Category: Economics

Containerisation

Billy/ / Australia; Frontier Nation, Economics, General, Whither Aussie House Prices

….is a word invented in 1956 by Malcolm McLean to describe the switch from loose freight that had to be manhandled in and out of trains, lorries, cargo ships, etc. to the standard TEU and FEU shipping containers we still use today.

Depending on your source of choice, containerisation lowered freight costs by almost 50% due to lower rates of breakage, pilfering and required labour. Obviously, if you were previously employed as a stevedore in a port, that last efficiency might not have felt quite so positive.

The word “contained” similarly can have positive and negative connotations today. Witness;

Here’s another use of “contained” to compare and contrast;

That was from Ben Bernanke.

He doubled down a couple of months later;

Hubris is a painful lesson to learn. Of course, if you’re the Chairman of the Federal Reserve, the only real injury you suffer from being proven utterly wrong and professionally incompetent is a bruised ego which you can nurse with your gold-plated pension (it’s funny how, in these times of fiat money, “gold-plated” is still used to refer to great pensions, isn’t it?).

Back then to Australian property prices….

For non-Australian readers, there are several important points to make before judging an opinion on the subject;

1. There is no such thing as a single “Australian property market”. In a country as large as Australia, with so many economic and climactic differences, there are multiple markets.

2. Many people have tried to apply lessons from other countries to Australia and been proven wrong continuously.

3. Opinions are like arseholes; everyone has one.

So, that being said, here’s some opinions with supporting information;

Sydney and Melbourne account for about 40% of the population and roughly 60% of the value of housing. Sydney is about 15% times larger in terms of population than Melbourne and 50% greater in terms of value (being mindful that “value” is determined by someone actually being prepared and able to pay the price quoted). For the purposes of this blog, therefore, we will use the term “Australian Property” as meaning the Sydney and Melbourne markets rather than, say, a small town next door to a mine that’s just been approved in a remote part of Queensland.

Predicting how a group of assets will be priced in the future is notoriously difficult, even the “experts” struggle with it. A search over the years for one such expert, Dr. Andrew Wilson (yes, he’s a doctor of property economics!) shows that he’s under-predicted the rises and not forecast the falls in his area of apparent expertise. The newspaper articles seeking his views never show his past performance in their analysis, however.

We might be able to at least predict the direction of the trend, perhaps?

Let’s list the main factors which might indicate main two Australian cities are on a trajectory for an increase in prices (“Column A”) and those which suggest a fall (“Column B”).

Ok, they aren’t actually presented as columns because I can’t be bothered to work out how to do that in WordPress, but you get the idea;

Column A – The bullish case for Australian property

The Federal government has a moment of largesse with taxpayer’s money and implements quantitative easing or hands out a cash gift to debt holders to sustain prices.

China primes the pump and begins another phase of massive infrastructure creation, requiring more of the stuff under the Australian gound.

India decides to rebuild the 3 largest cities and connecting infrastructure and strikes an iron ore deal with Australia.

Australia develops a widget that is manufactured locally and is as popular as an iPhone.

The largest natural disaster in history destroys a few states of the US and, the US Federal Reserve opens the faucets again.

Column B – The bearish case for Australian property

Lending criteria stays tight to retain the illusion of banking strength and prudence to the world.

An incoming new Federal government makes sweeping changes to the way tax is calculated, with negative unintended consequences.

Overseas funding for mortgages becomes more expensive. 60% currently comes from outside Australia and this is subject to the rate rises being seen elsewhere and Australia’s banks have fallen out of favour.

Banks play out Game Theory and reduce their exposure to riskier asset classes in the face of evidence of a downturn.

Criminal charges accumulate as political pressure demands scalps.

Employment weakens.

In anticipation of or in response to the decisions by the regulator, APRA, the banks impose and enforce tougher credit standards.

New rules and laws are introduced to regulate investment from overseas.

Chinese capital constraints are introduced, stemming the flow of funds south to safer Australian assets.

Interest-only loans reset to interest plus principal.

Global politics fracture further and protectionist stances become policy (in extremis, protectionism might create “hot” conflict).

Bill’s Opinion

It’s been a stellar ride, Sydney and Melbourne, but consider the possibility that your house might not be the pension fund you perhaps previously considered it to be. 18% annual rises will seem a distant memory if the current trend continues and “Column B” is stronger than “Column A”.

