification that the government has for stealing our money, and whether Brown chooses to call it "investment" or "spending" matters not a jot. In the end, he is still giving money to public sector companies so that they can employ 1,000 non-essential staff in one goodamn hospital.
On the other hand, Britain's infrastructure was so gutted by the Tories, that a heck of a lot needed to be borrowed.

This, I think, can be disputed. Given that the Tories were heavily criticised for their spending on roads, one can hardly say that they neglected that piece of infrastructure. Alright, much of it—the disasterous M25, for instance, which had to be resurfaced practically the day that it was opened—was extraordinarily badly implemented but that is simply the consequence of appalling, or just bog-standard, central planning.

BR was privatised by the Tories. That was a severe mistake. The total subsidy to the railways is now five times—yes, that is FIVE times—what the subsidy to BR was (and BR broke even in its last year of existence). The trouble with the railways actually originates in the late 70s and early 80s; because of the constant strikes, they lost an enormous amount of (profitable) freight work, including the Murdoch newspapers. This is why I danced a little jig when Jimmy "I would like to fuck up my industry and the workers in it" Knapp died.

The real problem with the privatisation of the railways is that it is not, to all intents and purposes, subject to competition. There is, for instance, one east coast line from London to Edinburgh. No company is going to be able to gain the capital to lay another line in order to run a better service for less money (even though GNER, which run that line, are one of the few companies that actually pay money to, rather than recieve money from, the government). Anyway, I digress.
Let him play his semantical games if he will (this acceptance may have something to do with spin being so much easier to swallow when it comes with a dour Fife accent than a high-pitched Fettesian/Etonian one).

Says the man with the strong Estuary accent. Ho hum...
The main thing in the budget is that spending has slowed and this ties in nicely with the government getting tough on bailouts after the bonanza in the health service in a market-efficiency sort of way.
There is nothing like the crisis in public finances that Diddy Cameron are decrying: national debt is still pretty average by historical levels.

Well, this is, on the face of it, quite true. Gordon started with a national deficit of the order of £16 billion. For a while, he was very prudent and, a couple of years into Labour's term and having raised some substantial taxes, Gordo had a "warchest" of, near enough, £16 billion. Good work, that man.

Except now the deficit is pretty much back to £16 billion. Not so bad, you may think. Unfortunately, this does not take account of the PFI project debts. These do not appear on the government's books (and often enough, not on the private companies' books either) but Private Eye estimated that this could be, conservatively, £60 billion. The average life of a PFI contract is 33 years and, if we divide 60 billion by 33, we get approximately 1.8 billion. So we can safely say that public sector debt has at least another £1.8 billion added onto the declared £16 billion. None of this takes into account the fact that Gordo has, for instance, been writing off road repairs as "capital expenditure" rather than the government spending which it so obviously is. What Gordo has realised is that credit limits are based on confidence, and he has made the spinning of the government's finances, in order to instill confidence in lenders, a consumate art.
I can't stand the way some (e.g. the Devil's Kitchen) talk as if the public sector doesn't actually do anything. What utter shit. How is it that social workers, nurses and teachers are thought to be wasteful while corporate lawyers and producers of iPods are thought to be doing something worthwhile?

Well, fuck me: where to start. Firstly, I don't think that anyone has said that the public sector doesn't do anything. What I have said is that the public sector does not generate any wealth, and I think that it would be difficult to argue with that. As I said above, the government has no money other than what it extorts from those who generate wealth, i.e. private business.

Secondly, corporate lawyers and makers of iPods do not extract money from their customers by means of threats. The government does. Those who make iPods or advise companies on how to avoid tax have to do a good job, or their products and services will not be bought. The government has no such constraints: it extorts the money from its "customers" by force. As such, governement agencies have no incentive to be efficient or good at their jobs: they will get their money whatever. This is what makes taxpayer-funded organisations so fundamentally wasteful, i.e. they are not subject to the pressures of the market.

That is not to say that nurses are not a good thing, or that they do not do a good job in the public sector, but that they are not doing it most efficiently. Doc Crippen recently highlighted a hospital were they were short of 173 nurse shifts. Another hospital has recently said that it can cut 1,000 staff without affecting frontline services. Firstly, how? Obviously, if 1,000 non-essential staff have been hired, our money has not been put to the most efficient use.

Secondly, everyone moans about how little nurses are paid. This only happens because the government controls NHS contracts. In the private sector, if you were short of nurses, what would you do? You would either raise the pay for nurses, in order to attract more people into nursing, or you would in make the job more attractive in some other way.

