Sunday, 2 December 2012

Alea iacta est - Brief thoughts on crossing the Rubicon

David Cameron mentioned 'crossing the Rubicon' several times in his speech in the Commons, saying that it would be enacting legislation to regulate the press for the first time in three hundred years. Yet this actually rather runs against what he presumably was trying to convey. Parliament is sovereign / supreme, and it is able to enact any legislation the Government wishes at any time, and is not bound by previous parliaments, provided there is a majority. So if there is such a danger of Government trying to muzzle the press, why has it, in his view, never done so in three hundred years, for most of which Britain was not particularly democratic?

And if that danger exists, why does it become more likely, or more dangerous if regulations already exist backed by statute? Assume that Leveson was implemented and a statute existed according to his criteria, if a subsequent Government then wanted to expand on this, by demanding changes which would genuinely reduce the freedom of the press (unlike the current proposals), are we to assume the press, which has been unrelentingly aggressive in attacking Leveson up until now, and which has access to millions of voters, would suddenly roll over and allow it?

Even assuming our politicians wanted to control the press, which so far they have shown no desire to do, as long as this remains a democracy, the press and we as citizens are quite able to consider any future changes as and when they happen-- if they do.

And again, as no parliament can bind its successors, we can actually cross the Rubicon in the other direction. There's no point of no return. If the situation was unworkable, it would be entirely possible to change things, if sufficient will existed.

Furthermore, in so far as there is an exception to the supremacy idea, it is this: That there is a thoburn constitutional character to the Human Rights Act, which requires the courts to interpret subsequent legislation as compliant unless it explicitly derogates or abrogates, and requires public bodies to comply with the ECHR, which includes a right to freedom of expression subject to certain ordinary limitations, which permit normal regulation, defamation law. The main way Parliament isn't entirely supreme, is that it has given some power away in respect of European courts for the purpose of these issues. At least for the time being.

His other concerns revolving around producing simple, workable law are simply absurd. There are many topics on which legislation is not simple, and Governments rarely avoid legislating simply out of fear that it might be difficult. And if they did, we might wonder why we had legislation on the health and social care bill, which many commentators were not convinced was even necessary. Indeed, quite a few lawyers have suggested Government has a tendency to either over-legislate, or under-legislate, depending on the politics of the issue.

I suspect this is a more accurate reflection on the Prime Minister's statement.

On a slightly different note, it is not true as Fraser Nelson suggested that you cannot have partial freedom of the press and still have freedom of the press. All freedoms, all liberties, all rights are partial in the sense that they are contingent on corresponding duties, and may be limited by conflicting rights and freedoms. We see this with the right to privacy vs freedom of expression, or the rights of women vs the rights of unborn children. As was famously said: "The most stringent protection of free speech would not protect a man falsely shouting fire in a theater and causing a panic". And freedom of the press is not freedom of speech, it is a pulpit, whose access to the public grants it power which over-rides that of ordinary speech or expression, and carries with it the responsibilities which a democratic society requires of its media.

To suggest freedom encumbered is no freedom at all, is to cast reality as an impossible conflict between dangerous absolutes.

Our press is already not free to break the criminal law. Regulation would merely ensure it was not free to ignore its own code.

Saturday, 3 November 2012

On the BBC, Savile and Listening to the Victims

I've been avoiding commenting on this topic for any number of reasons, not least of which that my thoughts can have little to add, and can do nothing to help the people who were victims, not merely of Savile, but more broadly within a culture we are learning more about by the day. After last night's notable Non-naming on Newsnight, and J. Dimbleby's comments however, I felt compelled to try to find some kind of balanced perspective on all of this.

First, on the real issue I have remarkably little to say. I was born in the 80s, I didn't watch the show, I never knew much about Savile beyond the ubiquitous pop cultural references (most recently entering into series one of Sherlock in relation to 'Jim' Moriarty, the reimagined consultant criminal). I certainly am not well equipped to speak to the culture at the time, nor to the many investigations started, stopped, hushed and never begun at all. The more we learn, the more unimaginable and horrific it seems.

The past is a strange and alien place, and all-too-distant. For a long time, when I was younger, I might have known the facts regarding racial segregation in the US, for example, but it was only as an adult I fully realised and understood how recent it was, how close at hand. There were many such discoveries, and they helped to colour my perception of the quantum jump that comes with a generational shift of values and perspectives, and to better begin to see the connections and traces that remained within modern, more oblique and complex forms of discrimination.