As for Scott Morrison, your Treasurer who is likely to be replaced within 18 months; in the words of Christine Keeler, “well he would say that, wouldn’t he……”

Minimum wages and unemployment

Billy/ / Australia; Frontier Nation, Economics, General

Australia raised the minimum wage by 3.5% this month.

Hurrah for all the lowest-paid workers, I hear you cheer.

Some cynics have suggested that this might not be the universally good news that most commentators suggest, however.

Their argument goes something like this; an organisation has a finite amount of available funds to pay workers. If the rate at which they must pay these workers is raised by legislation, there will be less money and therefore fewer hours of work will be offered to the workers.

The finance and economics commentator, Stephen Koukoulas, disagrees in this article on Business Insider. It’s worth reading in full but a fair summary might be, “price signals work in both directions; if wages were higher, the 5.5% of the potential working age population who are currently unemployed would find paid work more compelling than whatever else it is they do with their time“.

The Kouk is a well-respected commentator and generally talks a lot of sense but his position doesn’t ring quite true on this occasion.

He uses the technique of looking at the extremes to seek the truth, which is a useful method. If the wage was $100 an hour, who in their right mind would sit around at home watching daytime TV, for example?

There’s a problem with this however; it assumes everyone is capable of finding and keeping a job.

This chart shows the flaw in that argument;

It’s the distribution of IQ across the bell curve.

Look closely at the left hand side; 2.2% of the population have an IQ below 70. A score below 70 is a crushing intellectual disability, with very few suitable jobs available that could be undertaken by someone in that part of the distribution. Cognitive abilities will be severely limited and reading, reasoning and basic mathematics will be real challenges for them.

13.6% of people are between 70 and 80 on the IQ distribution. Although not as severe an inhibitor, these people will struggle with more complex tasks and interactions.

It gets worse…. of the jobs we are rapidly automating, the first cabs off the rank are the ones more easily codified into simple rules and processes. Mainly, these sit in the distribution to the left of a score of 80. Anyone who has been into a McDonalds recently will have noticed that orders can be placed on automatic tellers now; it’s not the manager who has been replaced but the entry level staff.

Bill’s Opinion

There is a point beyond which raising the minimum wage will have no effect on the level of unemployment if one of the reasons for unemployment is a fundamental incompatibility between the potential workers and the vacant roles due to genetics.

It’s not necessarily the fault of the person with an IQ of 70 that they can’t get a job.

“Full employment”, is a utopia that will never be achieved. Is an unemployment rate of 5.5% as close to full employment as Australia can get? Unlikely but it might not be too far off either.

Is Socialism a result of human genetics?

Billy/ / Economics, General, Whither Government?

John McDonnell, Deputy Leader of the UK Labour Party told those who would listen at Davos that the problems Venezuela is currently experiencing are a consequence of an incomplete implementation of Socialism, rather than a design fault with the ideology itself.

Ponder that for a moment; Not Socialist enough.

Today’s thoughts are not meant as a persuasion attempt to argue that Socialism is a catastrophically bad system due to a hard-coded flaw in the dogma.

If you don’t believe that the millions of deaths in the 20th Century in places as diverse in culture, history, environment and natural resources as Russia, China, Cambodia, Vietnam, North Korea, Bulgaria, Romania and Ethiopia are directly attributable to a design fault with Socialism then you may wish to find something else to read today.

Correlation isn’t causation, but when we start reaching the levels of murders that are uncountable (pick a source; 100 million? 200 million?), the on the ground buried in the ground evidence is just too compelling. How many more deaths under Socialist governments would it take to convince you? Half a trillion? More?

I’m suggesting a hypothesis that undeniably really bad ideas that refuse to die in the face of overwhelming evidence must be somehow genetically hard-coded.

Malthusianism and collectivism are two examples.

Malthus has been wrong with regards to humans now for almost 300 years yet the basic idea is still attractive to those who discover it, from the supporters of eugenics, through The Club of Rome to the religiosity of Al Gore and his supporters.

Collectivism has killed several hundred million and counting but dreamers like McDonnell still pine for the opportunity to finally implement the correct working version.

Let’s pause for a moment and count the ways McDonnell is suffering from cognitive dissonance;

  1. Denial of the overwhelming evidence across multiple geographies and points in time that collectivism finishes in tyranny, poverty and mass murder.
  2. Denial of the overwhelming evidence that trade and commerce between individuals has resulted in the most incredible fall in absolute poverty on a global scale.
  3. Dunning Kruger-ism at the improbability that he, and his closest cohorts, with their almost non-existent experience of managing anything more complicated than a local political party sub-branch, could measure and manage a national economy to deliver sustainable improvements to the lives of all its citizens.

