The Scotsman: He's on £20 notes and has a new statue - now let's give him a festival

By Eamonn Butler, Director, Adam Smith Institute (26 July 2008)

HOWEVER many great inventors, scientists and philosophers that Scotland has given birth to, her most influential scion must be Adam Smith.

In an age when the leading intellectuals thought all wealth derived solely from agriculture, he showed the wealth-creating importance of industry. At a time when nations believed that economic survival depended on keeping out other people's goods, Smith showed the mutual benefits of free trade. While the powerful guarded their privileges and considered poverty the natural state of others, he showed how freedom and competition could benefit the lives of ordinary people.

Smith's great book of 1776, The Wealth of Nations, crystallised this message for the world. All the leading politicians of the period read it (imagine that today!) and most accepted its powerful argument. Some acted upon it – tearing down trade tariffs, state monopolies, price controls and punitive taxes – unleashing the great 19th-century era of free trade, enterprise, industry and prosperity.

He was not the first economist, but Smith was the father of the economics we know today. For example, he insisted that the wealth of a nation was not, as most people supposed, the amount of gold coin in its bank vaults. (On that measure, Britain today would rank among the world's poorest countries!) Rather, said Smith, the wealth of a nation was what its people produced. He had invented the idea, which economists still use to measure countries' prosperity, of GNP.

Interest in this leading figure of the Scottish Enlightenment has been reawakened recently. Gordon Brown, another son of Kirkcaldy, has helped, stimulating books on Adam Smith and putting him on the English £20 note. This spring, the Liberty Fund held a conference in Edinburgh on Smith's ideas, and another will be held in Glasgow next April. Last month, we unveiled Alexander Stoddart's imposing statue of Smith in Edinburgh's Royal Mile, where visitors queue to have their pictures taken at the great man's feet. Perhaps some – and half a million visitors pass this spot each year – will be moved to find out more about him, and his humane economic philosophy.

Following the huge success of the unveiling events, there are calls for an annual Smith celebration – let's call it an Adam Smith Festival. A good time might be near his birthday in mid-June. (His exact birthday is unknown, though his birth was registered on 5 June, 1723. But the calendar was changed in 1752 and a few more days were added, so mid-June is about right.)

A highly successful part of the unveiling celebrations that a festival certainly should replicate was the Adam Smith Debate in the Caves, under the arches of South Bridge, Edinburgh. It was led off by former Scottish secretary Michael Forsyth, proposing that "this house would prefer to be led by an invisible hand" – against the opposition of his old political adversary Brian Wilson. It was an example of what many of us thought no longer possible: a really good-natured debate on serious issues that was both enlightening and entertaining. That makes it worth repeating: you won't see the like in Holyrood, after all.

Another highlight of the unveiling programme was the opportunity to enjoy Adam Smith's favourite food – strawberries – in his old home, Panmure House. Its new owner, the Edinburgh Business School, Heriot-Watt University, seems keen to repeat this event, too.

We will certainly stage an international dinner near the statue; and perhaps a candle-light vigil around it. But other people will have their own ideas. After all, it would not do for an Adam Smith Festival to be too rigidly planned. How much more appropriate it would be if different people's initiatives came together – as if led, indeed, by an invisible hand.

Published in The Scotsman here.

Slug path

asi-in-the-news/asi-in-the-news/the-scotsman-hes-on-p20-notes-and-has-a-new-statue-now-lets-give-him-a-festival

Joomla-id

1983

Old Teaser

Business Standard: Towards stakeholder capitalism?

by Deepak Lal, Senior Fellow in Globalization (July 24, 2008)

India can take the path Anglo-American capitalism took over the last 200 years.

In my last column I had examined the travails of Anglo-American managerial capitalism, arguing that it was the success of incumbent managers (the insiders) in using the political process to limit hostile takeovers (by outsiders) which has led to excessive executive compensation at the expense of the shareholder owners of corporations. In the process income distribution also worsened. An important feature of this form of capitalism, providing economic opportunities even for those without their own resources, and enabling outsiders to challenge insiders to impart the dynamism of creative destruction which is involved in the most efficient deployment of an economy's resources, was also attenuated. The US search funds which allow those without collateral or connections to finance their new ideas, is emblematic of the Anglo-American capitalist model.