Recent like-for-like polling has shown reductions in trust for the BBC, as well as reductions in scores for whether or not "the BBC is an institution we should be proud of". This seems to be absolutely normal at the moment, my twitter feed is often littered with comments about 'the BBC', as if it were simply a monolith. The BBC has many disaggregated parts, and how they relate, one to another, is far from clear or consistent at the best of times. Certainly, most of those who work there now were not present at the time in question, most were not involved in the aborted Newsnight investigation, and whatever their normal virtues or failings, most are still doing their jobs just as they were a month or so ago.

I'm not absolving the BBC of guilt. It seems undeniable now that investigations are decades too late, not merely months. Whatever happened in those dressing rooms, whatever rumours were or were not flying about, they should have been investigated, if only to ensure that there was no truth in them and to satisfy those involved that they had not turned a blind eye to something terrifying.

But to those who say "the victims' testimony should be enough", that is too broad a statement to make. Over time, given allegations, a full and proper investigation should be conducted, whether it is appropriate for that to be internal or via reference to the police. The BBC does however have an obligation not to simply take any allegation and publish it without full access to the facts, simply because as a powerful national broadcaster, much of what it airs will have effect irrespective as to denials or refutations subsequently offered, be they true or not. False accusations are at times made, and they can be very damaging. This does not lessen the pain of victims, nor reduce the damage done by questioning their motives, but it is a requirement both necessary and right of justice, that we prove guilt, and not merely assume it.

Bear in mind, newspapers have falsely accused, attacked and destroyed innocent people in the past, and been made to pay in the courts, quite correctly, as a result.

If the BBC had enough information and failed to speak, that would speak to a serious failure by those concerned, be it a Newsnight editor, and / or someone further up, or down the chain. If they spoke without adequate evidence, it would be equally troublesome. Imagine what would happen if the BBC stated a specific, named senior politician had been part of a paedophilia ring, and not only was it not substantiated, but it was later disproven. In retrospect, doubtless many would blame the BBC for reckless opportunism in translating an allegation into a headline.

Victims must be heard, they must be helped, and we must pursue those who abused their power, abused the trust invested in them and who were civilised by their ability to control their public face. The police in particular should follow every available lead wherever it takes them. But we should always be wary. It is altogether too easy for us to refresh old crimes, because the grief of discovery is felt keenly now, not decades ago. But those things did not happen yesterday, and in so far as such things still happen, it is in a very different context, and we can only strive to change that climate still further in days to come.

The exposure of criminality and evil does not taint a society, it should not make it feel darker and more oppressive. It is the very opposite, the concealment of criminality, that achieves those ends. If in the end individuals within the BBC, now or in the past, helped to conceal these things, then by due process they should be dealt with. If, on the other hand, they were not able in the space of a day to satisfy themselves that it was responsible to run a story, or at least to name names, we should at least wait another day before rushing to judgment.

And we should try to bear in mind that 'the BBC' covers an extremely large body of people, many of whom are not even remotely involved in any of this and could never have been, and without making claims for their honour, at the very least many will be disturbed and saddened to know that 'the BBC', of which they are a part, could lose the confidence of the public so readily. It might be better, instead, to criticise individuals, specific cultures, institutions, structures and decisions. In this area, you can find countless faults with the BBC, as indeed you could with many large organisations. In doing so we can improve it, instead of merely disapproving of it.

 This should not be the age in which we lose faith in our public institutions, it is instead an opportunity to remedy their failings and renew ourselves.

Sunday, 28 October 2012

Quis Custodiet Ipsos Custodes?

At all points in the events of the past year or so the media has been at great pains to aggressively assert that independent regulation with a statutory basis would, in effect, be the end of the free press, and with Leveson's recommendations soon at hand, those same voices in the press are now heating up their campaign to head off any chance of changing the system before it can get started.

I realise I tend to bang on about this, and I'm not minded to rehash arguments on the detail of independent regulation itself today. Rather I want to write about why the freedom of the press matters and what that freedom means in a democratic society. It is not the same as freedom of expression, which is an individual right-- itself limited, as was famously said, when it comes to "falsely shouting fire in a theater" among other occasions-- but rather entails a necessary responsibility. The freedom of the press exists as a necessary and positive component of a democratic society for the purpose of giving the voting public critical information about their society.