Note that in point #2 above, I use absolute poverty rather than relative poverty as the true measure of success. Put crudely, if we’re all equally scratching around killing pet rabbits for food, being equally poor is little comfort. If I can afford to eat, clothe myself and heat my home, the worry that Jeff Bezos is richer than Croesus is a luxury I can only afford because I am not dirt poor.

PJ O’Rourke said that Communism DOES work and is an absolutely perfect system inside his family home; he brings in the income and his wife and children distribute it according to their needs. The problem is that it just doesn’t scale any wider than the border of his property.

People like McDonnell are trying to scale to the macro what only works at the micro level. Perhaps a clue is to be had there.

Bill’s Opinion

It’s not credible to believe that the “if only we could implement Socialism properly” crowd are unaware of the brutal legacy of bloodshed of Socialism.

Its also hard to believe that, being aware of these mass murders in the name of their preferred dogma, they don’t care.

There must be something deeper, more fundamental to the human psyche that is the root cause of this refusal to give up on what is so clearly a bad idea.

Perhaps human evolution, so heavily-dependent on cooperation and self-organisation by specialities (at its simplest, the hunter goes off to hunt while the gatherer stays home to gather) has resulted in an instinct that teaches the positive value of collecting and distributing resources at a group level.

At the small scale of tribal/extended family, this would have been a very successful strategy.

The evidence is in that it results in tragedy at the scale of national populations.

How then, do we teach ourselves to let go of ideas when they cease to work for the circumstances with which we are faced?

That’s the thing with concepts….

Billy/ / Economics, General, Whither Government?

Apparently, cryptocurrencies make no sense.

The author offers the following qualities as being important for a currency;

  • facilitating transactions;
  • a store of value;
  • lending of last resort.

And then goes on to explain why cryptocurrencies, specifically Bitcoin, fail to tick any of those three qualities.

Tellingly though, he hints at the reason why our current currencies do provide those features;

Bill’s Opinion

Fiat currency passes his three tests not because “the government guarantees it” but because we believe that guarantee.

Money is fungible, a unit of measure and a store of value because we have bought into the idea*. When enough of us cease to believe in a concept, it stops being real.

Some examples of this include; the 12 gods of classical Greek religion, purgatory, the noble savage, copper bracelets for arthritis and the Bermuda triangle.

Sure, cyptocurrencies are a million miles away from being trusted stores of value or tools to transact exchange today. However, should enough people find that they trust the concept enough to use it in a limited way, there is nothing to distinguish “Billy Occam Coin” from good old greenbacks.

In the meantime, if you distrust those central bankers but don’t want to buy a cryptocurrency that fluctuates 10% up or down daily, gold seems to have passed the test of time as a value store. You might find your local bartender reticent to give you change from an ounce of it when you order a beer, though.

*I disagree about the “lender of last resort” requirement – many of our economic issues today would have been avoided without this “public service”. Let failed banks die and new ones fill the space.

Modern slavery, same old stupidity

Billy/ / Economics, General

Slavery still exists along the supply chain of some of the most reputable businesses.

“FTSE 100 companies have a major influence in eradicating modern slavery,” said Hyland. “Therefore, I have written to 25 companies identified in the BHRCC research as non-compliant, and which had still not corrected their omissions by December 2017, to encourage improved efforts in the coming year.”

A quarter of the FTSE100 are not taking seriously the risk of slavery in their supply chain? That’s pretty dire.

“Taking action on modern slavery and human trafficking is not just a moral obligation – it is in fact good business sense: forced labour in company operations or supply chains has potential to disrupt business, weaken investor confidence, incur litigation costs and cause significant brand damage.”

Well, that’s not strictly true, is it? The Romans built an entire empire off the back of slaves and it’s doubtful the Southern plantation owners would have sold as much cotton if the price had included market rate wages as input costs.

Slavery has been the primary route to wealth for most of human history. It’s only recently made bad business logic since the Judeo-Christian culture decided it was immoral and put severe sanctions in place to prevent it. It continued elsewhere in the world, however, a fact which ought to kill any conversation about cultural equality dead.

