Trickle-up economics always wins

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There was a story in the i paper yesterday about how some of the UK’s billionaires ‘lost’ huge amounts of money in a single day as a result of the Trump-induced stock market crash. My heart bleeds for them, of course, although I’ve been unable to find a small enough violin to mark the occasion with sad music. The question, though, is ‘where did the money go?’. After all, basic book-keeping tells us that a loss in one place must be balanced by a gain somewhere else: if the money has ‘gone’ it must have ‘gone’ somewhere.

The truth, of course, is that the money hasn’t gone anywhere; it was never there in the first place. At the time of writing the story, those billionaires still own all the assets they owned the previous day – all that changed was the theoretical cash value of those assets if they decided to sell them at a particular point in time. Even if they did suddenly decide to sell them, they won’t have ‘lost’ the difference between one day’s valuation and the next day’s valuation. The amount that they will have ‘lost’ will be the difference between what they paid for the assets and what they receive from them at the point of sale, adjusted for inflation. In most cases, that ‘loss’ will be negative, i.e. they will have made a profit not a loss. It’s just that the profit will be less than the profit that they would have made had they sold them a day earlier. An asset whose price is inherently volatile and bears little relationship to the underlying value of the property concerned is a remarkably poor way of measuring wealth, and the idea that company owners and long-term investors make a profit or loss on a day-by-day basis as the price of shares varies is nonsense.

That’s not to say that there are no winners or losers, however. People who own shares more indirectly – for example in pension funds – and reach a point where they have little option but to sell will certainly find that, even if they’ve still made a net profit over the whole term of their investment, their retirement plans may have to change dramatically as a result of the actions of the madman in the White House, because they will receive less than they were expecting. It is they, rather than the billionaires, who are the real losers. There are people who have profited as well. People who have, or can access, sufficient funds to buy and sell shares on a daily or even hourly basis can take advantage of all those forced to cash in their savings at a low price by buying low and selling when the stock bounces up again. It’s even easier if they have advance warning of Trump’s actions, a hint of which he was kind enough to give them just a few hours before reversing his tariff decision.

The White House itself has released a video apparently showing Trump congratulating some of his billionaire buddies for making a killing on the back of his actions. “He made $2.5 billion today, and he made $900 million. That’s not bad,” said His Orangeness. There were some real winners and some real losers as a result of Trump’s actions, but they weren’t the billionaires highlighted in the story referred to at the outset. The winners were the people in a position to speculate and gamble on the stock markets, and the losers were those who depended on stability and certainty for their retirement. Surprise, surprise, the net result was that money and wealth flowed from the many into the hands of the few. Trickle-up economics always wins through in the end.

Reaching for the Golden Oldies

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If there’s one sure sign that a Prime Minister thinks he or she is sailing in troubled waters, it’s when he or she reaches out for the Golden Oldies. And there are few Oldies quite as Golden as the mantra about ‘more bobbies on the beat’ which is, apparently, Starmer’s topic of the day. It’s a well-played tune, previously deployed by Rishi Sunak, Liz Truss, Boris Johnson, Theresa May, David Cameron, Gordon Brown, Tony Blair, and John Major. I’m pretty sure that I remember it from Thatcher and Callaghan as well, although the online fossil record is harder to follow from such primitive times.

There are another two certainties which follow on from any promise to increase the numbers of police on patrol. The first is that it won’t happen. And the second is that it would make little difference, even if it did. Crime is a complex phenomenon, which has no one simple cause, and whilst seeing more police walking around, preferably armed at least with tasers and big batons, appeals to a certain electoral demographic (a demographic which obviously suffers from a combination of short memory and gullibility), there is no real evidence that it makes a huge difference to the volume of crime – and it may not even be the best way of using any additional resources which can be dedicated to policing. As one anonymous police source put it, “We’d rather take the money with no strings attached and invest in other things”.

One report on Sir Starmer’s anticipated pearls says that the measures are being introduced amid “fears there is a lack of visible police presence which is driving street crime and in turn more serious and violent offences”. It’s utter nonsense, of course. Lack of visible policing doesn’t ‘drive’ crime, it merely makes it marginally easier to commit. The ‘drivers’ of crime are many and varied, but include drug abuse, greed, poverty and desperation, to say nothing of crimes of passion. There was once a politician who promised to be “tough on crime, tough on the causes of crime”, but when he got into office, he discovered that the second was too difficult and would require too much effort, and the first was more easily addressed by empty rhetoric than actual action. Still, empty rhetoric makes for a good chorus line in a golden oldie.

Time to embrace the elephant

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There was a time in the 1960s, when Harold Wilson was PM, when the big monthly financial news regularly headlined by the BBC was all about this strange thing called the ‘balance of payments’. It was a crude and simplistic measure of the difference between imports and exports, and the news was invariably bad – the UK was importing more than it was exporting. These days, the numbers are worse – much, much worse – as this chart shows, but no-one is worried about it. The story about how a small imbalance was an existential problem but a huge imbalance is not an issue is a tale for another day. The point, here, is that government at the time, prompted as I remember by tabloids, launched the ‘I’m backing Britrain’ campaign, encouraging consumers to seek out and purchase UK-made goods rather than imports.

The campaign generated a lot of light, in terms of publicity and faux patriotism, but not a lot of heat, in terms of its effectiveness. It’s a precedent worth bearing in mind when considering the calls for a ‘Buy British’ campaign in response to the Trump tariffs. There are, of course, plenty of good reasons for buying goods as locally as possible, keeping the money in the local economy and reducing food miles amongst them. But for a variety of reasons, not all of which are immediately obvious, buying local can sometimes be an expensive option, not one open to everyone. Even assuming that everyone had the choice, and the financial ability to make that choice, of selecting British produce over all others, past history does not suggest that success is guaranteed. Worse still, if we did all choose to buy British, it doesn’t follow that the chief sufferers would be the desired target (i.e. the US); it’s just as likely that producers in other countries, including some of the poorest, would be the main losers.