But since the late 19th century it has faced competition from the corporatist "stakeholder" model pioneered by Germany after its unification in 1871, and adopted by the reformers of the Meiji revolution in Japan. The major differences with the Anglo-American variety were, first, the toleration of cartels, as (following Fredric List) the nation rather than individuals was considered the basic economic unit, with industry required to serve the national weal. Second, there were incestuous relations between the industrial corporations and commercial banks. Third, German corporations had a two-level system of corporate control: a management board for day-to-day management and a supervisory board consisting of various stakeholders: shareholders, banks, cartel members, local politicians and trade unions. Fourth, companies had to provide social insurance to their employees as well as "co-determination", by giving them a formal voice on company boards.

The Japanese chose a variant of this stakeholder capitalism through the zaibatsu. These were conglomerates, which included banks and insurance companies, at whose centre was a family-owned holding company, with other associated firms linked by cross-shareholdings and interlocking directorships.

After the war, the US tried to introduce more features of Anglo-American capitalism in the two countries. But both reverted to their older corporatist forms. The German "social market" recreated Bismarckian corporatism, while Japan saw the zaibatsu reborn as the keiretsu. This model was exported to other Asian countries, most notably South Korea, whose chaebol was another form of corporatist capitalism. This is the so-called Asian model of capitalism.

It was successful as the countries adopting it were latecomers to industrialisation, catching up with the industrial leaders in the UK and the US. Late developers with abundant labour can easily discern the initial industrial structure in line with their comparative advantage. It will consist of small-scale labour intensive industries, which can be financed through the extended family or small partnerships, run by owner-managers. With growth and the shift of comparative advantage to progressively more capital-intensive industries, families would not have the large amounts of capital required to establish such businesses and retain control, avoiding the "agency" problems of managerial capitalism, discussed in my last column. This problem can be overcome by creating large concentrations of wealth or finding ways for some concentrated wealth holders — like rich families — to indirectly control enterprises run by managers. The Indian managing agency system is an example of the latter path. It has resurfaced in a slightly altered from since the 1991 economic reforms.

In the countries of stakeholder capitalism, the financial institutions of the family-owned conglomerates channelled the savings of the general public to their enterprises. This process was directed by the State as a major stakeholder, creating immense moral hazard. Neither the controlling family members, whose financial stake was diluted over time, nor the managers or bankers found it necessary to undertake prudent investments. After the easy "catch-up" stage of capitalist development, many bad investments were made leading to financial crises.

Thus in Japan, Aldo Ando ("On the Japanese Economy and the Japanese National Accounts" NBER wp. 8033, 2000) has calculated that, from 1970 to 1990, because of these bad investments the Japanese corporate sector incurred capital losses of $405 trillion, with non- financial corporations earning a rate of return of about 2.5 per cent and financial ones 1.6 per cent. Japanese households, having cumulatively saved $1,250 trillion (at 1990 prices), found they had suffered a real capital loss of $389 trillion. Thus an ageing population found that its stakeholder capitalism lost 31 per cent of its lifetime savings over 30 years. No wonder the aged Mrs Watanabe continues to save rather than spend to see her through an uncertain old age. A generation which propelled the Japanese miracle, after war-time destruction, finds its hopes along its savings turning to ashes.

What then explains the undoubted economic success of the countries adopting corporatist, stakeholder capitalism? A neglected study of the comparative growth experience of OECD countries by Maurice Scott (A New View of Growth, Oxford, 1989) shows that the Japanese growth rate of 9 per cent between 1960 and 1973 and the German rate of 6 per cent between 1955 and 1962, can be explained entirely by the investment rate, the growth of the quality adjusted labour force, and a catch-up variable. The stakeholder model of capitalism had little to do with it. But their subsequent decline in growth and their continuing economic stagnation is due to the rigidities and inefficiencies in their labour and capital markets caused by the stakeholder model. Reluctantly, along with other adherents of the "Asian model", they are moving towards the shareholder model of the Anglo-Americans.