So which are the companies who so callously flaunt the requirements of the Modern Slavery Act and what are those requirements?

The BHRCC research, from October 2017, commended Marks & Spencer, Sainsbury’s, Unilever, British American Tobacco, Tesco and Vodafone for their work against modern slavery. Hargreaves Lansdown, Paddy Power Betfair, Pearson and Worldpay rated poorly.

Under the MSA firms with a turnover of £36m or more must produce slavery statements approved by the board, signed by a director and published on a website with a link from the homepage.

It feels like another outing for our old friend Pareto.

Let’s work back from the outcome we wish to achieve; something like eliminate slavery from the supply chain of goods and services entering the country.

With that goal in mind, it would make sense to address the supply chains of those companies with the largest risk of discovering slavery in their supply chain, so the largest by revenue might be one crude measure but it may be more effective to target those most reliant on imported goods and service, surely?

The bookmakers Paddy Power Betfair, for example, may have very large revenue but is unlikely to be reliant on any significant value or volume of imported goods and services, maybe a bunch of IT equipment but little else.

The same could be said for the others named in the article. Let’s also remind ourselves what it is they haven’t done; written a statement and posted it on a website. Not exactly commensurate with the efforts of William Wilberforce, is it?

Bill’s Opinion

Naming and shaming organisations for failing to comply with legislation is fine but let’s not delude ourselves into believing it actually achieves the outcome we require.

The revenue trigger for the MSA legislation is a crude measure and risks leaving smaller firms with more potential of finding slavery in their supply chain unexamined.

In fact, this is simply yet another example of this lesson on setting KPIs.

Sustainability or fame, journalists must choose

Billy/ / Economics

H/t to Dominic Frisby for the core of this idea which he summarised on a recent James Delingpole podcast.

Journalism will likely go down in history as the profession most-ironically least-aware of its impending doom. By this, I mean that it is the profession which is paid to report on, erm, new and interesting developments.

So the irony is that this same profession completely missed the invention of the internet, cheap mobile data, smart phones and social media, the combination of which has all but destroyed what was previously a solid and respectable career from school leaver to retirement age.

Before technology overtook journalists, the supply/demand curve was balanced enough to keep everyone employed, even with the various government-sponsored news sources providing the same service “for free”, such as the UK’s BBC, Canada’s CBC or Australia’s ABC.

This all changed when we could select various news websites on our phone rather than waiting for the 9pm news or the paper boy to do his rounds in the morning.

The industry has been hurting since with many famous old brands closing shop or downsizing to shadows of their former selves.

In recent times however, some brands are beginning to turn a profit again. The Times Group (The Times and The Sunday Times) in London made a profit in 2014 for the first time in 13 years. In 2016, The Times Group made £11m while in contrast, Guardian Media Group, owner of The Guardian, lost £69m.

The Times implemented a “hard” paywall in 2010.

The Guardian does not have a paywall, just a passive-aggressive begging letter at the bottom of every webpage.

There is another huge difference between the paywall and non-paywall media companies; you will know the names of the journalists employed by The Guardian, you are unlikely to recall any for The Times.

As a journalist, it’s fantastic for your public exposure if you are employed by a non-paywall newspaper in a way that those behind the paywall can only dream of. People can read your content for free, resulting in more publicity and other side projects and TV/radio appearances, while your employer continues to pay your salary at a flat rate.

Those behind the paywall must continually write quality and engaging journalism that chimes with their readership. If not, they will be replaced by someone else who can.

The free content johnnies, on the other hand, are working for clicks alone. It apparently makes no difference whether or not they are monetised in any way.

Think Giles Coren versus Owen Jones.

One model boosts a few egos whilst murdering shareholder value, the other demands quality and delivers increased shareholder value.

Bill’s Opinion

Paywalls are inevitable for non-state funded news organisations. Cost cutting is a healthy discipline but there comes a point where the quality suffers and consumers choose to pay for a better product. The results of this experiment are now in.

Organisations such as the UK’s Guardian Media Group or Australia’s Fairfax are currently staring down few choices, none of which are palatable; charge for all content, find a new business model or close down.

The journalists have a starker choice; write content people are willing to pay for or find another job.

The next two or three years will be interesting times watching the non-paywallers.

Your taxpayer rupees paid for this

Billy/ / Economics, General, Whither Government?

I’m still in India, Calcutta to be precise, one of the best cities in the country for many varied reasons.

