Friday, February 17, 2012

The grasshopper and the ant, EU-style

One of these countries is rigorous, responsible and wise, whilst the other is corrupt, irresponsible and foolish.




Who was Ramsey McDonald again?

What a mess Labour is creating for itself right now. The latest is this - Labour proposes cutting £6 billion from the transport budget. This is probably about as wrong as it is possible to be, on just about every level.

First, as a piece of political rhetoric it is totally stupid for Labour to play the deficit game. They will never get 'credibility' for proposing cuts, because the Tories are the ones who celebrate slashing state programmes, whilst everyone knows Labour would rather not. So why pretend?

Second, strategically it makes no sense. If the cuts succeed (ie an improbable recovery happens anyway), Labour will gain nothing by saying 'oh we would have done that too'. If the cuts fail (ie the economy continues to stagnate) then what is gained by saying 'oh well, our cuts would have magically produced a different result'?

Third, it is based on a stupid idea - that in a recession you should use the only lever available to cut demand rather than increasing it. It didn't work in the 30s, it isn't working in Greece, it won't work here.

Fourth, if there is one area where increasing public spending would have unambiguously positive results in terms of quality of life, equity and economic growth, it is transport. Britain's transport network is a joke, and a major drag on growth. In a few short years, it will be an economically unsustainable joke, as it is based on wasteful consumption of an increasingly scarce resource that we will be competing for with a billion Chinese.

Please, stop playing this game. If cuts are a success, you lose. If cuts are a failure, you own the failure.

Friday, February 10, 2012

Merkel's vision for the EU

Angela Merkel has made an interesting and depressing speech about the Euro situation, reported here (Germany and Europe: A very federal formula - FT.com).

My first reaction is - good luck with that. Events today in Greece suggest it is entirely fanciful to imagine that such a fiscal union could ever get off the ground. Inviting countries that are suffering the worst crisis for the best part of a century to give up what is left of their political independence is an ambitious project indeed. Actually, for ambitious read ridiculous.

But quite apart from the practicalities, it is the wrong objective for a whole host of reasons.

First, not satisfied with designing a currency union which tried (and failed) to control some risks (government deficits) but ignored much bigger ones (volatile capital flows), the Franco-German leadership wants to entrench the same mistake in a much more rigid fiscal union. Worse, it would be a pro-cyclical fiscal union, focused mainly on preventing governments from intervening in slumps. The last three years have demonstrated that it is completely stupid to try to balance budgets in a recession. So Merkel's response is to prevent anyone from opting out of the stupidity.

Second, this institutional design, as well as being bad for everyone, is also worse for some member states than others. So Germany and France will be required to do next to nothing, whilst the GIIPS countries will have to jump through flaming hoops. Guess which member states have the most power in the EU? Well, that would be the ones who won't be required to make any sacrifices. Funny that.

Third, and perhaps most important, does anyone seriously think such measures could win popular support? I'm pretty sure Merkel is under no illusions. So that means yet another backroom deal which Europe's beleaguered leaders will then have to foist on their electorates as a fait accompli. Only this time, governments are not just unpopular, they have lost all authority to ask for sacrifices. Syntagma square here we come.

So in short, we have a proposal which is undemocratic, economically insane, and can only work if the EU drops any pretence that there are EU member states that matter, and EU member states who just have to suck it up.

Sunday, February 5, 2012

Labour back in the lead

For a party leader assailed from all sides as a failure and loser, Ed Miliband is spending rather a lot of time ahead in the polls.

Saturday, February 4, 2012

No child left behind - unless they have too many siblings

Neat summary of the rationale (if we can call it that) of the government's proposed benefits cap from the priceless Institute for Fiscal Studies.

The IFS note points out that a cap is a crude and inconsistent way of cutting benefits, since it cuts an amount, not a benefit rate. Another way of putting this is that is cuts the benefits entitlement for a family with x children, but not for a family with x-1 children (or if you prefer, for a family living in a high rent city compared with one living in a lower rent city).

Effectively, a child who has many older siblings is deemed by the government as having fewer social rights than an identical child with fewer or no siblings. What conception of justice or rights can possibly justify this?

Worse, although you could argue that those who breach the benefit cap because of high rents can move (presumably meaning schooling changes and wrecked social relationships), there is not much you can do if you have too many children. Even if you believe that providing higher benefits for big families incentivizes dependency, it is still retroactive, and there is no going back on the decision to have children. Ironically, the IFS note also points out that this will create a big incentive for affected families to split up (or pretend to), which will actually increase the benefits that can be claimed if a single family has to be accommodated twice.

If this measure gets through, we can look forward to a big increase in social misery for the most vulnerable people in this country, and it probably won't save much money.