The desire to strike back at Trump and by extension the US is entirely natural and understandable, but finding the best method of doing so is far from straightforward. If, as most of the experts say (and I believe them on this), the main immediate losers from tariffs are the consumers in the country imposing them, then retaliatory tariffs would do more harm to UK consumers than to anyone else. The second-line losers are the companies and their employees in the country targeted by tariffs, but the relative size of the UK and US economies means that the US economy can tolerate higher tariffs more easily than could the UK economy. Protection of those impacted looks to be a better mitigation than retaliatory tariffs, even if the UK government has been more than a little timid on that front to date.

Possibly the worst possible response is to plead with Trump for a deal which gives the UK some advantage over all the others seeking similar relief. Not only would it involve making unwanted concessions (and not just over things like food regulation – it’s clear that the US also wants to use its economic power to affect social and taxation policy in supplicant countries), the probability is that he’d just bank any concessions made and start again a short while later demanding more concessions. Giving in too easily to a bully merely convinces the bully that he didn’t demand enough in the first place.

That leaves us with the elephant. There is one, and only one, economic entity in the world which is big enough and has a diverse enough economy to be able to stand up to the US on the one hand, whilst developing its own economy internally to reduce or eliminate the need for the US on the other. It is, of course, the EU. Joining forces with the EU, and co-ordinating a joint response, doesn’t even require rejoining, or even the partial rejoining which the single market and the customs union represent. It merely requires a willingness to accept that joint action is better than allowing Trump to divide and rule (making that difficult is precisely why he hates the EU so much). It says a lot about what the Labour Party, founded on the idea of solidarity, has become that the idea of collective action has become such an anathema, and that competition and stealing a march on others is the only option of which they can conceive.

Misreading the signs

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Government spokespersons have been quick to try and spin the fact that the UK has been hit by Trump with a lower tariff than others as a product of Sir Starmer’s genius approach of doing whatever it takes to please Trump – saying ‘yes sir’ in all the right places, offering the shiny bauble of a visit to the King of England, hinting at reducing taxes on US tech companies etc. It’s a form of self-reassurance for a government which doesn’t really know what to do.

I’m not sure that it’s true, though. Trump didn’t get to a policy of charging exorbitant tariffs on non-existent imports from uninhabited islands by considering how nice the penguins were being to him, even if some of them are indeed king penguins. The approach he took was the entirely arbitrary one of counting the number of apples in Tesco, dividing it by the number of oranges in Aldi and halving the difference, or some other equally irrational mathematical approach. The UK has been subjected to exactly the same calculation, based on exactly the same algorithm, as all the other countries; there’s no special treatment involved at all. The tariff on UK goods is low because the UK does not have a trading surplus with the US, which implies a lesser punishment has been meted out because the UK is not particularly good at selling goods to the US.

It might legitimately be counted as a Brexit dividend, though. Had the UK still been part of the EU, the punishment would have been based on the balance of trade between the US and the EU, and because the rest of the EU appears to be rather good at selling more to the US than it buys from them, the UK would have been hit with the same tariffs. I’m not entirely convinced, though, that enabling the UK to be judged on the basis of its own failures rather than on the success of the EU as a whole is a ‘dividend’ about which we should be boasting.

The worst aspect about assuming that  a lower tariff is some sort of success, however, is that it provides Sir Starmer with a self-justification for a policy of continuing to appease His Orangeness. When what is needed is a collective approach, seeking to obtain and maintain an individual advantage over what used to be called our partners doesn’t look like the approach most likely to bring about any change.

How real is paper wealth?

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‘The markets’ have reacted fairly predictably to Trump’s puerile attempt at a conjuring trick by registering some dramatic drops. The analysts tell us that this reflects their pessimism about inflation, interest rates, and economic growth, all of which are likely to be adversely affected by the trade war which Trump has kicked off. Whilst I don’t doubt that economists (most of them, anyway – there are always some who’ll take a different view) do indeed see Trump’s actions as a threat to economic prosperity, I wonder if that’s what ‘the markets’ are really reacting to. It probably would be the case if markets were doing what classical economics says that they do, which is matching capital with investment opportunities in expectation of future profits. But if those same markets are actually more about gambling and speculation, which is probably the reality behind most trading, then what really drives them is an attempt to second guess what other players will do in response to tariffs in the hope of turning a profit by making a better guess than those other players.

It underlines that share prices an extremely poor indicator of economic value; they often bear little relation to the value of the underlying economic assets which they nominally represent. And their volatility makes them a poor measure of the wealth of their owners. To take just one simple but current example, the share price of Tesla has plummeted since Musk got involved with Trump’s administration. He’s still a very wealthy man, on paper, but his total wealth is apparently a lot less now than it was a few months ago. In his case, the scale of things means that it makes little practical difference, but the question is whether ‘paper wealth’ is a sound basis for assessing anything.

That’s relevant in the context of the increasingly strident calls for a wealth tax here in the UK. Whilst the idea appeals to many of us, assessing the amount of wealth owned by an individual is not a simple or straightforward task, especially if the value of a significant component of that wealth can vary from day to day – or even hour to hour. And non-paper wealth – property, land etc. – is not easily realisable or assessable without being realised. What is easier to assess, albeit still difficult when the tax system is complicated and people can afford to pay expensive advisers (although both of those obstacles could be overcome by a government intent on fairness), is the income generated by that wealth including, of course, any increase in value from the date of acquisition to the date of disposal of any asset. We certainly should do more to tax the wealthy, but taxing the wealthy isn’t necessarily the same thing as taxing their wealth. Their income is a lot easier to get at.

Sir Billy No-Mates

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It’s unclear exactly what Trump is hoping to achieve by imposing tariffs on all good imported to the US. Sometimes he implies that it’s a temporary move to restore what he calls 'fairness', whilst at other times, he implies that it’s intended to be a long term replacement for income tax – a way, in effect, of transferring taxation from the income of the richest to the expenditure of the poorest. He either doesn’t understand, or is pretending not to understand, what tariffs are or how they work. My money’s on the former; partly because it’s the simplest explanation and Occam’s Razor applies, and partly because anyone who thinks that tariffs can be applied to smuggled fentanyl is clearly demonstrating his lack of understanding. Whilst the idea that smugglers would stop at the border to fill in forms and pay the tariff is attractive, its relationship to reality is somewhat distant.