Newspaper subscribers in the city were greeted by this paid front page on one of their main broadsheets (if you’re not familiar with Indian numerical terms, 1 lakh = 100,000, 1 crore = 10,000,000);

I’m not going to poke fun at the Indian version of English deployed within the infomercial, there’s more speakers of the language here than in any other country so it’s as much their language as ours after all.

I will, however, examine the insidious way the reader is encouraged towards gratitude for the efforts of a certain publicity-shy state minister over the last couple of years in his job of spending their money.

Picking out a few example statements;

“Free Power to Agriculture“; someone is paying for it, just not the farmers.

“Telangana exceeds national per capita consumption“; is that a good thing? Interesting difference between India and a western country where the former might see increased usage as a key metric of modernisation. In the west, we’d just feel bad about it.

This is the most instructive part though;

One assumes reliable and cheap electricity supply is the requirement most rate/taxpayers would express, not employment, promotions, changes to employment status, etc.?

This is how India differs from most other Anglosphere countries however.

India is an amazing country. Firstly, it never should have been a country in the first place; the British conquered, bribed or annexed a lot of disparate kingdoms (none of which were anything close to a democracy) into what then became lumped together and known as “India”. The mutiny in 1857 is now referred to in India as the First War of Independence, but in reality, it was no such thing, if the British had lost there would have been an inter-regnum which would have seen various Maharajas competing for top dog status, the population wouldn’t have been consulted or considered. The Partition of 1947 was a disaster that was perhaps waiting to happen as a consequence of this unnatural joining of many different kingdoms.

India is amazing also because it is simultaneously the epitome of a capitalist economy and also a centrally-planned state. You’re probably wondering why and how this can be.

The vast majority of transactions,  95% in fact, in India are cash. As a consequence it’s hard to get a breakdown of the values but one could reasonably assume most of the volume is below US $10 in value. The important point is that the Government doesn’t have much opportunity to be involved in these transactions. This is why a paper cup of masala chai still costs roughly what it did 20 years ago (10 rupees), a shave at a barbers’ still costs about 60 rupees and an autorickshaw journey of a few kilometres is still less than 100 rupees. The input costs are the major factor in the price, not the government overheads, and these have remained flat or reduced over time.

On the macro level, however, the taxes paid in a country of a billion or more people still total a very large number. As with politicians the world over, this money is then diverted to pork-barrel projects that buy short term votes; dams, electricity distribution projects, highways, border skirmishes with Pakistan, etc.. However, because of the 95% cash transaction issue, the politicians usually steer well-clear of the full Communist central planning drive for utopia as it’s obvious to anyone with half a brain that the oppressive infrastructure just isn’t in place to enforce it. It’s a nice halfway house really; the politicians can get comfortably wealthy through the usual methods but are happy enough to let most people simply get on with commerce. And commerce works; the middle class here has grown 20 fold in 25 years.

Bill’s Opinion

One of the main brakes slowing India from becoming a centrally-planned disaster is the inability of a government to intervene in the minutia of the population’s lives. Unmonitored transactions is a key foundation to this freedom.

As the American Founding Fathers and Hayek’s Road to Serfdom warned us, concentrations of power and information in the hands of government officials always leads to abuse. Just because  your guy got voted in and used the additional power in a relatively useful way, there’s no guarantee the next guy will be benign with the increased reach.

It’s for this reason, I hope cash, gold and cryptocurrencies have a long life ahead of them. Imagine a world were every single transaction is tracked electronically and then consider what that information would be worth to a malicious leader.

Oh, and irony of the day; Calcutta isn’t even in the state of Telangana.

What if the Bitcoin boom was a conspiracy?

Billy/ / Economics, General

Conspiracy theories are for the birds, never ascribe to mendacity that which can be explained by incompetence, but they can be fun nonetheless.

Bitcoin is currently going through the mania phase of the classic chart of the bubble.

Articles about the cryptocurrency are everywhere on social media and, regardless of whichever Legacy Media ™ newspaper website you view, there will be a daily quotient of about three articles posted.

It’s the new big thing. If you bought some 5 years ago you’re minted, if you didn’t, there’s a thousand opinions on whether there’s still time.

This one, for example, written by the suspiciously 1930’s Film Noir named Spencer Bogart, in which he gives 3 reasons why the Bitcoin valuation is about right.