Friday, February 3, 2012

The Times - an unexpected friend for cyclists II

In yesterday's post I briefly mused about The Times cycling campaign and wondered why the relatively small number of cycling deaths in London (around a tenth of the number of pedestrian deaths) suddenly became a source of public disquiet. Here's a couple more thoughts.

Mary Bowers is in a sense a typical cycling victim: a young woman hit by a truck which was turning left across her path. The majority of cycling deaths in London are caused by HGVs, and the majority of deaths are women. I can't help thinking that this may have helped capture the empathy of non-cyclists, who may be irritated by the stereotypical cyclist - a MAML (middle aged man in lycra), or a young man on a fixed-gear bike racing through red lights. Somehow, the latter categories are 'asking for it' through their deviant and 'threatening' behaviour, whilst a young woman on a bike is worthy of protection.

The irony is that more aggressive cycling seems to be safer. The dangers facing cyclists are often best resolved by ignoring red lights and stop signs and getting ahead of traffic, so we can be seen. Remaining trapped beside a turning lorry is the worst place you can possibly be. But being a passive, 'innocent', victim is socially more appealing. The public image of cycling has been shifted by these tragedies affecting young women, shifting the emphasis from the 'deviant' to the respectable.

As a middle-aged, middle class, white man, cycling is just about the only way in which I can experience what it is like to be on the social margins, a place where rights are ignored, violence is acceptable, and the law fails to protect. It's pretty educational, and not much fun. But the shift in focus represented by The Times' campaign may change that. There's nowhere more mainstream than The Times.

Thursday, February 2, 2012

The Times - an unexpected friend for cyclists

The Times has launched a big campaign for cycle safety, with front page treatment, centred around the serious injuries suffered by Mary Bowers, a Times journalist, on her way to work in November.

The Times is almost the last place I expected to find support for cycling, but they seem pretty serious about it. Cycling campaigns have so far been unsuccessful in reaching beyond the margins into the mainstream, but it seems that, at last, some kind of momentum is developing. The London mayoral elections this year will give even greater prominence to cycling.

As a social scientist, it's interesting to see how something can change from being an accepted pathology to becoming a political issue, requiring action and change. In part, it's about tragedy touching the people running a major newspaper directly. But clearly something was already moving, as cycle deaths had started to hit the newspapers before that. I can't help thinking that the disproportionate number of London cyclists who are young, well educated and linked to the media industry has something to do with it.

But it's also yet another demonstration of the role of social networks; blogs and twitter have served to mobilize the cycling community and reinforce a sense of grievance and a sense that change is possible. The feckless Boris Johnson and his inability to build on the success of the bike-hire scheme is another factor: it was a great publicity stunt to get people to call them 'Boris bikes', but it turned out not to be a free lunch. People expected roads that you could ride them on, and the cycling superhighways have been a dangerous fiasco.

So, we'll see what happens. 20mph limits in city streets would be a start, but what is really needed is a fundamental culture change, in which motorists give up their presumed right to dominate the roads. It's hard to see that happening without fundamental, and expensive, redesign of the urban space. I'm not sure if the Times really wants all that, but then again, I didn't expect this either.

Wednesday, February 1, 2012

Welfare is good for the economy

Welfare is good for the economy.

Or at least, that is one logical interpretation of this chart, which measures income inequality before and after taxes and benefits in advanced countries (the chart is from an OECD report on inequality). The difference between the blue and grey bars for each country is a rough measure of how much the government intervenes to make household disposable income more equal than the 'market' allocation.


Two things stand out here.

First, all governments reduce inequality, but they vary a lot in terms of how much they intervene to change pre-tax allocations. Belgium has pre-tax inequality at a similar level to Canada, but post-tax inequality is much lower in Belgium. Pre-tax inequality in Italy is even higher than in the US, but post-tax it is much lower. So governments can do quite a lot to make society less unequal, at least in terms of income.

Second, on a rough measure of how these different countries have performed in the years since the current downturn began, high levels of redistribution seem to correlate with better outcomes. So, Sweden, Denmark and Finland, who have low deficits, trade surpluses and have recovered lost output more quickly, also happen to have a much greater difference between pre- and post-tax income inequality. In other words, they redistribute more. Even Germany, although it has intermediate levels of inequality, redistributes almost as much as the Nordics. The basket cases: the US, the UK and the GIIPS countries, are all at the low redistribution end of the scale, and have suffered bigger losses of output, and bigger fiscal deficits (and this is probably not endogenous, given the data come in part from the pre-crisis period).

So the best predictor of emerging quickly from the world's worst recession for 80 years is to have high taxes, high public spending, and substantial reallocation of market income from rich to poor.