The underlying statistics on which the tariffs are based are also questionable: the idea than an island group only inhabited by penguins and seals is exporting quantities of “machinery and electrical” goods to the US is fanciful at best. Whoever produced the figures for his show yesterday clearly didn’t apply any sort of ‘sense check’ to the numbers before letting His Orangeness loose to announce them. The calculation of the total value of tariff and non-tariff barriers is opaque, to say the least, but then basing decisions on arbitrary figures pulled out of thin air is his normal modus operandi.

However flimsy the factual basis, however arbitrary the decisions taken as a result, the fact is that the tariffs are going to be in force (until he changes his mind, which could be tomorrow - or even later today - based on experience to date), and the question is about how to respond. The main losers, in the immediate short term at least, will be US consumers. Even if the companies importing goods from elsewhere succeed in ‘persuading’ their suppliers to drop prices, or themselves decide to somehow ‘absorb’ part of the increase, the bottom line is that, for US consumers, prices of imported goods will rise. That isn’t a bug, it’s a feature; intended to encourage more domestic production. It might even work, but not on a large scale in the timescale of the current Trump presidency. Investment decisions required to build domestic capacity to replace imports aren’t going to happen overnight. To the extent that US demand for their products reduces or they feel obliged to reduce their pre-tariff prices, companies in all of the countries hit by tariffs, as well as their employees, will also be losers although, again, the timescale of that happening depends on how inelastic the demand for their products is.

For all the same reasons, it follows that the main losers when countries impose retaliatory tariffs will, in the short term, be the consumers in those countries; the process is a reciprocal one. For that reason, and despite all the natural desire to hit back at the person and country responsible, the immediate reaction of Sir Starmer (which is that he should not react immediately) is probably sensible as far as it goes. If and when it becomes clear that Trump’s approach is giving some US companies either individually or by sector an advantage over UK companies, that is the time to respond forcefully. Protectionism can also be reciprocal, another of those unfortunate facts which Trump seems incapable of understanding.

The bigger concern with Sir Starmer’s response is about whether trying to ingratiate himself and the UK with His Orangeness is the best way to deal with a bully. Being best mates with a bully might buy some relief in the short term, but it facilitates the bullying of others and, in the long term, the bully will always come back for more. Sir Starmer’s apparent unwillingness to collaborate with others rather than seek advantage over them is unhelpful, and fails to acknowledge that, however important the UK might have thought itself to be in the past, the future of these islands is inevitably linked to that of the rest of Europe. His reluctance to accept that a choice has to be made is itself making the default choice of sucking up to the bully. Talk of a reset of the relationship between the UK and the EU is just hot air when the government is seeking to negotiate an advantage for itself over the EU partners. Pretending to be everyone’s best friend is the best way to end up friendless.

Following the money

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He might twist and turn a little on the issue, but there’s no real doubt that Farage wants to move from an NHS funded out of taxes to one funded more by insurance. He knows, though, that the NHS ideal of services being free at the point at which they are required is popular, and he’s obviously finding it difficult to find a form of words which means that would still be true as well as meaning that those who can afford to pay for insurance will do so. 

It isn’t just a Farage thing, either. There are plenty of Tories as well as an increasing number of Labour politicians who seem to be thinking along similar lines, with they key phrase always being about ‘those who can afford to…’. A system of health care based on the most well-off paying more than the poorest sounds hard to argue against – but what advocates of such an approach want us to forget is that that’s exactly what we have now. Health care is free for all, funded by tax and National Insurance, and those who earn the most pay the most. In principle, there’s no necessary difference between the two models. In principle, it shouldn’t matter which model we use, so why are they so keen to change?

Ultimately, there are several reasons, none of which they are particularly explicit about.

The first two are purely ideological: they have an almost pathological hatred of taxation, the state, and the whole idea that the state should be doing anything. Handing over the NHS to the management of a network of private providers and private insurance companies is, in their eyes, axiomatically better. That leads us on to the second reason, which is almost a corollary: they believe that all economic activity (and whilst ‘economic activity’ isn’t the first description of the NHS which springs to mind for many of us, the NHS is actually a significant part of the UK economy) should be profit-generating.

There are also two probable consequences of an insurance-based system along the lines that they are suggesting. They are both features rather than bugs. The first is that the target group for paying more is rather larger than the wealthy few who might be more easily targeted by a more progressive tax system. What might be called the ‘middle earners’ are the ones who would end up paying more. They might be ‘able’ to afford it, although it is always and inevitably the case that people paying more for one thing end up with less disposable income to spend on other things. That is the price they would pay for having a more reliable and available health service. The second is that we would end up with a two-tier health system. The UK, allegedly, cannot afford to improve the NHS for all, but a system of private providers available only to those paying for insurance would provide a better service than the residual NHS which would continue to exist to serve those who could not afford, or choose not, to pay for insurance. It is, after all, that belief that they will get a better or faster service that drives many to pay for private insurance currently.

The ‘winners’ from the alternative system would be those owning the shares in the companies guaranteed to make a handsome profit; there is a group in the middle who would lose financially but probably gain in terms of an improved service; the ‘losers’ will be those who are thrown back on an inadequate public NHS, getting a second-class service – typically, the poorest and the lowest earners. It’s obvious why the first of those three groups would see this as being in their personal interest. They will be a reliable source of donations for any party promoting such a policy. Those in the second group would have to weigh up the pros and cons rather more carefully; some would favour it, others less so. But the target electoral group for Farage and his gang is actually the third group. His reluctance to spell things out starts to look entirely rational.

Planning on the basis of blind faith

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The establishment of the Office for Budget Responsibility by George Osborne in 2010 was a cunning plan to embed orthodox neoliberal economic thinking into the UK economy; to guarantee, in effect, that no non-Conservative government (for which, read Labour) could ever try to follow a different path. He never intended that it would trip up a Conservative government but, in fairness, who could honestly have foreseen Liz Truss? When the inevitable happened, and a Tory Party riven by Brexit, broken by lies, and displaying utter incompetence eventually gave way to a Labour government, the plan worked like a dream. Lacking in sufficient imagination to realise that she could just abolish the OBR (other countries manage without one), appoint different people to run it, or simply change its remit, all of which are in the power of the government, Reeves has chosen instead to do exactly what Osborne planned, and treat its conclusions as though they were written on tablets of stone handed down from on high.