The Value of the Press

Independence-- which is the perennial question in this case-- from Government exists so that the press can fearlessly criticise and analyse actions taken by the state and by other powerful groups. You might also argue the press should be independent from all manner of fear or favour, including commercial, personal and political biases, but as this is unreasonable in the context of a free press, pluralism becomes its proxy, providing diversity in place of independence and, hopefully, preserving the public good.

And the public good is why we need the free press in the first place: The public need information about many things, be it the functioning of institutions other than Government, the current state of science in relation to health or dietary advice, the state of the law (for ignorance is no defence), economic data, and so on. We also desire a balance of views in and of itself, and separation between objective factual reporting and opinion. Ideally, we should see well researched arguments presenting clear evidence on matters of importance which will help us to decide how to vote, and to behave in our own lives.

A varied press made up of many entities provides a great deal of freedom for individual and differing views to break through, and reduces the power commanded by any single publication, or any single voice. Of course, smaller publications may also lack resources to engage in expensive investigations, but as it happens, the UK market is in fact highly saturated and dominated by very large players.

The Perils of the Press

Unfortunately, while it is inevitable that none of our newspapers can be consistently relied upon to give entirely accurate information on all topics, some of our papers cannot be relied upon to give good information a majority of the time on a majority of topics, many of them important. Worse, some papers at times incontrovertibly distort information with manifest presence of mind. If you, as a citizen with the right and the duty to vote, wanted information on European directives and regulations, on the state of science as it related to your decisions, or even in many cases on individual judgments in UK courts, you would do well to avoid tabloid journalists in particular as a source for that information.

The press have a campaigning mentality, not just on issues such as paedophiles and child protection, famously, but on political questions, be they as broad as general elections or as narrow as the recent AV referendum, and even on how to regulate the press themselves. In this, the press have engaged routinely in epistemic myopia and disingenuous and deceptive arguments in order to get their own points across. Additionally, they know their individual audiences, and they prefer to cater to them in much the way politicians seek to garner votes, pandering in order to sell copies of their papers. This commercial interest functions as an informational feedback which helps to ensure ordinary people find the information which supports their pre-existing beliefs, something they are already predisposed to do, as are we all.

The Practice of the Press

Of course, the press does get many things right, and it does many fine things, and there are many individual journalists who cannot be faulted. But the problem is, that's irrelevant. Many doctors cannot be faulted, many lawyers cannot be faulted, many politicians cannot be faulted. Regulation does not exist for the best cases, but for the worst. The press would say their accountability comes in whether or not we buy their product, but  most of their consumers have placed their trust in the papers they customarily read, and have no other reliable source, nor the time to conduct detailed research of their own.

Even so, despite the horrendous and persistent failure of many papers to fulfill their most basic duty and do proper research and present information with nuance and clarity, there is almost no chance of any attempt by Leveson or Government to deal with the question of factual inaccuracy, or over the porous division between opinion pieces and news.

Instead, the most likely main purpose of the current drive is to provide an independent basis for complaints to be made when serious abuses come to pass, as they did repeatedly before the hacking crisis finally became news-- in one recent and well known case leading to vast damages being awarded after several of them repeatedly proclaimed the guilt and assaulted the character of an innocent man. And there is no basis for believing that an independent regulatory authority could not be contrived in a way which left it entirely separate from Government. This has been done countless times, and in many contexts.

In Conclusion

The press is not merely a 'negative freedom', one which is free from interference by the Government, but a positive one, the papers are empowered by their access to millions of people and their control over the flows of information. They are needed, to play a crucial and indeed central role in our democracy but they must be held to the minimum responsibility to the basic rights of individuals that comes with that power.

Self-regulation has failed time and time again, because self-interest does not align with the public interest for the media. In an ideal world the media would serve their role by investigating those in power, presenting information clearly, with detail, nuance and with care to the evidence and how evidence should be properly analysed and presented. It should be diverse, and it should be virtuous. But if we cannot have that, we must insist at least on access to justice for those directly wronged.