Strangely, none of his three reasons are “because people are hoping to sell it later for more than they bought it”.

As Warren Buffet may or may not have said, there are only two types of assets, those with an income stream and those that you hope like hell someone will buy off you later for more money.

Of course Bitcoin is a bubble.

The interesting question is not whether it’s a bubble but whether there was any intent or design behind the instigation of the bubble?

Is there a puppeteer pulling the strings or did this come about by the magic of human interaction at a speed never seen before.

Please note, the use of the word “magic” is not meant sarcastically there; humans trading in markets are responsible for wonderful things (you and I being alive and with a better chance of living longer than any of our ancestors, for example). This is a kind of magic.

But is Bitcoin multiplying by 25 times (or whatever it is currently) its value in a year a result of some effort to by an unknown party? If so, who, why, how?

In our investigation of this possible global conspiracy, let’s examine motive; who would most benefit from a bubble in the cryptocurrency?

Anyone holding it, obviously, but also anyone who wished to see it discredited. There are are only two things we know about bubbles; they crash and you can’t predict when. If you wished to discredit Bitcoin, instigating a bubble and the subsequent wringing of hands after the crash might work.

So who doesn’t want this cryptocurrency to work? Well, people invested in other cryptocurrencies and traditional currencies.

Ah, you’ve worked out where this conspiracy theory is going….

What if Central Banks such as the Federal Reserve instigated this bubble to prevent an alternate currency from destroying its stakeholders’ grip on the world’s economy? Would anyone doubt that they would if they could?

How then might this be achieved? Simply by buying the damn thing and watching the price increase!

Bill’s Opinion

The concept and the underpinning technology of Bitcoin seem sound, it’s just that there’s a wave of very basic human emotion riding it currently.

Whether or not there’s a Central Banker’s hand giving the surfboard a helpful shove or not we may never know. It’s not completely beyond the realms of possibility though.

In 2014 the World Bank produces a report with the conclusion that Bitcoin was not a deliberate Ponzi scheme. To misquote the words of the recently deceased Christine Keeler, “well they would say that, wouldn’t they?“.

Tickets please

Billy/ / Economics, General

From this morning’s Creepbook for Business feed (the author’s name removed to save their blushes);

Well, yes but….

Using the same logic, a bus driver should receive about a quarter of the salary of the pilot of a 777 passenger aircraft.

The ground crew responsible for connecting the air bridge to the aircraft should probably get a “not killing people” bonus for every successfully alighted passenger too.

Also, every car driver giving a lift to 2 passengers should receive a payment of around a 15th of the bus driver pro-rata to take in to account that it’s not a full time job.

In addition, we might make an argument that there should be a “not killing people with a vehicle” bonus offered to all potential jihadists whenever they get behind the wheel.

Ok, those were facetious examples but they illustrate the point. We don’t pay people commensurate with the risk that they might kill others; it is surely a consideration but there are multiple other contributing factors which determine the value we place on a profession.

Some other elements which we use to determine the VALUE (to use the original author’s stylistics) of a profession;

  1. Rarity of the skills required
  2. Danger of activity being undertaken
  3. Entry costs of joining the profession
  4. Availability of similar or adjacent services or products

 

(1) and (4) are closely-related; if I need to fly between New York and Washington, I could purchase the services of an airline pilot, a train driver, a bus driver or rent a car and drive myself.

The airline pilot has the most complex training, entry costs to the profession and highest level of regulation to comply with but this doesn’t result in their salary being the highest in the country.

Why?

Because we have alternatives to their service which match our appetite for risk, cost, comfort and speed. If, to pay the pilot’s salary, the airline needs to charge $10,000 a ticket for a short round trip between two cities, most people would choose to take the train, bus or drive themselves. Heck, for ten grand, you could buy a secondhand car specifically for the journey.

The author of the comments on the news article above is not asking the right question. The interesting question is not, “shouldn’t we pay bus drivers more money because they could kill 30 people in one crash?” but, “given that bus drivers can kill 30 people in one crash, why are the salaries of bus drivers the world over consistently lower than other professions?“.

Bill’s Opinion

Bus drivers get paid at the rate they do because;

  • It’s a commodity skill that literally every sane and able-bodied adult can master by attending a short training course, exam and subsequent re-testing.
  • Not killing people by negligence or malice is a fundamental axiom by which we expect everyone in society to comply. You don’t get a prize because you didn’t kill anyone at work today.
  • By choosing to drive a bus for a career, you have consciously concluded that  neurosurgeon, barrister, airline pilot, internet entrepreneur, engineer, professional soccer player, international assassin, etc. are all out of reach of your capabilities at this time, all of which pay better than bus driver.