She wanted to count her benefit cuts as saving £5 billion, but the OBR calculated that they would only save £3.4 billion, so off she dutifully went to lop another £1.6 billion off future spending plans. Experience tells us one clear truth – both her original estimate and that of the OBR are wrong. We don’t know by how much (or even in which direction), but planning on the basis that either one is correct five years in advance would be stupidity of the highest order (and therefore, apparently, a basic tenet of government financial planning). As JK Galbraith so succinctly put it, “The only function of economic forecasting is to make astrology look respectable”.

It’s interesting to note, though, that Reeves’ faith in the power of economic forecasting is selective. When a forecast produced by the OBR ‘forces’ her to do what she wants to do anyway (and anyone who believes that she really doesn’t want to cut benefits needs to get out more), it’s an immutable law of economics; when another forecast by her own government tells her that the result of her actions will be to push 250,000 more people (including 50,000 children) into poverty, she demurs, and claims that they’ve got it wrong because her benefit cuts will miraculously result in more people being in work. The forecast almost certainly is wrong, of course (back to Galbraith), but by how much and in which direction we won’t know for some time to come. What we do know, without having to wait any time at all, is that we have a Labour government which is remarkably relaxed about putting more people into poverty when it’s entirely within their own control not to do so.

Minds don't need to be particularly great to think alike

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Apologists for Britain’s colonial past invariably point to what they see as the ‘good’ outcomes of imperial conquest for the conquered, usually expressed in terms of systems of government, the rule of law, Christianity, cricket, and the English language. Whether these are actually ‘good’ things or not depends on perspective; the assumption that they are is itself a product of the imperialist mindset, revolving as it does around some concept of cultural superiority. Leaving that aside and assuming, for the sake of argument, that these are indeed good things, none of them actually formed any part of the original intention of conquest. That was always about access to resources, and the opportunity to use the power of the imperial state to extract wealth which could be accumulated by individuals, and much of which was repatriated to the shores of the imperial power. That wealth, taken by force from the conquered peoples, was the basis of the great wealth of the cities of the imperial powers, including, of course, Britain. In return, the natives got Shakespeare, a bargain for which they should, apparently, be eternally grateful.

Sometimes, people confuse imperialism with colonialism; but not every country added to the empire was actually heavily colonised. Some were, of course – the territories currently known as the USA being one of them. From a British point of view, the other territories most heavily colonised were places such as Canada, Australia, and New Zealand. They’re not known as the ‘white commonwealth’ without reason. The USA (a former colony in the true sense of the word) and its constitution were founded on a number of ideas, one of which was the rejection of colonialism and imperialism, and the idea of ‘freedom’ (a word which has many different meanings). Watching that former colony lapse into its own form of imperialism ought to be surprising but is somehow not.

The methods are different in the twenty-first century; although Trump hasn’t ruled out direct military conquest, he has a clear preference for economic domination, even if his grasp of economics leaves more than a little to be desired. But his motivation – control of resources, and the transfer of wealth from other countries to the US – is a direct match for the motivation which led to the empires of the past. And blatantly so. Having got Ukraine to agree to allow half of its mineral wealth to be expropriated on the basis of a lie that aid provided was a loan rather than a gift, he has done as all bullies do when the bullied bow down before them. His conclusion from the willingness of Ukraine to give up 50% is that he didn’t ask for enough, so he’s doubled his demand. He now wants control of all of it. Along with a veto on Ukrainian policy.

His motivation for taking Greenland, although presented in terms of ‘security’ is much the same. He wants access to its resources, and his promise that Greenlanders will become rich if they allow it is as valid as his promise that US citizens would become richer by electing him; it’s a promise which is only ever intended to apply to a tiny minority. Yesterday, Putin declared that he thinks Trump is serious about taking Greenland, but thinks that it's what he described as “an issue that concerns two states and has nothing to do with us”. It’s an open invitation to Trump to view Russia’s intentions in relation to Ukraine in the same terms. The two presidents are clearly thinking along similar lines. And the opinions of others count for nothing, with either of them.

Uninvited guests

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Relative to the size of its population, Greenland must surely be about to become the most-visited country by US dignitaries in the period since Trump was elected for the second time. His son, Donald Junior, undertook an entirely ‘private’ visit before his father was even installed in the White House, turning up in a discreet fashion giant Trump-branded jet and spending the day there, during which homeless people were invited in off the street to enjoy a free lunch wearing MAGA hats (which the ‘tourists’ had coincidentally brought with them) for the benefit of the photographers (who had also conveniently tagged along for this ‘private’ visit).

Next up, originally scheduled for Thursday to Saturday, was another ‘private’ visit by the Vice President’s wife to ‘watch a dog-sled competition’, which the VP himself rather impulsively decided to join. After all, what sort of VP is so busy that he can’t suddenly drop his semi-public planning of bombing raids to take a three-day trip to the Arctic to watch a few dog sleds racing? Coincidentally, the National Security Advisor (assuming he’s still in post tomorrow) and the Energy Secretary are also joining the group in order to visit the US base on the island before they were planning for themselves to become part of the assembled audience for the dog sledding. Until, that is, there was some pushback, as a result of which the dog watching has been cancelled, and the group will confine themselves to a one-day visit to the US base, whilst the armoured cars which had already been delivered to transport them around the island were sent back to the US. Pity that – it rather spoiled the punch line about half the US government literally going to the dogs.

According to Trump (a form of words which is enough in itself to tells us that whatever follows will be a lie), the delegation on this ‘private’ visit had been ‘invited’ by unnamed Greenlandic officials, although no-one in the Greenlandic government seems to know anything about any invitation. It was probably issued by the new officials whose appointment to run the island Trump has not yet announced. It’s certainly in line with Trump’s equally specious claim that Greenlanders ‘want’ to become part of the USA despite (presumably ‘fake’) opinion poll findings to the contrary. It’s not a Trump original playbook, of course: Putin also ‘knew’ that Crimeans were aching to become part of Russia before he seized the territory in 2014. Even longer ago, a certain European dictator ‘knew’ that Austrians wanted to be German deep down, even if they didn’t know it themselves. As both that dictator and Putin knew, it’s far better to hold a referendum on the issue after taking control, when the voting and the counting of the votes can be ‘properly supervised’ than to accept the verdict of polls taken in advance.