India has combined "owner-managers" in its large business houses, with its legacy of the institutions of Anglo-American capitalism. But the post-Independence financial repression with the banks being nationalised prevented the free entry into the capital market, which is the hallmark of Anglo-American capitalism. Today, by allowing takeovers, completing the privatisation of banks, and ignoring the proponents of stake-holder capitalism, India can repeat the dynamic capitalist growth which has been a hallmark of the Anglo-American capitalism over the last 200 years.

Published in the Business Standard here

Slug path

asi-in-the-news/asi-in-the-news/business-standard-towards-stakeholder-capitalism

Joomla-id

2165

Old Teaser

Telegraph.co.uk: Speculators provide a useful service

By Eamonn Butler (July 24 2008)

Politicians have to blame somebody for rising oil prices, and with the Olympics coming up we can't be nasty to the Chinese, so the scapegoats of the moment are, of course, the speculators. They are the villains: when prices rise, they bet on further rises, and that simply compounds the price-rise fever.

Italy's finance minister Guilio Tremonti (who calls speculators the "plague of the 21st Century") wants their scalps, invoking Article 81 of the European Treaty, outlawing "anti-competitive agreements".

France's Nicolas Sarkozy, who holds the presidency of the EU, seems to be backing the move. The fact that Article 81 rulings can be made by majority vote is bad news for the UK, which depends on its enormous financial services sector. But the politician's frenzy is based on complete ignorance of what speculators do.

Yes, they take a bet on future prices. But to survive, they have to be highly clued up about the markets they bet on. They don't bet on rising prices unless they think demand is going to outstrip supply.

That makes their bets a really useful indicator of where prices are heading - which enables suppliers to adjust their production in line with the real needs of end users. And it allows suppliers to produce and trade with confidence at known future prices, so reducing the volatility of markets like oil.

The oil price has risen because demand from China and others has gone up but production hasn't. Outlawing speculation won't change that. Let's hope the EU doesn't kill off the UK financial services industry to find out.

Published by telegraph.co.uk here

Slug path

asi-in-the-news/asi-in-the-news/telegraphcouk-speculators-provide-a-useful-service

Joomla-id

2067

Old Teaser

Guido Fawkes: Right's Think Tanks Enjoying Revival

By Guido Fawkes (22 July 2008)

Propeller-Head Wonk Watch: James Purnell's "workfare" proposals are being warmly welcomed by Chris Grayling his Tory welfare shadow. “Much of today’s package is a straight lift from our Green Paper in January... Because these are Conservative proposals we will support them. We will help him get them through this House."

The Government's Green Paper may be lifted from the Tory Green Paper from January which itself bears a remarkable similarity to the Adam Smith Institute report from November 2007 - "Working Welfare". The ideas in that were were first expounded by the former MP for North Norfolk, Sir Ralph Howell. A resolute free-marketeer, Howell was the author of the ASI report "Why Work?" in the mid-1990s. The ASI's Madsen Pirie says "this idea has taken longer than we would have wanted to become government policy". The ideas were theoretical at that time in the 1990s before they were implemented in Wisconsin.

Michael Gove's advocacy of the Swedish model of "free schools" may owe a little to another recent ASI report - Open Access for UK Schools: What Britain can learn from Swedish Education Reform. Over at the new look Centre for Policy Studies things are getting more lively after a quiet period, Policy Exchange is becoming something of a powerhouse (incidentally, it was cleared by the Charity Commission of tit-for-tat allegations of partisanship).

Published on Guido Fawkes' blog here.

Slug path

asi-in-the-news/asi-in-the-news/guido-fawkes-rights-think-tanks-enjoying-revival

Joomla-id

1985

Old Teaser

Telegraph.co.uk: International development community wants global welfare

By Alex Singleton (22 July 2008)

One of the most worrying ways in which the international development community has been regressing has been the move of focus from short-term relief aid and wealth-creating infrastructure towards the creation of a global welfare state.

Governments, including our own, are now increasingly funding poor countries' consumption, in particular by supporting healthcare services and primary schools.

International development should be about helping poor countries lift themselves out of poverty, so that they can fund their own public spending, rather than relying endlessly on the (forced) generosity of overseas taxpayers.

