2+2=5

The numbers just don’t seem to add up to me.

The Guardian today reveal that the Treasury expects that around 1.3 million jobs are to be lost as a consequence of the budget. Of these around 600,000 are direct public sector job losses with the rest culled from the private sector.

David Cameron insists, with chutzpah in Kathy Newman Alice Tarleton‘s words, that unemployment will befalling every year this parliament. This is a reiteration of what the Office for Budget Responsibility describe; a situation where jobs lost in the private sector are replaced, more than replaced, by those created in the private.

As Anthony Painter points out this means that net job creation must proceed at rates in excess as were enjoyed in the period 1999-2007. Let me reiterate, Cameron implies that our recovery from a catastrophic financial crisis – which usually tend to L shaped rather V shaped – will see a flurry of job creation not seen even during the longest boom the UK has seen.

There are ways out for Cameron, but none particularly convincing.

A contractionary fiscal position can be met offset with an expansionary monetary position; lower interest rates or quantitative easing, for example. But it looks as though we will be facing tighter, not looser, monetary policy in the near future.

Or we can trade our way to a boom, after all Stirling has plummeted, but every country is planning on doing that, and we can’t all run trade surpluses.

Businesses can be impressed by tough measures and they can boost their confidence, of course that hasn’t happened and confidence is down.

Alternatively, Cameron is just making over optimistic prediction. This is something which he lambasted Brown for while in opposition but seems to have embraced once ensconced in the seat of power. Both the private sector and the Trade Unions are dubious of Cameron’s predictions and they can add my voice to their incredulous calls.

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What will happen to the North Korean Football Team?

I think today’s upcoming match pitching North Korea against the Ivory Coast is a worthwhile time to revisit a post originally published in April.

I recently finished reading The Aquariums of Pyongyang by Kang Chol-Hwan. It is an account of life in a North Korean gulag. It’s not incredibly current, especially as his time in the gulag finished in 1987, and the book was first published in France a decade ago. But in a country that seems to be plodding along at the pace of an ox drawn cart, and that has suffered a great famine in that time, it offers a relatively insightful glance into a world that very few people have gained access to. Excepting suspicious footage of the Gulag in which the memoirs speak of which surfaced on Japanese TV in the past few years, it is something which very few people have been granted access to.

I could put together a several thousand page rant about the Korean Worker’s Party, the ‘Dear’ and ‘Great’ leaders, and the bleak situation which North Korean citizens have had to endure as a result,. It’s something that many people have done before, and with limited fresh information coming out of North Korea, runs the risk of recycling the words of previous commentators. So in an effort to keep this post somewhat topical (whilst avoiding all the election hype) I saw a specific section which I thought I could work with regarding the treatment of a former North Korean national sporting hero.

As you may well be aware, the North Korean national football team has qualified for the World Cup finals in South Africa this summer. A feat that they only achieved one time previously when the tournament was held in England (as a Scot I won’t dwell on the final outcome that particular year!). Considering that even less was known about the nation then than now, and that prior to the tournament, no Asian team had ever got past the first round (again, a sensitive issue to a Scot…) very little was expected of the team. Something that was reflected in the 1000/1 odds that were granted to the lowly Koreans prior to the tournament. After a steady, if unremarkable first couple of matches, their final group match against Italy at Ayresome Park in Middlesboro was a decider for qualification to the next phase. Lining up against one of the top seeds and, at the time, joint most successful team in world football with two previous tournament wins, most had resigned them to defeat. They surpassed everyone’s expectations with a victory to take them to the quarter final where they lined up against Portugal with the mighty Eusebio. After 22 minutes, they went 3-0 up, before conceding five and killing off what would have surely been one of the greatest ever success stories in World Cup history.