But, to continue the parallel with Crimea, how long will it be before the US equivalent of ‘little green men’ start mysteriously appearing on the streets of Nuuk?

Avoiding the question

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Pensions are a complicated business, and the UK State Pension is particularly so, given that the rules, amounts and eligibility criteria for the different rates keep changing. But in looking at the history of the triple lock, we need to go back to the Thatcher years. For some years prior to 1980, the uprating of pensions was based on a combination of average earnings and the Retail Price Index, but Thatcher’s legislation in 1980 ended the link with average earnings. Over the long term (even if it doesn’t always feel that way!), wages tend to rise faster than prices, which is why people generally feel better off over time and enjoy a rising standard of living. But an income linked only to prices will inevitably do no more than maintain a standard of living, and the extent to which it even does that will depend on which prices are included in the calculation and the extent to which the things purchased by an individual match that selected ‘basket’. Those on lower incomes (such as those dependent on the state pension) often find that their more personal rate of inflation is higher than the overall average, meaning that they slip backwards.

The triple lock was intended to reverse that decline and bring the state pension back to the effective relationship it had with earnings prior to 1980. On that basis, Steve Webb (the Minister who introduced the policy) was surely right when he said recently that "there will come a point when it's done its job". Whether merely ‘restoring’ that relationship to its pre-Thatcher level is the right target or not is a matter of opinion; there has been remarkably little debate about what the ‘right’ relationship between earnings and pensions should be. 30%? 50%? 80%? 100%? Parking that issue, the question in considering whether the triple lock has done its job or not should be an assessment of whether the percentage is or is not back to the 1980 level. At that point, and assuming some sort of agreement on the ‘right’ percentage of average earnings, a single lock (with average earnings) is all that is needed, and would also align the incomes of pensioners and employed people in the same relationship with price inflation. But making that assessment isn’t straightforward because of other changes to pensions (including the move from the old married couple pension to individual pensions, for example), but if any of those arguing for the abolition of the triple lock truly felt that they could make a good case for having restored the 1980 value of pensions, we can be certain that they’d be shouting it from the rooftops. The rooftops are looking and sounding conspicuously quiet.

They don’t, of course, put it in these terms, but anyone arguing for abolition of the triple lock (and Labour seems to have its share of them as well as the Tories) is effectively arguing for an arrangement which, at best, locks the rate of pensions at its existing relationship with average earnings. It’s easy enough to see why they avoid putting it that way – it’s not an argument that I’d want to make given the comparatively low level of the UK state pension. Those arguing that better off pensioners (those with savings and investments or good occupational or private pensions) don’t ‘need’ the full state pension and should be paid a lower amount are being disingenuous at best, and avoiding the real point at worst. Pensions, of necessity, require long term decision-making, and many people will have planned for their retirement on the basis of assuming that the ‘deal’ that they thought they were getting when they started work – paying NI in return for pensions in later life – would be honoured in due course. Had they known in advance that that particular income source would then be means-tested, they may well have taken different decisions, but they can’t go back and do something different. There is another way, though. Those on higher incomes – whether through pensions, interest payments, dividends, rents or wages – could be asked to pay more in tax. The source of that income ought to be irrelevant: the clue is in the name, it’s an income tax. The talk about reducing the state pension for some recipients is really about avoiding that issue. Labour, just like the Tories, is reluctant to tax more heavily those who can best afford to pay it. Talk of ‘need’ or ‘means tests’ is just a distraction from that reluctance to in any way reduce the disposable income of the group in society which they represent and serve - the most well-off.

Helping the medicine go down a different throat

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As I remember childhood, being given a spoonful of sugar with, or immediately after taking, some particularly unpleasant medication was a common practice. Today’s health experts probably wouldn’t approve of giving a child a spoonful of pure sugar in any circumstances, but then medicines tend not to be so foul-tasting these days, and have largely been replaced by bland taste-free pills of one sort or another anyway. I’m aware of no circumstances, though, under which the spoonful of sugar would have been given to a completely different child instead of the one who was suffering from whatever disease was being treated.

But then I’m not Chancellor of the Exchequer, so what would I know? According to modern economic theory of the Reevesian kind, spending £2 billion to build 18,000 affordable homes for one group of people will sweeten the pill represented by the £5 billion in benefits being removed from an entirely different and much larger group of people. It’s an ‘interesting’, if somewhat unscientific, proposition, but it would never survive the sort of thorough testing required for the acceptance of any new approach to medical treatment, with its concomitant stress on empirical data. It also looks unlikely to survive the rather less thorough (and completely untested) implementation which is about to happen. It makes sense only as an exercise in dividing people into groups and encouraging them to blame other groups for any problems they might have.

Cutting in the right place isn't as easy as it sounds

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Many years ago, when I was working as a Systems Analyst designing computer systems, I ended up talking to an administrator in one department and looking at all the information she collected and collated into reports. One report was particularly complex, and was going to pose problems in ensuring that all the data was available in the right place and format to produce it; as things stood it was taking her a week or so every month to locate and compile the information. I asked what happened to the report when she had produced it and she pointed to the cabinet where it was filed. In response to the follow up question about who looked at it afterwards, the reply I got was along the lines of “No-one. But the Director asked for it once a few years ago and we didn’t have it. So now we make sure we’ve always got it.”

It's a small example of the way in which large organisations can accumulate tasks and activities which serve little purpose, but the people performing them don’t have the authority to stop them, and those who do have the authority usually don’t even know they’re happening. And it’s one of the reasons why there is almost always scope, in any large organisation, to eliminate certain activities (and the people performing them) with zero impact on the overall performance. So when someone – like for example, the Chancellor – claims that there are too many people in the civil service and that the number can be easily reduced, part of my reaction is to think that she’s probably right. In principle. What she does not (and cannot) know, however, is how many are surplus to requirements and which ones they are. One of the consequences of that is that an arbitrarily imposed top-down target almost invariably ends up removing at least some of the ‘wrong’ people, whilst those busily engaged in preparing obscure reports ‘just in case’ carry on regardless.