Friday, 26 October 2012

Brief notes on the quarterly figures

On the 1% growth figure, I heartily recommend Duncan Weldon's breakdown of the detail, as ever. For my part, I want to highlight a few thoughts on the question of these quarterly growth numbers:

First, when we talk about bank holidays reducing / displacing growth by some percentage (or fraction thereof), we aren't (substantially) talking about GDP growth in the sense of productivity increases, but rather a change in the level of GDP in that specific year, because of a social choice to work one less day, or an influx of cash associated with the olympics, and so on. In one case, the discussion has focused on displacement of GDP activity between two quarters, one of which had negative growth, the other positive.

In fact, many kinds of productivity increase happen irrespective as to anything else. If the US adopts a particular way of organising its workforce which increases efficiency by 10%, there's no barrier to that information being transmitted and those practices being implemented here, even if we did nothing to develop them. Similarly, changes to accommodate the digital market and reduce the production of physical media might produce efficiency gains without a substantial investment being required upfront.

In this way, the relationship between growth and the many details under discussion is not always absolute. It's always worth keeping the difference between permanent improvements in productivity and mere differences in output in mind.

Secondly, when we consider core components of GDP, net exports / imports are contingent on demand in our major trade partners, and their growth, Government spending is set to dip more rapidly as time passes, consumer spending is constrained by the continued deterioration in real wages and very high household debt, and investment is reliant on expectations of future demand and / or Government money. Even if low demand depresses prices, high energy and food prices, which are substantial to households, and high household debt will persist.

When you combine all of these facts, it is very difficult to see a strong recovery. The overarching question is: where would it come from?

The core measure that will decide both the 2015 election, and our economic prospects will be 'real wages'.

Tuesday, 9 October 2012

David Cameron, Fairness and Re-inventing the British Economy

David Cameron this morning argued that the rich had paid 'ten times more' than the poor towards tackling the deficit, part of an ongoing Conservative message seeking to demonstrate their commitment to fairness amid austerity. For months now we've been hearing variants of this message from individuals in the media and in politics, with some going as far as the straight-out argument that the wealthiest pay a disproportionate percentage of the overall tax take and therefore should be given something of a break in the rhetorical class war they feel is on-going.

Class warfare itself is always a strange idea. It's difficult to imagine a concept of class which is not divisive, even discriminatory in some way. It rarely has good connotations. In any case the rich pay huge amounts in tax, absolutely massive amounts more than the poor. And people like Fraser Nelson who point this out are absolutely right. The difficulty, the chief difficulty that they face is that the rich also earn huge amounts of money, absolutely massive amounts of money. That is to say, the poor are statistically less likely to earn enough to pay tax and if they do pay tax, they tend to pay tax on lower overall earnings, and to pay a lower marginal rate of tax on those earnings.

Similarly, when Cameron claims the rich have contributed far more than the poor, this is rather ignoring the fact that job losses disproportionately affect the poor, as does wage-stagnation. The rich have been getting richer while the poor get poorer. By analogy, it's true that when the public sector declines and the private sector grows, women on average lose more in earnings than men, and in that circumstance you could just as easily argue that under this Government men were contributing more towards paying down the deficit.

All of this ignores the fact that an extra pound (or one less) of income matters considerably more to someone on the minimum wage than to someone with an income over £150,000 per year. The diminishing marginal utility of units of currency is a fact of economic reality. Consider spending priorities for someone on a modest wage: At first you'd pay for the mortgage, the rent, council tax. Without these you'd lose your home, or face legal penalties. Then there's food (in the US, there's healthcare too), heating, electricity, utilities in general, and of course transport which you most likely require to get to work. Only after these necessities do you pay for other items, from a new laptop to eating out, to outright luxuries.

When you earn very little, every penny matters because you might barely be able to pay for the necessities. And luxuries you buy are precisely that, a luxury. For someone with great wealth, even luxuries can be almost effortlessly afforded, and as such cease to be rare, and lose much of their psychological value. Although, they might find even more expensive things to buy. They often do.