Understandably, following their incredible victory, the team went on a bit of a celebratory binge, which was then used as a reason to blame for their eventual exit from the tournament. After seeing pictures of the team celebrating, the Pyongyang authorities deemed their actions “bourgeois, reactionary, corrupted by imperialism and bad ideas” and the whole team, upon arrival back in North Korea were punished with a stint in the hard labour camps. Kang Chol-Hwan talks of meeting one of the stars of this team, Park Seung-Jin 12 years later, still serving after reacting badly to the punishment which included treatment which stretched as far as a 3 month stint in the utterly barbaric “sweatbox.” This, Kang describes as a Papillon-esque small shack where prisoners are forced onto their hands and knees. Where the prisoner’s heels are pressed so tightly into their body that the buttocks turn solid black with bruising. Barely enough food is provided to survive whilst in this prison, and the tortured are forced to pounce upon cockroaches and centipedes in order to survive. Prisoners are not permitted to talk – the only gestures allowed were to raise your right hand if you wanted to be sick, or left hand if you had to relieve yourself from the other end. If the prisoner made a noise, the guards would relentlessly beat them. If there was any other movement the guard would beat them. That is of course, unless they favoured other punishments such as being forced to crouch over a septic tank with the prisoner’s hands tied behind their back and their face forced downwards.

So other than to give you an unpleasant account of torture methods used in North Korea, what has this post told you? North Korea is isolated from the outside world. Even the route of escape which Kang eventually took – past relatively lax border guards in China has been limited with the construction of concrete walls and barbed wire lining the border to stop escapees. The lack of information regular citizens have of the outside world is startling. The internet is but a fantasy to all but an elite few. Tuning in to South Korean radio is punishable with a spell in the gulags. The country has the lowest rated free media in the world. The very few tourists allowed in the country are scowled at by the North Koreans, who believe them to be a threat to their great nation. The population of North Korea genuinely believes that their “Great Leader” saved them from the American Imperialists who invaded their country. They also believe that they are the most successful and most fortunate nation in the world. The thought of them losing in the World Cup (which, lets face it, looking at their group is incredibly likely!) is inconceivable to the 180,000 odd who can pack into their Rŭngrado May First Stadium in Pyongyang, which I recently learned is the largest stadium in the world.

The World Cup for me and many other people worldwide is a hugely anticipated sporting spectacle. It’s a chance to watch the best in the world compete in the world’s most popular sport. But naturally it brings political implications. I just hope that people pay a bit more attention to this North Korean team. I fear for these players who will almost certainly never live up to their nations impossible expectations. Whilst many casual observers may expect the team to return home to a heroes welcome regardless of the results, the reality may be far starker. So let’s hope, that in 43 days (and counting) when the tournament commences, that the team won’t be ‘corrupted’ in the free, western world and be accused of actions that are “bourgeois, reactionary and corrupted by imperialism and bad ideas.” Let’s hope that the media steer clear of arousing unwanted political controversy which would have extremely far reaching implications, and let’s hope that the logic and lunacy of Kim Jong-Il doesn’t stop these players enjoying their well-earned spot in the limelight amongst some of the world’s sporting elite.

Brad DeLong slouches towards a completed manuscript

Before the invention of agriculture it is almost surely not good to be the king. You can use your status to pick the best of things, but the amount of things you have is limited to what you can personally carry. And if your exactions become too onerous the people can simply leave for the hills. But once a population becomes agricultural, people cannot leave for the hills. Hunting and gathering in the hills cannot support the population densities of agriculture in the irrigated plains, so departure means death for overwhelming numbers and also the loss of all of the value of the labor that has gone into ploughing and sowing and weeding. Agriculture opens a new career path: that of a specialist in systematic violence directed against other humans who makes threats to induce them to give you a third of their crop—or else.

A parasitic caste or class existing by virtue of their organized ability to take a substantial share of the agricultural (and craftwork) producers’ crops becomes the rule soon after the coming of agriculture. Such castes and classes live better albeit more dangerously than the peasants. (If they didn’t live better, after all, why accept the extra danger?)

Interesting throughout, you won’t read these paragraphs (only two of 17 are abstracted here) anywhere else as he’s just cut them from his book.

Class war and misleading graphs from ConservativeHome

Well the budget is out and Tim Montgomerie helpfully provides this graph showing that those with the broadest shoulders are baring the greatest burden.Screen shot 2010-06-22 at 15.02.45

Or are they?

His second graph (added an hour later in an update) shows the impact of the budget as a percentage of income and it paints a somewhat different picture.

Both graphs together tell many stories.

We are shown the dreadful impact VAT is going to have on the poorest, even with all the exemptions they are still going to feel the biggest burden because of it.