The ‘savings’ aren’t easy to quantify either, and depend at least partly on the method used to identify those who will get the chop. If the reduction is achieved by removing some of the oldest people, then in a hierarchical organisation like the civil service they may well turn out to be both the most senior and the most highly-paid, for whom a redundancy package and early retirement may look attractive. And since both the redundancy payments and the pensions come out of different pots, the ‘savings’ can appear to be quite high. But whatever the Chancellor may say about targeting ‘back office’ functions rather than front line operations, that isn’t the way arbitrary targets work out in practice, and the total savings at a macro level may well be considerably less than they appear looking at a single budget line.

In essence, her thinking doesn’t seem to be that different from that of Musk, even if not so scattergun an approach or so deep a level of cuts. But both of them start from the assumption that public spending adds no value, and is an ‘overhead’ on the rest of the economy. The US administration is even thinking in terms of redefining GDP itself to exclude government expenditure, which is a somewhat drastic approach. It's neo-liberal economic claptrap, of course. The public sector contributes a great deal to the well-being of citizens. Once upon a time, a Labour government would have seen that as a good thing.

If the problem is a moral one, we need a response based on morality as well

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Labour ministers have been trying to present their proposals on reducing the cost of benefits by presenting the issue as one of morality. On Wednesday, Sir Starmer attempted to explain why he thinks that cutting benefits, or making them hard to access, is a moral issue. As he put it:

“I think one in eight young people not in employment, training or education, that’s a million young people, I think that’s a moral issue. Because all the evidence suggests that someone in that situation, at that stage of their life, is going to find it incredibly difficult ever to get out of that level of dependency.”

Taken in isolation, it’s a reasonable argument. It is indeed a moral issue that, as a society, we are letting down young people to such an extent. The problem isn’t so much with what he had to say about that, but with the response he proposes to deal with it, which is to ensure that those people are never allowed to get into a dependency on benefits because he's making those benefits inaccessible. Addressing the problem might well be driven by a sense of morality; leaving people with lower incomes is definitely not a moral response. What they are doing is pretending that a solution based on withholding access to funds is the answer to an entirely different problem. It’s based on assumptions (not always clearly stated) that: (a) the only validation of worth in society is through paid employment or preparation for paid employment, (b) that anyone not in work has deliberately chosen to put himself or herself into that position, and (c) that keeping people in poverty somehow magically changes their situation and enables them to find employment.

As an exposition of the underlying ideology of rampant twenty-first century capitalism, it’s hard to fault. As an exposition of traditional Labour values, not so much. Young people are facing real challenges, and the UK is wasting a lot of talent and ability, and that is indeed a moral issue – those statements are unarguable. The leap, though, from accepting that to implementing reductions in income for some or all of the people in that group is not only not a moral position, it’s a complete non-sequitur. The paucity of government thinking on the underlying causes and how to address them ought to be shocking, but sadly is not. Like the Tories that they’ve replaced in the corridors of Whitehall, Labour ministers seem to be incapable of looking beyond the pounds and pennies to the real people they are supposed to be representing.

We really don't need medieval ritual

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“Of all the issues, in all the parliaments, in all the world, they chose this one.”  It’s not exactly Bogie-level rhetoric, but then neither does it reach the elevated level one might expect in a gin-bar. It is though, an issue which some Members of the Senedd, particularly the Tories, are attempting to turn into some sort of scandal. I’m referring, of course, to the swearing (or, rather, non-swearing) of oaths by those giving evidence to the Senedd’s Covid Committee.

Whether swearing an oath makes any difference to the truthfulness and honesty of a witness is, to be kind, an open question. Maybe in some rather more god-fearing past the fear of divine retribution made people more fearful of lying, although if someone’s life depended on not telling the truth it’s hard to believe that a mere oath would make a difference. Besides, we live in a more secular society these days, and fear of divine retribution is greatly reduced. In any event, people increasingly choose to affirm rather than swear on a holy book anyway, and the potential spiritual consequences of breaking an affirmation are undefined. (As an interesting aside, affirmation wasn’t originally introduced to accommodate atheists as many believe, but to accommodate Quakers who devoutly followed the biblical teaching of Jesus in the sermon on the mount in which he told his followers never to swear any oaths on the basis that they were duty bound to be honest anyway.)

Giving Members of the Senedd, even the Tory leader, the benefit of the doubt, I’m not convinced that they really believe that taking an oath before giving evidence will add much to the probability of truthfulness. I assume that they (yes, even Millar) have a bit more intelligence than that. I suspect it’s rather more to do with status, or perceived status. ‘Proper’ inquiries require an oath, so anything which doesn’t require one is perceived as having a lower status. But where does that ‘properness’ requirement come from, if not the arcane processes of Westminster? Wales really doesn’t need to emulate the antiquated customs of the English system: the purpose of having a parliament of our own is to forge our own future based on our own values and judgements. Getting hung up on obscure, obsolete and irrelevant medieval rituals doesn’t exactly help that.

Politically defined insanity

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When you ‘know’ that one political ideology, or one system of government, or even just one political leader is so perfect as to be beyond any rational criticism, it’s easy to see that any opposition must be based on some sort of insanity. That was close to being the official doctrine of the former Soviet Union, in which the science of psychiatry was misused to institutionalise anyone mad enough to dissent. On the other hand, maybe the Soviet authorities had a point – it isn’t wholly unreasonable to regard anyone dissenting from the government line in a society where justice is both arbitrary and violent as possibly being a little mad.

There was news yesterday that Republican law-makers in Minnesota have introduced a new bill proposing that ‘Trump Derangement Syndrome’ be officially classified as a mental illness. The reports don’t tell us what treatment is proposed for this new illness, but it’s doubtful that they have any intention of extending the already limited US healthcare system to include medication for a disease which may afflict up to half the population. The prisons probably don’t have enough spaces either.

It couldn’t happen here of course. In the UK, government politicians are more interested in abolishing categories of mental illness than inventing new ones. It does remind us, though, that politicians deciding what is or isn’t a mental illness is a very poor approach to a serious issue.

What about the responsibility of the individuals?