And of course, while the poor are often struggling to pay off the mortgage, and yes, even the credit card, the rich are able to garner interest on savings, make investments and avoid paying interest when making purchases. They enjoy greater and easier access to a range of advantageous options and opportunities, including the ability to have multiple homes, more comfortable and swifter modes of transport, more capacious living spaces and more pleasant environments. They are more easily able to make the decision to work less, and enjoy more leisure time without losing the financial means to enjoy these advantages. And they are able to outbid those poorer in society, on virtually any commodity, from housecleaners to simple food, when the supply is scarce. And of course, they routinely outbid the poor on public school educations.

Wealth performs the same function it has ever performed, it makes it easier to succeed and to survive, to develop your own potential and to thrive to the best of your ability, and to obtain even more money. By its very nature it is surplus; wealth is obtained by earning more than you need, and more even than you spend. Sometimes this is done through thrift and extreme hard work and entrepreneurial spirit, other times it is through good fortune or even by birth.

There are two lines of argument on taxing income, and wealth. One is essentially economic, and has to do with efficiency and equality, and is not entirely simple. Income serves as a labour price, and sends signals which are meant to match supply to demand in a market for specific skills, experience and capabilities. In this way, the argument is put that for example, banks pay large sums for top talent because they want the best, in order to employ their extremely large sums of money to the best of purposes. Alternately, poor households tend to have children who perform below their innate potential, and excessive inequality has the habit of reducing the productive potential of a society in many complex ways including health and social costs.

The other line of argument is in some sense moral or political. One argument is what we might term 'structural', in that it argues, for example, that wealth must be taxed to avoid intergenerational transfer of advantage which is unmeritocratic in character. This kind of thinking produces the inheritance tax. The other line is more versed in liberty, and this view demands that property rights should be treated as just that, rights attributed to the person who owns and has earned their wealth, such that state interference should be seen, again, as just that. This sort of clash of ideology, while a simplification, is very much active in our politics today.

I think most people can sympathise with both sides of each argument. We can see that people with special talents are in greater demand, and we can just as easily see that talented people sometimes aren't given chances as a result of their background. We have a desire to pass down our own assets to our children, and we don't want to be told it has to be, rather impersonally, recycled into the social vat. But equally, we can understand the price that comes with social fairness.

The Prime Minister-- it goes without saying, a man of great personal means-- cannot hope to convince the public that his budget is fair, or that the rich are paying more than the poor. Even if it was absolutely true on paper, and he was not distorting the facts to his advantage (which few members of the public would believe, even if it were true- of *any* politician), most ordinary people see rising costs and stagnating wages. And they see the richest in society becoming wealthier in newspaper headlines year on year.

David Cameron is wasting his time on fairness, his only meaningful argument was efficiency and his preference is for liberty. His goalpost was deficit reduction, and on that he has, so far, plainly failed. I need not say that in my view his economic strategy is devastatingly mis-conceived, because ignoring anyone's views or beliefs, the Conservative party's fortunes, for a generation no less, will almost certainly be decided on the deficit and household finances. Costs are destined to go up: food prices have unstoppable momentum due to surging global demand, and a serious drought this year, and energy prices are similarly disposed, and suffer from a poorly designed energy sector in the UK with a lack of forward investment. And as for wages, with diminished demand for labour and high unemployment we are unlikely to see wages rise above inflation, as indeed they have not.

 In the dying days of World War II, not long after the Great Depression, the then government of the United States drafted the G.I. Bill, seeking to provide for the veterans of the conflict. This legislation would allow former soldiers to take out low-cost loans, attend further education and generally facilitate their re-entrance into society. In the process it helped many of them to advance their lives ways otherwise not possible, including moving into better accommodation, creating new businesses and developing skills. In short, it helped create the American middle class of the post-war era and to end the staggering inequality that had preceded the great depression.

The UK is currently treading water, holding its breath until the moment of calamity passes, and things go on as normal. But normal was a delusion, economic inequality in 2008 was not so far from that before the great depression, and it has not improved since. It was obscured by the availability of credit, and the unwinding of all that leverage is the cause of much of our ongoing problems even now.

 Low rates of interest, much touted by Government are as much bad sign as good, as much a casualty as a cause. They have not risen because private money has fled away from risk and into Government debt (to say nothing of BoE purchases), and they cannot rise because to do so would quickly render the mountain of British debt unsustainable, inducing increased rates of default among households who have survived the recession only because of diminished debt-servicing costs. Household debt levels, built up during the crisis, can only be reduced by substantial wage inflation, default, or an injection of cash from elsewhere. Otherwise, stasis is the best available option for the economy, because significant recovery cannot realistically happen while Government is retrenching, Private Investment is at a standstill and demand from both domestic and foreign sources is tepid at best. The European crisis is part of a long term re-organisation of the economic landscape, and it has affected us and will, but Britain too has a reconfiguration to undergo, and right now, we aren't starting down that road anymore than they are.