We are shown that the Tories are not afraid to offer the very richest the largesse of Government, they are suffering relatively little.

About our society, the difference in the absolute figures and relative figures shows us how unequal we are.

About Tim Montgomerie?

Well his preference for the first graph shows he is both an excellent propagandist for the wealthy [1] and someone who doesn’t understand poverty. A graph that shows poor people can’t pay much for something, and the wealthy can, isn’t exactly demonstrative of much that isn’t obvious, if you know what to look for in the first place.

[1] For those who can’t see the venom dripping from their screen, this is not a complement.

***

Sadly, I don’t have much time to analyse the budget. I stick with my original position as outlined in the below posts.

Dave, Nick and George: Crushers of optimism, enemies of business

Paul Krugman is angry

This country doesn’t have an overdraft you twat

I hope I’m wrong, but I don’t think I am. George is going to tank the economy, and while I don’t think we are destined for a double dip we are going to be in a worse state than we needed to be for sometime. Perhaps we’ll see some more activism from the Central Bank to offset some of this, but I’m not holding my breath.

Time to get your barricades polished.

File:Eugène Delacroix - La liberté guidant le peuple.jpg

“What’s that @CharlotteGore? My Restraining Order is in the post?” — Charlotte Gore continues to demonstrate that she doesn’t understand economics

This is now a trilogy.

Perhaps quite a rude trilogy now, but it appears I’m not making much headway.

However, I think perhaps I might have secured a toehold [if you need to be brought up to date please follow the footnote 1].

Charlotte Gore believes that the Government, by its very nature, has no means of creating wealth itself. This is the reason she is worried about the deficit.

This is wrong, and as yet, she has provided no evidence to support her position. She has, in fact, provided evidence which contradicts her position, although I’m not sure she realises it.

The evidence contradicting her position, provided by Charlotte, is provided below.

The things that help generate wealth – courts (and the police), roads, rail, national grid.. these are all things that the private sector WOULD provide if they needed to, if building a motorway was a way to get goods from A to B in the most efficient way possible, thus helping them make money, then they’d do it.

I am now going to summarise this argument so its easier to understand.

  1. X is currently done by the state and creates no wealth.
  2. X is a necessary service.
  3. Because it is necessary, if the state did not do X then the private sector would do X.
  4. The private sector only does things which produce wealth, because it only survives by doing so.
  5. Therefore when X is done by the private sector it creates wealth.

As I hope my more astute readers have observed this makes no sense.

In fact what Charlotte Gore has demonstrated is that certain things currently done by the state produce wealth.

This conclusion was reached solely using the assumptions presented in the three missives delivered to the internet on the subject from Charlotte’s own keyboard and their logical conclusions.

Therefore, I repeat, the state under certain circumstances can produce wealth.

But wait. There is more.

Charlotte: Anything [the state] does aids wealth generation by the private sector incidentally and indirectly only, and never as efficiently or successfully as the private sector would, which by its nature only does things from which it can make money.

This is a statement of empirical fact provided in absence of evidence. This is also a statement in denial of a widely accepted, in fact almost utterly irrefutable, theory. Enter stage right Joseph Stiglitz.

Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well. But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.

The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place.

That is flatly in contradiction to Charlotte Gore’s argument.

In fact, once again Charlotte ignores the post on which she seeks to comment, as I make the very same argument in my post with regard to Pigou taxes. Do go and check as I think I argue it quite eloquently.

But wait. There is more.

Charlotte argues that whatever the state does at best  “aids wealth generation by the private sector incidentally and indirectly only.”

This is an interesting argument because it assumes an economic system which hasn’t existed anywhere for thousands of years.

What she is describing is a system where trade is rare. Most productive processes aid wealth generation incidentally and indirectly only and only do so to any great degree when combined in aggregate with other services.

For example, I work in customer services, writing letters requested from members of staff and responding to letters sent in by customers. Even with the rest of the business, I am not aiding wealth generation in any way other than incidentally and indirectly.

Tim Worstall provides his beloved Scandium to all and sundry should you provide him with the cash he requires. Yet if a lump of Scandium were to arrive through my letter box I wouldn’t be able to put it to use as anything other than a paper weight.