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In the latest example of deliberate lawlessness, it seems that the Trump administration has wilfully ignored a judge’s order to turn back flights carrying deportees to El Salvador, even to the extent that another flight took off after the judge had issued his ruling. The legal arguments about written vs verbal orders and the limits of judicial competence, to say nothing of the use of wartime powers in peacetime, will continue to play out in the US courts. Those of us without legal expertise are not well-placed to forecast the eventual outcome, although Trump’s record of losing court cases is impressive. The actions of his administration are unusual, in that the normal response to a court ruling in any country where the rule of law is held to be important is to obey the ruling whilst appealing it, rather than make up excuses to ignore it.

In an unrelated incident last week, Musk posted an ill-conceived tweet in which he argued that Hitler, Stalin and Mao killed no-one – the killings were all carried out by public servants. It appears to have been some sort of attempt to justify mass sackings of civil servants, although ‘insensitive’ is a wholly inadequate word to describe that. Technically, however, Musk was correct – the physical killings were carried out by those given the orders rather than by those issuing the orders. The Nuremberg trials fairly comprehensively demolished the argument that ‘only following orders’ was an acceptable excuse, and found that those executing the orders also bore individual responsibility for their actions.

That brings me back to those deportation flights. The orders may have come from the White House, but the actual deportations were carried out by individual public officials and law enforcement officers. Maybe the pilots and airport staff who facilitated the flights also bear some responsibility. They are, of course, effectively immune from prosecution whilst His Orangeness reigns in the White House, but such immunity may not live for long after that. Perhaps they assume – as Trump increasingly seems to be doing – that the regime will never come to an end: cancelling elections starts to look like a mere misdemeanour rather than a felony after his actions so far. But I do wonder how much thought they’ve given to the potential consequences of their own actions should democracy and the rule of law ever be restored in the US. But then, I suppose that another lesson from Nuremberg was about how easy it is for ordinary people to get caught up in a belief that what they are doing is normal. And with Labour's continuing assault on the most vulnerable in society, it might not only be the US forgetting that particular lesson.

Some things are best left to doctors

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It is inarguable that the number of people with a mental health diagnosis has increased. It doesn’t follow from that, however, that Wes Streeting is right to claim that there is ‘over-diagnosis’. There are a number of reasons for the increase in the number of people with a diagnosis, including a reduction in stigma for those seeking help as well as a better medical understanding of some conditions. It doesn’t matter whether a health problem is down to physical issues or mental issues (and there's an argument that many mental health issues have underlying physical causes anyway): as a general rule, identifying more sufferers and providing them with the right treatment and support is surely a good thing rather than a bad one. That some people will be misdiagnosed or wrongly diagnosed is inevitable. It happens with all sorts of illnesses, always has and always will. When cases are numbered in the millions, achieving 100% accuracy is an impossible target.

That doesn’t seem to be the understanding of the English Health Secretary, though. He seems to have in mind that there is a ‘right’ number of diagnoses, and that that number is lower than the actual number currently being recorded. His basis for making that assumption is unclear. Maybe he can explain it clearly and succinctly, but he hasn’t done so thus far. It’s hard to avoid the conclusion that his main driver for making the assertion has more to do with the costs than health – both the direct costs of treatment and the indirect costs of lost productivity from people who aren’t working. It isn’t just him: there seems to be an underlying attitude amongst Sir Starmer and his ministers that many of those who are not working due to poor health are lazy lead-swingers who need to be forced into work regardless of the consequences for their health. I doubt that anyone would argue that there are no people at all in that latter category, but there is no evidence of which I’m aware that the problem is anything like as widespread as the government seem to be assuming. By concentrating his attention on mental health issues, Streeting is in danger of reviving the stigma which has taken decades of work to reduce.

He is, of course, only responsible for the English NHS, and his approach doesn’t necessarily have to be replicated here in Wales, although if Labour MPs are dragooned into going along with him, neither is it certain that the approach will not be more widely applied. But any cuts to benefits or to mental health services implemented on the back of dodgy assumptions certainly will affect people here. His wish to eliminate duplication and waste in the NHS is understandable, but saving money by having sweeping diagnoses made by bean counters and politicians rather than by doctors is surely a step too far.

Avoiding accidents

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During the cold war there were rather more ‘near misses’ than most of us knew about at the time. Whether it’s a good thing or a bad thing that we didn’t know about some of them is debateable. I tend to the view that it might have hardened opinion against nuclear weapons, but others will take a different view.

The one incident which does stick in the memory – at least for those of us old enough to have been around at the time – was the Cuban missile crisis in 1962. The ostensible cause was the deployment of Soviet missiles in Cuba, although apologists for ‘the west’ often choose to overlook the fact that that deployment was itself, at least in part, a response to US deployment of nuclear weapons in Italy and Türkiye. The roots of such events are always more complex than is obvious, and invariably oversimplified to meet the propaganda needs of one party or the other, but establishing the accurate detail is not relevant to the point here. The point is that both sides sought to deploy their armaments within close proximity of ‘the enemy’.

For a state which wishes to be able to launch a nuclear attack on another state with the minimum of warning, thereby restricting the ability of the other side to respond, locating weapons close to the borders offers obvious advantages. But the party thus threatened then finds itself with less time to think about a possible threat, and reduced thinking time increases the possibility of a mistaken reaction to, say, a flock of birds, to pick just one of the near misses of the past. Whilst the appeal to the military mind (which tends to assume that war is inevitable anyway) might be obvious, from the point of view of those who’d rather like human life to continue for a while longer, siting nuclear weapons as close as possible to their potential targets is a really bad idea.

Yet that is exactly what the Polish president has proposed this week. It’s easy to get into a ‘who started it argument’, given that Russia has already moved nuclear weapons into Belarus, but that doesn’t make responding in kind a rational choice. Ratcheting the spiral ever upwards is a dangerous choice when what is needed is a mutual de-escalation. NATO states choose to believe that Russia is just waiting for an opportunity to send its armies rampaging across the whole of Europe to impose its will on us. For reasons discussed previously, it’s an unlikely and wholly impractical scenario. On the other hand, Russia fears that NATO wants to obliterate and subdue it. For similar reasons, it’s also an impractical scenario. But paranoia feeds on itself, with every move analysed from the point of view of those pre-existing prejudices and suspicions.