 The Tories want to cut somewhat faster, Labour somewhat slower. What noone in politics seems to be able to tell us, is where our next balanced, healthy economic generation will come from. If Ed. Milliband's one nation speech had one theme, it was that society can only succeed if everyone participates, and is able to participate, if noone is left behind. It demonstrated arguably more of a coherent policy vision than the Prime Minister has for Government, but it left out that one lamentable necessity of a responsible opposition: details of a credible alternative. Labour remains afraid to commit. It is unclear whether they will commit even on the eve of the election.

In politics there are few easy answers. The coalition is essentially waiting and hoping things get better. They have no answers. George Osborne once said that if he had a magic wand that could mend the economy, he'd wave it. Which is appropriate, as what little the coalition does do seems to be little more than magical thinking, on the one hand worried about what Krugman terms the 'confidence fairy', on the other making gestures and 'signals' by reducing regulations and lowering taxes with no proven beneficial effect-- Cameron campaigned on reducing corporation tax and removing investment tax credits, with the net effect that cash-rich companies have hoarded wealth, and little private investment is currently going on. Labour clearly believes it has, or had answers, as evidenced by many of Ed Balls's speeches, but is afraid of being caught flat-footed by events. Furthermore, it is afraid that by the time of the next election there will be far less room to act with Government spending. So they are afraid to say anything meaningful.

Even as the IMF downgrades its forecast for this year's GDP growth in the United Kingdom, its projections for next year remain rosy. Just as their projections for this year were last year. It's entirely possible their predictions for 2014 will be quite upbeat in 2013. The only real question that remains, is how many years will it be until they are actually right? And how much long term damage to the nation's productivity will we suffer before we begin to re-invest in our future? These are the questions on which the next election will not hinge, these are the questions politics cannot answer, these are the questions for right now. No matter what happens to the country, the causes will be obscured and the choices relatively binary, Labour or Conservative. And neither has any answers, so neither can really be held to account.

Tuesday, 11 September 2012

The State Investment Bank in Brief

There are a bunch of issues tied up with recent discussions over the investment bank, and industrial strategy and I want to condense these to the smallest passage possible, so here goes:

Much as with the housing development problem, taking care of the supply side alone is simply not sufficient. Small businesses and individuals who need loans are unlikely to get them for two primary reasons: Lack of security, and risk. Risk in this case is substantially amplified by an overall lack of expected future demand. Lack of security is always and genuinely an issue that the state can intervene to help with.

Take the example of student loans. Some students are clearly at risk of never getting employment which will allow them to pay back their loans, and deciding who will, and who won't is a difficult thing to do. Given positive externalities, the state has tended to simply extend loans to anyone able to qualify for a university course, and ignore this risk to repayment beyond that point. As to the question of security, the rich are clearly able to repay debts irrespective as to future income, and the poor are certainly not. The market would normally either refuse to lend, or charge a higher rate to compensate for the likely default rate. The state equalises the rates, and indeed under the current system charges more to those who earn more.

How much money you have has little relation to your potential, so it is right that the state acts in this way. The same problem applies with SMEs, where they, unlike many large firms, do not have sizable reserves to borrow against, and this does not necessarily predict their ability to succeed in business. Discriminating on the basis of resources would create high entry costs, and concentrate the market, potentially reducing competition and innovation, and so there is a case on this basis to help lower credit costs in some situations. The repayment risk is heavily affected by expected future demand for products and services, however, and one reason the banks have substantially reduced outgoing loans is to avoid unnecessarily risky loans.

The Government itself has, on the record, argued that the major cause of its failure to use allocated funds to support business in this way is the risk involved in many prospective enterprises.

As to targeted investment, and the channeling of pension funds into safe, high return public infrastructure investment, and so on, there is clearly a good argument there. Government investment in schools and hospitals, partly funded by pension funds achieves an increase in employment, future capital, externalities, and safe, reasonable returns for pensions. The only question is whether the money is used efficiently, effectively and appropriately, and this problem is one of decision making and oversight, and is entirely separate.