So, our money is spent badly in that it is used to employ 1,000 people who needn't be employed to do the job that the NHS should do, i.e. cure patients, and it also keeps nurses on such low wages that no one wants to be a nurse. This is a perfect example of how central planning fucks up both those it is supposed to serve and those who are supposed to deliver the service. No one is happy.
If economies are to grow sustainably, they need a solid infrastructure, both social and economic. This is where dynamic efficiency comes from not an economy stripped to it bare arse by short run growth fetishism.

It is not that the public sector does nothing, my dear FE, it is that it doesn't do it efficiently precisely because it is not open to market forces. Obviously, the FE is an economist and I merely a poor layman; I just call it as I see it...
Another point upon which some need a colo-craneal separation procedure is on the environment - don't those jokes about global warming improving the weather just get better?

Christ, if I see another cartoon about how it's raining...
Brown missed his chance on the environment today. Britain should be hiking up pollution taxes (of course not too fast, remember prudence) not only for the environment's sake.

Yeah, because it really would be wonderful if at least one of the countries which had ratified the Kyoto Protocol was actually anywhere near meeting its targets. For more details on the vast cost of this ridiculous piece of crap, i shall pass you onto Master Worstall, whose assessment of this load of old garbage is pretty accurate.
If the world is committed to tackling climate change, green industries will be big business, so why not gain those competences ASAP? That the most prominent wind turbine companies are Danish goes some way to proving this point.

The plain, scientific fact that wind turbines are completely useless seems, unfortunately, to have passed certain people by. The National Grid requires a certain underlying amount of power. It then needs extra power for when there are peak usage times. Unfortunately, wind power is completely fucking useless for this.

Wind turbines produce a certain amount of power but, because of the varying nature of the wind, this is far from steady. In order to attempt to combat this, every turbine has an electrical capacitor buried underneath it. Unfortunately, these capacitors only hold a certain amount of charge, with the effect that, when the turbine is most useful, i.e, in strong winds, a great amount of charge generated is dissipated. Unfortunately, the government has a massive bee in its bonnet about wind power, and subsidises wind farms, and the electricity that they produce, to a massive degree (see Private Eyes passim ad nauseam) and so it is always going to be a good investment for any business. Indeed, many of the current windfarms in Britain are not even connected to the National Grid yet, because the infrastructure is not yet in place to deal with such massive variance in electrical generation.

What the government could look at is, perhaps, something like the LIMPET wave-power installation on Islay, which does create a constant wattage, which is connected to the National Grid and which provides almost enough electricity to power the Highlands and Islands. Mind you, the LIMPET installation was built, and is run by, WaveGen; a private company without any public sector funding. Which illustrates perfectly, I think, how private competition can rise to the challenge of environmental concerns.

Well, fuck me!—who'd have thunk it?


Tory Convert said...

Just to point out that wave power is one of the most expensive forms of renewable energy, in terms of cost per tonne of CO2 saved. It would need large economic incentives to make it economically feasible.

What about carbon capture and storage linked to hydrogen power?

chris said...

Tidal power is a better option than wind, and regular as clockwork. Britian is also has very good tides for generating power, the Bristol Chanel has the second biggest tidal difference in the world (14 m) and the Seven Bore is also rather impressive. But this is not to forget lovely lovely nukes.

Jim said...

"the LIMPET installation was built, and is run by, WaveGen; a private company without any public sector funding. Which illustrates perfectly, I think, how private competition can rise to the challenge of environmental concerns."

You're right; it can. But what really annoys me when I read the "In The Back" section of Private Eye is those private corporations who fill their boots through innumerable PFI contracts where they know the government will bail them out regardless of their performance (see Crapita and all its govt. deals, Network Rail, NHS contractors etc). Sure, the private sector can be effective, but only when the profit motive isn't rendered moot by subsidies or at odds with the purpose of their contract.

Devil's Kitchen said...


I agree with you. But this is, in the end, a failure on the public sector side. As the Eye constantly points out, PFI fails because the private companies carry no risk, and thus have no incentive to be efficient. Effectively, they become tainted by the public sector disease.


Jim said...

I don't think so. This government has a fetish for private investment - hence foundation schools/hospitals, PFI for everything - and will go to any lengths to bail them out when stuff goes wrong. It's less a public sector disease than the government trying to out free-market the free-marketeers. George Monbiot has written on how coroporations are actually demanding regulation so they can deal with climate change, yet the government is refusing to give it to them. As George says, "the obstacle is not the market but the government, waving a dog-eared treatise which proves some point in a debate the rest of the world has forgotten."

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