Rebuilding trust and assurance once it’s been lost is no easy task, and the folly of Russia’s invasion of Ukraine has made it even harder. But every journey has to start with the first step, and if the best time to start was a decade or two ago, the second best time is always going to be ‘now’. Ramping up the perceived threat level by deploying US nuclear weapons closer to Russia’s borders will add to the problem rather than forming a basis for a solution - and increase the possibility of an accidental attack by one side or the other. It's not a view which Sir Sabre-rattler Starmer seems able or willing to understand.

Tabloid headlines are no basis for policy-making

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In their attempts to justify their planned reductions in the bill for welfare payments, Sir Starmer and his government have increasingly taken to describing their demand that anyone who can work should work as some sort of moral crusade. The underlying argument, albeit not always expressed in clear terms, seems to be that there is some sort of contract between the state and its citizens, as part of which the state agrees to protect vulnerable citizens whilst citizens agree to contribute by getting themselves gainfully employed. There’s a lot to unpick there.

It treats the state and its citizens as two different parties to said contract. Yet, in theory at least, the state is claimed to be nothing more than the way in which citizens act collectively. But if the state and the citizens are really one and the same, it’s an odd sort of contract. In the way that Labour increasingly talk about the relationship between citizens (or workers, to use their preferred term, which treats anyone not making an economic contribution as a second-class citizen) and the state, it seems as though they are closer to the Marxist understanding of the bourgeois state as an arm of the bourgeoisie to which others sell their labour – with Labour placing itself firmly on the bourgeoisie side of that equation. Let’s give them the benefit of the doubt, though, and assume that it’s just clumsy wording on their behalf, and that what they really mean is that membership of society confers both rights for its members and responsibilities to other members, and that the state is the way in which that relationship is managed and maintained.

I suspect that most of us (even if not all of us) would agree that we want to live in a society which provides a decent living for people who are young, or old, or sick, or disabled as well as those who work. By and large, we’d extend that protection to people who are temporarily out of work. Labour’s target seems to be twofold: firstly, people who can work but choose not to, and secondly tightening the definition of those who can’t work, particularly as it relates to the sick and disabled. Both are problematic. Whilst there is no doubt that there are some people who see a life on benefits as a valid life-style choice, the number is actually not as large as some tabloid headlines would suggest, and neither is the lifestyle as generous or luxurious as said tabloids would have us believe. Similarly, whilst there is no doubt that some of those who are sick or disabled could do some sort of work, the approach to assessing fitness for work – which has been largely outsourced to private providers, frequently with no medical qualifications or experience, who have performance targets to reduce the numbers – has often been heartless and cruel, to say nothing of unfair and stressful. And the sort of work which the individuals theoretically could do isn’t always available anyway. More generally, even if the number of people unemployed matches the number of vacancies, it doesn’t follow that they’re in the right places or that there’s a skills match. A carpenter in Ceredigion can’t simply become a brain surgeon in Banff.

Accepting all those caveats and exceptions, there are undoubtedly a number of people who could be gainfully employed but aren’t, even if the numbers (and therefore the potential resulting financial savings) of those who could actually be matched with suitable vacancies are very much lower that the government likes to claim. Arguably, there is a group of people who are not meeting their side of the contract with their fellow citizens. The issue of what should be done is, however, a great deal more complicated than the simple mathematics used to calculate benefits savings might suggest. Cutting the level of benefits payments is a blunt instrument, even if it could be precisely targeted (perhaps in the age of Sir Starmer, we should say ‘laser-focussed’ which seems to be his in-word) only at that small number of people, because it doesn’t only affect individuals, it also hits their families. Reducing their income can have other consequences such as homelessness which lead to other costs and problems. Even if – and it’s a very, very big if – we, as a society, want to make that group of people suffer, to starve them into accepting whatever work might be available even if not suitable, do we really want to push their children into poverty and homelessness? That’s not a consequence which sits well alongside other alleged government priorities.

At the heart of the issue is a really simple question: how does a society enforce the obligations of membership as well as protecting the rights? The question is simple enough, but the same cannot be said about the answer. Just about the only certainty is that sanctions for non-compliance aren’t the right answer when it comes to benefits, although they seem to be the only ones that Sir Starmer and his crew are considering. A political agenda driven by tabloid headlines and prejudices causes more problems than it solves.

Following the money

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Trump’s attitude to the stock markets varies. When the US stock markets are riding high, Trump is quick to claim it as a vindication of his brilliant economic policies. When they take a dive (as they have done a few times recently, usually in response to wildly fluctuating tariff policies), he claims that he doesn’t pay any attention to what the markets are doing. If his chosen indicator doesn’t show the result he wants, then (like Groucho Marx with principles) he has others.

Whether a stock market movement in a particular direction is a good thing or a bad thing depends on one’s perspective, but it really isn't a very good measure of economic success. For those whose wealth is measured largely in terms of the value of shareholdings – such as, to pick names almost entirely at random, Elon Musk or Donald Trump – a fall in share prices can suddenly make you look a lot poorer, whilst a rise can make you look a lot richer. So: from that perspective, rising share prices good, falling share prices bad. On the other hand, for a wealthy person who wants to acquire more wealth, falling share prices creates good opportunities to buy up assets cheaply, especially if you know, or have reason to believe, that any fall (such as that induced by an on-off tariff policy sending prices yo-yoing) will be followed by a rise. And that’s true, even if there is no insider trading happening.

It underlines one of the issues with a casino-style stock market. Traditional economic theory suggests that the stock market is a means of matching available capital with investment opportunities, but it’s long since become divorced from that (which is why the government’s floated suggestions of replacing cash ISAs with stocks and shares ISAs do not achieve the aim of getting people to invest in businesses). In a casino stock market, share prices no longer bear any clear relationship to the value of the underlying assets. For some investors, there is at least a partial relationship with expected future profit flows in the form of dividends, but day to day share prices depend mostly on expectations of the way those prices will move, with the gamblers and speculators more interested in making money from large and frequent trades on small marginal changes in share price than in the future prospects or dividends of the company whose shares are being traded.

The result is that there are a small number of people making a great deal of money out of Trump’s capriciousness. By what I’m sure is nothing more than complete coincidence, many of them will be among Trump’s donors and supporters. Who’d have thought it?