There are also industries which are clearly worth investing in. There are two main reasons for this:

a) The market won't meet needs. Due to high entry costs there may be few firms in the sector. They may not have access to infrastructure or a large pool of individuals trained to meet the needs of that specific sector. Continued increases in technical efficiency, available specialised labour and available infrastructure are likely to accumulate as an industry develops and persists over time. None of these things exist before the industry has taken root, and this can make it very expensive in emerging industries to get started. Further, where costs will come down with these investments the sector may become more competitive and profitable after being aided with investment than they could possibly be without it.

b) There are clear needs, strategic or economic. During world war II, the enigma code and the loss of food shipments from abroad gave Britain a harsh lesson in the risks of relying on imports for a vital good. Future food scarcity, lack of oil and gas, and general energy constraints may be satisfactorily predicted from climate models, the marginal cost of extraction and processing of fuels, and other factors. A strategy to develop national production may be wise in these cases even if those industries were currently uncompetitive.

Similarly, there may be areas where the UK has great commercial potential, but is hampered by a lack of support and investment comparable to that available in other states.

In Conclusion:

Neither project Merlin, nor any of the various other measures the Government has taken to support lending to SMEs are likely to be very helpful while demand is weak and future economic performance is unsure. A programme of investments may boost employment and demand while meeting needs, but will fail to address the financial constraints faced by households and sufficiently address levels of debt. Will try to jot down something slightly more detailed later.

Friday, 13 July 2012

On House of Lords Reform

I'm opposed to the present HoL reforms. Vehemently so, and instead of writing an essay on history and the constitution and the nature of democracy I want to simply go over a few arguments (for and against) that are floating around right now.

1. It's undemocratic that the upper house which writes our laws should be composed of bishops/aristocrats/party cronies.

The first point here is that the HoL only has a suspensory veto. It is not capable of resisting the Commons indefinitely, and on certain kinds of bill--the most important of them-- it is not by convention permitted to resist it at all. It is also a mistake to assume that the amendments of the Lords are such a crucial factor in writing legislation. Politicians do not hand write their laws, a great many factors go into producing a bill and the Lords play a fairly minor role, aiming to improve the laws.

Of course the composition of the Lords must be reformed, and it has been gradually changing as a result of past reforms. The Law lords no longer sit, and the inherited positions have been disappearing. In any case, the absence of elections provides great freedom to all members, and there are a great many crossbenchers and individuals of great expertise. The current reforms do not aim to do away with these benefits entirely, but the imposition of party lists and elections would fundamentally change its operation.

2. The last thing we want is more elected politicians.

Democracy is important but it is not a panacea for all ills. Elected doctors would not be better than professional doctors. Nor are elections the only or best means of accountability in all situations. Barristers are not held to account by popular opinion, nor judges by the media. They have professional standards and a culture which promotes certain forms of behaviour. An elected judge would have to consider what would win him elections, and not merely what the law (which was set by the elected legislature) demands given the facts of the case in so far as the law of evidence renders them applicable.

The Commons is our elected house, and it writes our laws. If the Lords was elected by PR there would be a clash for primacy, as parliamentary supremacy is based in large part on its democratic legitimacy. This would not only produce cost, uncertainty and potentially gridlock, it would also risk situations where one house 'won' on an issue, and sections of the public felt cheated, choosing to regard the house which favoured their position as more legitimate.

Not that I am arguing there is no place for elections, or PR in the Lords. The overwhelming purpose of the Lords is to consult, consider and provide improvements to the Law as proposed by the Commons. Bagehot favoured it as a place where elections were not a consideration, but today we would additionally favour it as a place where appointed experts could play a role in the process. There are many in the field of law who have vehement objections to how legislation has unfolded in recent decades, and many in the fields of science who feel evidence has not been taken into account properly. These elements, while not democratic, may be considered helpful to the production of mature law.

Elected politicians represent us. They play a competitive sport whose aim is to win our votes and to remain in power. Most of them are idealistic and want to produce a better country, but they are hampered in what they can do by their need to position themselves in the eyes of the public, and against their rivals in the quest for power. They are necessary, often hard working and frequently noble of intent, but they need not make up every part of the system.