Unfortunately, many in the international development community want the creation of a global welfare state. So it's no surprise that a new report form the Chronic Poverty Research Centre, the Adam Smith Institute reports, is calling for:

"a massive scaling up of state welfare in developing countries, ranging from cash benefits to 'minimum income guarantees.'

"Later this year, the World Health Organization is also likely to recommend expanded social protection - including minimum wages - as an essential means of improving the health of the poor."

None of this addresses the real causes of poverty - weak support for contracts, excessively high taxes and tariffs, business-destroying corruption, and restrictions that discourage private enterprise.

And, as the Adam Smith Institute puts it, "in fragile African economies, asking the private sector to provide 'minimum income guarantees' is tantamount to telling them not to bother employing anyone at all."

Published on Telegraph.co.uk here.

Slug path

asi-in-the-news/asi-in-the-news/telegraphcouk-international-development-community-wants-global-welfare

Joomla-id

1984

Old Teaser

Telegraph.co.uk: 30-somethings will be poor in retirement thanks to Gordon Brown

By Eamonn Butler (21 July 2008)

 

A piece in The Guardian predicts what many of us were already thinking: that 30-somethings are going to have a poor retirement. We're all living longer, so more of the government's budget will be eaten up by state pensions.

But then people are staying in school longer (indeed, the government is going to raise the leaving age to 17 shortly); and they are taking more gap years, and spending longer at university doing PhDs and MBAs and so on – all of which means that the proportion of working people in the population is falling. Working families already feel they are paying enough tax, without having to shell out more to pay other people's pensions.

Britain used to have the biggest private pension savings in Europe. Indeed, larger than the rest of Europe combined. The speed with which Gordon Brown managed to kill off this employment-based pension system was quite astonishing. Company pension schemes have been closing all over the place, and workers who would formerly have joined a company pension plan now just don't have the option.

Of course, the government has tried to compensate with its own folly with numerous tinkering schemes, like Stakeholder Pensions, the Personal Account (due in 2012, but likely to fail, according to the Telegraph's Paul Farrow) and the Savings Gateway for lower earners. Trouble is, if people on low incomes save for their retirement, they will just lose benefits. They might as well spend it now and have a good time.

The solution, as the Adam Smith Institute spelt out years ago in a report by pension expert Alan Pickering, is simple. We need to raise the pension age, and index it to life expectancy. The money saved should be used to raise the basic state pension substantially so that no pensioner has to rely on means-tested benefits. Which means that when people save for their retirement, they get the benefit of it instead of the state clawing it back from them.

The knowledge that everything you save for retirement is yours would undoubtedly encourage more people to do just that. Simple, isn't it? Simple, but a solution that requires vision and boldness from the government. Pity it's not going to happen then. See you in the old folks' bread line.

Published in Telegraph.co.uk here

Slug path

asi-in-the-news/asi-in-the-news/the-scotsman-hes-on-p20-notes-and-has-a-new-statue-now-lets-give-him-a-festival

Joomla-id

2043

Old Teaser

Dizzy Thinks: Illogical liberal conspiracy

19 July 2008

A few years ago I bought a book, it was called How to win every Argument: The Use and Abuse of Logic by Madsen Pirie, President of the Adam Smith Institute. It is, without doubt, one of the best book I've bought and/or read. What's great about it is that you can just dip into it anywhere and remind yourself of the techniques in argument that are entirely commonplace in political discussion.

The reason I mention this is because I've just read a piece by Unity on Liberal Conspiracy which, unusually for Unity who I have significant respect for (even if I do have trouble reading his posts to the very end sometimes), is little more than one great big fallacy. The parts in question relate to his conclusion about some obscure organisation called the "Centre for Open Politics". Unity points out that

In reality, the two founding members of the ‘Centre for Open Politics’ are Harry Cole, formerly the Vice-Chairman/Treasurer of Edinburgh University Conservative Future, and Amanda O’Brien who, earlier this year, was listed on campaign blog of Michael Rock, the current national Chairman of Conservative Future, as the Deputy Chairman of Essex Conservative Future.