Trade for my services occur in this case within a firm, Tim without, my services are for money as are his, but as usual we only provide part of the value added which the customer receives. Wealth generation only ever occurs as a small part of a value added chain, unless of course you are fucking Ray Mears.

But wait. There is more.

Charlotte: You’re still missing the important bit. While the courts, for example, are absolute [sic] essential for wealth creation – which they are, by the way, because they help make sure contracts are enforceable – they are PAID FOR by the Private Sector.

Here Charlotte argues that because service X is “PAID FOR by the Private Sector” that X cannot be a service which creates wealth.

My customer service job is “PAID FOR by the Private Sector” yet the job I do produces wealth. I still have the job, so I hope Charlotte would agree that it must logically produce wealth, otherwise it would not be “PAID FOR by the Private Sector” and I would be let go (what a wonderful euphemism, no?).

Things which are PAID FOR can still be (and almost always are) things which produce value. That they are purchased is not an indication that they do not produce wealth often the opposite.

Of course, the private sector is compelled to purchase these things. However, because all private actors can enjoy the benefits of the courts, police etc. (as you acknowledge) without paying for them a degree of compulsion is the fairest and most efficient way of delivering these.

Here you must be brimming Charlotte: “I didn’t mean PAID FOR in that manner, I meant that the private sector paid for these things yet they are enjoyed by someone else.”

Yet when we are discussing “the courts” (which you specifically cite) the private sector is enjoying the benefits, and as Joseph Stiglitz points out aboveit is almost certainly more efficient that the alternative.

There is no more.

The state can produce wealth, you have admitted even if you don’t realise it. You must refine your arguments if you wish to convince anyone.

Which actions of the state do not produce more wealth than are consumed in their production? Which actions of the state are mere second best uses for things which can best be used best by private enterprise? Etc.

Once again I conclude the same, you want to convince me of why you are, and therefore I should be, worried about the deficit, but you have yet to present any sort of logically coherent argument in favour of your position.

And now for something completely different.

Let me present an argument against the deficit to you which troubles me. It makes me rethink my position in a way you are unable to provoke.

This argument concerns fiscal policy and monetary policy.

Say the fiscal authority (call them the Labservative Democrats) and the monetary authority (call them the Bentral Cank) have different targets for employment and inflation.

If the Labservative Democrats decides to boost aggregate demand and inflation in an attempt to boost employment by fiscal measures (i.e. running a deficit) then there is nothing stopping the Bentral Cank from withdrawing stimulus to prevent  an increase in employment and inflation (i.e. raising interest rates, or signalling they will raise interest rates sooner than otherwise).

This neutralises the beneficial effects, while leaving the debt. Bad all round.

I don’t have a completely satisfactory answer to this dilemma. However, I have several completely satisfactory answers to the arguments put forth by you. If you wish to convince others to your way of thinking then you need to start being more convincing.

I’m not sure I have much more time for you when as you can see, actually existing policy dilemmas exist for me.

______

[1] To bring you up to date Charlotte Gore argued that the reason she is upset about the deficit is because she doesn’t understand economics the Government, by its very nature, has no means of creating wealth itself and that it was simply building up debt with no demonstrable benefit.

I argued at first that the police, courts and army – the night watchman and thoroughly classical liberal functions of the state – did produce wealth regardless of your political ideology. So her principle objection is in fact fallacious.

However, rather than accept this she responded that “even if you consider the courts, the police, the road network and all the other infrastructure, non of these create wealth… it’s the private sector that generates the wealth.” I began to get exasperated here and as Quinn pointed out “it appears Charlotte… left a comment without reading this post.”

So I followed with another post wherein lied two propositions.

Firstly that if the police, army and courts did not exist it would be necessary for the private sector to provide them. Of course, they would only be provided by the private sector if they produced wealth, as the private sector is motivated only by the profit motive (oversimplification alert!), ergo they produce wealth, ergo when the state performs these actions it produces wealth.

Secondly, when negative externalities are produced, such as pollution, this can be taxed at the rate of damage and the proceeds distributed to the victims of said damage. In this way allocative efficiency is raised and wealth is produced (because scarce resources are allocated more efficiently when priced correctly).

See above for Charlotte’s response, and my response in turn to her.