3. The Supremacy of the Commons would be threatened.

This serious concern, already mentioned, is entirely valid and difficult to assuage. It rests on the character on the second house. If the upper house is to remain an amending chamber with a suspensory veto, it would not be expected to challenge the primacy of the lower. However if 80% of the members were elected by PR, arguably a more representative electoral system than FPTP, they could absolutely claim the legitimacy to go substantially further than the bounds of the Salisbury convention, or of the Parliament Acts. And many in the public would sooner or later support this position.

However the danger might manifest, it remains real and serious. Governments may do things that many do not like, myself included, but they are fundamentally democratic and responsive, even if it does entail the odd U-turn. An elected second house would either produce expensive redundancy, or gridlock, where each house was dominated by a different party, or coalition of parties. The benefits of blocking something you dislike quickly fade when you are faced with a complete inability to achieve anything when in power.

And this presents other problems as well. Many policies cannot work if incremental in nature. Small changes intended to address regional poverty will often result in no measurable change at all, owing to the feedbacks involved. This can serve as a justification to avoid doing anything, when a bolder measure would prove successful. Government should be many things. It should be transparent, accountable and limited in its powers, but it should not be rendered impotent by the prospect of being blocked in the second house at every turn.

The current argument is that long terms (15 years) would sustain the primacy of the Commons, and achieve many of the benefits of the unelected status quo. There is some truth in these assertions. However, they carry with them certain negatives. Elections either must be drawn from votes taken at the close of each general election, electing by thirds, in which case the tactical voting of FPTP would be enforced on the PR system, or it must come from costly additional elections, in which people vote in largely a similar way, for parties and not for candidates. This produces members selected by their parties, not particularly voted for by the public on an individual level, without any guarantee of expertise on any issue, and without any measurable accountability for the ensuing decade and a half. It may actually close, rather than open the system, rendering it more dominated by elites. Bear in mind, appointed individuals would be drawn from outside the political elite by an independent selection commission.

There is some virtue in having party list candidates for the Lords. Clearly the purpose of PR is to achieve a mix of MPs who reflect the parties voted for at the election by percentages, achieving representation of views of the nation as a whole, not of a geographic constituency. The question is whether they should make up such an overwhelming majority of the Lords, and whether 15 year terms are the proper reply to the primacy issue. A smaller proportion would give greater prominence to the appointed individuals in applying scrutiny, and reduce the capacity of the party faithful to act as spoilers for Government legislation. A larger proportion risks undue legislative authority, a risk averted only by long terms in Parliament-- even though long terms, relatively unchallenged are the norm for many seats in the Commons.

It is also important to avoid applying PR to the Lords simply because Mr Clegg was unable to secure AV for the Commons. Electoral reform in the Commons itself is important, and effecting constitutional change of this magnitude to the second chamber in order to change the nature of British Democracy is a drastic, and likely undemocratic move, given there will be no referendum, the people rejected AV, and noone has put much effort into explaining the reforms.

In Conclusion

I don't personally want to leave the Lords unreformed. I don't think it has to be put off simply because there are "more important things" on the agenda. Nor do I oppose everything that has been suggested. It does seem that the current proposals have not been settled on, and that a strong political consensus, or a referendum should be pursued before such a major constitutional change is attempted. Whatever was or wasn't on manifestos in 2010, it is clear that no such consensus really exists. Nor have these changes been discussed properly in the media. The majority of the discussion has been dominated by the politics, and not by the arguments.

We need to talk about it because it isn't as simple as taking an archaic institution, removing the landed aristocrats and introducing democracy. We have to consider the system as a whole. How does the elected House of Commons operate, should FPTP prevail? How will the two houses interact for any given set of reforms? What benefits and costs will accrue for any given set of reforms?

And to those who say it has to be better than the status quo, we should bear in mind that the status quo is capable of change at any time, doom and disaster will not result from leaving it in place another year, but changes can be dramatic and may produce unanticipated consequences. The case for reform must not only be made in terms of broad ideas, but in terms of practical realities. The opportunity presented by Lords reform is potentially far greater than the problems it presents, if done with great care and thought, it could dramatically improve the quality of our democracy, but that does not require it to be democratic.