Moreover, as an article posted at Conservative Home in July 2007 reveals, Cole spent much of last summer working out of Conservative Central Office with the previous Chairman of Conservative Future, Mark Clark, and Justine Greening MP, on the preparations for Conservative Future’s national Fresher’s Week recruitment drive and was even given his own e-mail address on the official conservatives.com domain.

He goes on to draw the conclusion on his own website that this impacts on the credibility of any argument they might make. This is the classic

ad hominem circumstantial

fallacy at play. Rather than taking on the argument it takes on the bias of two people and draw conclusions about the validity of an argument they make upon those circumstances of the arguer.

From a logical point of view this is a really crappy argument. The bias of a person does not itself make an argument made by the person invalid. Just because two people have been involved in X in the past it does not follow that their involvement in Y is linked to X as a 'false flag' operation.

This does not negate that the Centre for Open Politics might actually be what Unity says it is. The point is that the argument to justify the assertion that Unity is making is logically fallacious. Unity goes on to say that he will be contacting

the Electoral Commission, myself, to advise them of Cole’s undisclosed background in the confidence and advising them that there is ample evidence to suggest that Cole has submitted a wholly vexatious complaint.

All the "evidence" he refers to however is circumstantial. Again I stress, this is not an argument that Unity's conclusion is wrong, it's an argument that his route to reaching the conclusion is a logical pile of poo and essentially vexatious reasoning.

Published by Dizzy Thinks here

Slug path

asi-in-the-news/asi-in-the-news/dizzy-thinks-illogical-liberal-conspiracy

Joomla-id

2044

Old Teaser

Journal Live: A FAIR price to pay?

by Jane Hall, The Journal (July 18 2008)

As the credit crunch bites and we become more conscious about how we spend our money, what does the future hold for prime food brands like Fairtrade? Jane Hall finds out.

IMAGINE having to permanently forego your morning wake-up shot of Peruvian coffee or soothing cup of Assam tea.

Worse still, muse on what it would be like to never again enjoy the pleasure of eating a banana, drinking pineapple juice or adding an exotic twist to your fruit salad with slices of mango and papaya.

Contemplate what life would be like with no more lemons, limes, grapefruit or lychees. No more demerara sugar, cashews or raisins. And no more organic cocoa.

In short, consider what it would be like to exist with no more imported foods. Could you handle it? They say a ripple in America creates a wave this side of the Atlantic, and the credit crunch is threatening to turn us all into penny-pinchers. Already discount supermarket chain Aldi is cashing in on people’s worries with plans to increase its chain of 400 UK stores to a 1,500-strong empire in the next five years.

The German chain’s expansion plans come amid increasing signs that cheap and cheerful high-street retailers are benefiting from a tightening of the consumer purse strings as inflation hits an 11-year high of 3.8% following a ferocious rise in the cost of living in June.

Now there are fears that inflation may soar as high as 4.5% or even 5% by the end of this year as wage growth stays muted and everything from energy bills and fuel to food prices continue to rocket.

It is premium-priced foods like Fairtrade that are likely to feel the sharp end of the economic turndown as consumers ditch them for their cheaper conventional counterparts.

There is already evidence this is happening. A recent survey found that nearly three in five people said paying up to 45% more for fairly- traded goods is no longer an option.

Add concerns over food miles and climate change to the mix, and Britain is now experiencing a bunkering down not seen since the Second World War and the days of rationing.

Nearly 100,000 Britons are on allotment waiting lists (in Blyth Valley, Northumberland, around 1,140 people are currently hoping to be allocated one of the area’s 900 plots, while in North Tyneside the figure is 1,316 for the borough’s 1,718 strips of land across 53 different sites).

Vegetable seed sales increased by 7% last year and the National Lottery is investing £50m into community gardens and school farms.

But as we look to save the pennies and consume less foodstuffs like Fairtrade, how is this going to affect the Third World producers whose income is entirely dependent on our demand for their fruit, tea, chocolate, flowers and cotton?

Fairtrade sales were worth £500m last year. This compares to £2bn for organic foods.