 

What we are prepared to pay for individual professions is determined by the VALUE (sic) we judge the profession to provide, a judgement made against multiple factors not just the fact that they could have killed us but but managed not to today.

Is Universal Basic Income just Marxism by another name?

Billy/ / Cultural Marxism, Economics

There is a steady stream of mentions in the media of a concept called Universal Basic Income and a general view that it is “a good thing”.

Definitions of what is actually involved in implementing a UBI or critical analysis of the concept rarely accompany these references to it.

We intend to undertake this missing analysis here.

Definitions;

UBI is variously described as;

  1. a non-means tested guaranteed “wage” to all citizens of a country to cover basic shelter and food needs, or
  2. as above but for all residents of a country, or
  3. as above but globally, i.e. every human

 

The last option falls apart quite quickly upon analysis, so let’s clear that up first;

Option 3. How would we fund and distribute a global UBI?

There would need to be a global collection method, an agreement between all major economies (as they would presumably be the main net contributors) on the level of income per capita and whether or not there would be sliding scale based on relative cost of living in each location.

Then we would need to solve the problem of distribution, taking particular care not to consolidate power or increase the opportunity for corruption which would prevent the funds reaching the intended recipients.

Put simply, there would need to be some level of world government to siphon off the money and redistribute back to every human alive. This sounds very familiar to the well-documented previously failed experiments in central planning and control. To paraphrase P. J. O’Rourke, “socialism works very well within the boundaries of my house; it’s just failed every time anyone has tried to scale it up beyond that”.

Option 3 is pure Marxism, in other words and should be called out as such at every opportunity.

Option 1 and 2. How would we fund and distribute a national UBI?

This is a more nuanced question. Tim Worstall suggests that a national UBI could have significant personal and national benefits, possibly resulting in a higher standard of living for all. Tim’s analysis relies on a major assumption to fund the UBI, however; it will need replace all other forms of government largesse to the population, so no welfare state, no medicare/medicaid, no state insurances, no tax breaks for business, etc.

Those familiar with the concept of the Overton Window will quickly realise that, although Tim’s analysis might work mathematically and perhaps have a good grounding in economic theory, the blending of what is essentially a proposal for a method of central redistribution to result in a “small government” would require the voting public to accept a range of political ideas with a level of nuance not previously documented. In effect, they are being asked to accept the concept of blending the collectivist preference for a benevolent state with the Libertarian preference for individual freedom and responsibility. It completely challenges the almost genetically-accepted idea that left and right are at opposite ends of a political spectrum.

This isn’t to denigrate the intelligence and subtlety of the average voter, but to simply recognise that they are unlikely to invest the time out from their day to day lives to fully engage with the idea of a UBI that replaces all current state-distributed safety nets. This is likely to be mainly a failing of the communication skills of political class, underpinned by a very solid undercurrent of distrust and loathing from the voting public.

If Tim Worstall’s version of UBI is so very unlikely, are there any other proposed method of implementing it?

The Socialist Party of Ireland suggests that a UBI is only practical if all major industry is taken into state control, which simply proves the axiom that, to a man with a hammer, the entire world looks like a nail.

Socialist Appeal (“the Marxist tendency of the movements of workers and youth in Britain“) are deeply sceptical of the concept unless it is is also accompanied by major tax increases. Obviously, this completely contradicts the economic analysis of Mr. Worstall and, again, refers us back to the hammer/nail analogy.

Bill’s Opinion

To answer the original question; “Is Universal Basic Income just Marxism by another name?“, the answer is clearly, “yes, if you ask a Marxist“. The answer will be different if you are discussing it with a proponent of smaller government.

Perhaps we’re asking the wrong question. How about the following;

Is a UBI likely to be ever successfully implemented in a democratic nation?

Not a chance; the definition of and implementation of a UBI has such a myriad of options that each will see in it only what their personal agenda desires. To reach a broad political consensus on what the best and most feasible solution is to implement would require more agreement across the political spectrum than has ever been witnessed before.

Anyone who presents it as an option should be challenged to show how the major political and economic ideologies can have their differences reconciled before being allowed to waste any more of our time suggesting the concept.