Any drop-off in consumer interest for Fairtrade goods would therefore have serious implications. Even the free trade-focused Adam Smith Institute warned earlier this year that “farmers who have been promised long-term contracts and sustainable prices may be unprepared to cope if Fairtrade’s stock suddenly falls in the public eye."

Why is this? Because more than seven million people in 62 countries depend on Fairtrade for their livelihood. This is either directly through employment or indirectly by profiting from the schools, hospitals and other benefits.

So is the UK’s dependence on tropical fruits a sustainable one, or are we about to experience an about-turn and head back to the days of our ancestors when they only ate what was in season and had to survive the lean winter months on what had been pickled, preserved and prepared in the months of food glut.

Barbara Crowther of the Fairtrade Foundation believes we aren’t ready yet to abandon our love of the exotic. “I don’t know about you, but I don’t want to survive on turnips and potatoes for the rest of my life.

“By supporting agriculture in other parts of the world, we enable growers to provide food for themselves and protect the lands of their community so they’re not bought out by huge developers.

“And if we’re worried about the increasing level of food prices, we should send a positive signal to the growers of those products that we’re prepared to invest in their future, as we’re going to keep relying on them to grow things." But what if Britain decided to go entirely local and seasonal? “I don’t think this would ever happen, as the cost of manual labour in the UK is too high," claims Edson Marinho of Etica, a Brazilian farmers’ co-operative that grows mangoes for Dutch importer and distributor AgroFair.

“But if it did, it would result in chaos: even the biggest producers of Fairtrade goods wouldn’t have anywhere to sell, prices would fall and whole corporations would end up bankrupt."

One alternative to eating seasonally and locally, says Robin Murray of TWIN, an alternative trading company that launched Cafedirect and Divine chocolate, is to grow everything Britain wants in Britain.

“Let’s say we could grow bananas in greenhouses in Kent," says the economist, alluding to the 80-acre Thanet Earth project, which will grow 1.3 million types of fruit and vegetables under seven glasshouses 365 days a year.

“Does that make ecological sense in a lifecycle term? Let’s say it does. Then the banana industry the whole world over would have to be restructured – so should we build houses for Ecuadorians here in the UK to help us grow the bananas they used to grow?"

This notion of responsibility lies at the very heart of Fairtrade, not least because 1.5 million livelihoods in Africa alone are estimated to be dependent upon UK consumption of agricultural and horticultural produce.

But the land that’s used to feed the West could actually be used to feed Africa itself, opponents to Fairtrade have argued, as our purchase of Fairtrade products is coupled with the need to help feed continents that can’t feed themselves.

“They call this Fairtrade," says Anthony Blay of Vrel, a Fairtrade co-operative with 250 hectares of banana and pineapple plantations in Ghana. “But this isn’t a fair world: there’s a huge difference between the price we sell our mangoes for and the prices in the supermarkets in the UK. There is something going seriously wrong here."

While Ghana also grows crops like cassava, tomatoes, okra, peas and millet for internal trade, it has had to start importing rice from China to help feed its population of 23 million.

“If we could feed ourselves with our own food, that would be better," admits Anthony. “But the organic bananas that we export to the UK are too expensive for the average Ghanaian to buy." Vrel ships 5,000 boxes of bananas in five shipping containers to the UK and France every week. The bananas are put into plastic bags, which are themselves sent from the UK, to help them be differentiated from conventionally grown ones, resulting in 100,000 plastic bags being used every week.

While transport actually only accounts for about 10% of food’s carbon footprint, the rising cost of fuel is expected to bump up shipping costs, which in turn will increase the cost of Fairtrade goods.

But forget the future of Fairtrade, says Anthony Blay: he’s not even sure that farming – Fairtrade or not – is an industry that has much long-term projection.

“The toll of climate change is taking effect in a way that it didn’t in my parents’ time," he explains. “There are so many risks associated with farming that I’d rather my children go to school. If climate change continues like this, even more people will fall below the poverty line.

“And then," he says, a note of desperation in his voice, “then what are we going to do?"

Pulbished in livejournal.co.uk here

Slug path

asi-in-the-news/asi-in-the-news/journal-live-a-fair-price-to-pay

Joomla-id

2045

Old Teaser

View London: Ministers 'could not run businesses'

July 18 2008

It is unlikely government ministers have the skills or background to run a private company, a new survey has claimed.

A questionnaire of chief executives at the UK's top 100 companies pours cold water on government claims of successful management.

Ben Farrugia, policy analyst at the TaxPayers' Alliance, said: "Comparison with the most successful business leaders in the country reveals that the people running public services lack appropriate experience, have near impossible tasks to do and are never in their job for long enough to engage properly with their departments."

The survey found chief executives recommended managers had at least five years in the post for them to get to grips with the task at hand. This flies against a government culture in which secretaries of state are shuffled between departments every two years or so.

John Reid, for instance, spent the years between 1999 and 2007 being secretary of state for Scotland, Northern Ireland, health, defence and home affairs, as well as being leader of the Commons and minister without portfolio.

The average appointment for senior civil servants stands at two years and eight months.

The chief executives also asserted the importance of experience in the sector the organisation works in, but government department are usually so vast and varied it is near-impossible to be properly experienced in the sector.

The Department of Culture, Media and Sport, for example, has 63 subsidiaries covering everything from heritage sites to the 2012 Olympics.

The chief executives also valued experience of senior management, leading the Taxpayer's Alliance, who conducted the survey, to point out that none of the current Cabinet have managed a large business, and that only one in seven MPs has any management experience at all.

But Dr Eamonn Butler, director of the free-market Adam Smith Institute, says the two cultures aren't comparable.

"When an executive says something, he expects it to be followed up, but when a minister says something it's the beginning of negotiations," Dr Butler told politics.co.uk.

"It's one of the reasons business people don't understand Westminster. They assume there's a chain of command. But in politics people have all sorts of different views and things take place through discussion," he added.

Published in Viewlondon.co.uk here

Slug path

asi-in-the-news/asi-in-the-news/view-london-ministers-could-not-run-businesses

Joomla-id

2046

Old Teaser

The Guardian: A strike against good sense

by Ruth Lea, Senior Fellow in Economy of the Adam Smith Institute (July 17, 2008)

Council workers' call for a better pay deal are understandable, but we would all pay the price

The sight of council staff striking for inflationary pay awards of around 6% is as depressing as it is predictable. I appreciate, of course, that consumer prices inflation is rising, led by higher food and fuel costs, and many people's living standards are now falling. After a period of 10 to 15 years of uninterrupted growth and rising living standards this is a nasty shock for us all. And it is a particularly nasty shock for the less well off, including pensioners, who spend proportionately more of their limited budgets on food and utility bills.

But this is not all. Some people are now losing their jobs. Every day there is more bad news – for example in the house-building sector – but few parts of the economy will be immune as the economic slowdown tightens its grip. The unemployment claimant count rose by over 15,000 in June and, bluntly, this is but the start of a protracted period of worsening employment prospects. It is worth noting that the public sector is the least vulnerable section of the economy when it comes to insecurity of employment.

The chancellor argues strongly against inflationary pay awards throughout the economy – whether in the public or the private sectors. He is quite right. He knows that if the pick-up in prices inflation leads to higher wages then there is a real risk that an inflationary "wage-price spiral" becomes embedded in the economy – as it did to devastating effect in the 1970s. And the Bank of England has made it abundantly clear that if inflationary pressures build up further, they will raise interest rates. The economy needs higher interest rates like a hole in the head.

Inflationary settlements in the public sector do not, in themselves, directly trigger off a wage-price spiral, as their goods and services are not, on the whole, sold on the open market at a "price". Instead the provision of public services deteriorates – fewer school books for example – and/or council tax bills rise. But high pay awards in the public sector can increase pressure for inflationary pay awards in the private sector. And – surely the clincher – council staff workers must realise that they will be condemned as irresponsible and unfair if they push for high pay awards when their private sector friends may be losing their jobs.

Life is not pleasant for many at the moment and it's going to get worse. We're all in this together.

Published in The Guardian here

Slug path

asi-in-the-news/asi-in-the-news/the-guardian-a-strike-against-good-sense

Joomla-id

2177

Old Teaser