In richer economies, industry’s share (itself composed of manufacturing, construction and resource extraction) is much smaller — approximately 20% in America, Britain and France. In Germany, though, it’s significantly bigger at around 30%. This is unusual for a major western economy — especially one without a vast hinterland full of natural resources (like Canada or Australia).

When you consider that Germany’s export-led economy also lacks the ‘advantage’ of low labour costs, you have to wonder how they do it. The country’s high tech, high skill, high wage manufacturing sector is a wonder of the global economy, the engine room of Europe and a force for stability in German politics. Which is why its sudden downturn has caused widespread concern. Is this a sign of impending recession – not just in the Bundesrepublik, but across the EU and beyond?’

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Are we due another recession?

By Peter Franklin

Writing for Bloomberg, Chris Bryant argues that in some ways it might be worse than that:

“So far the problems aren’t nearly as acute as in 2009; industrial production fell by a comparatively modest 4.2% in July. The worry, though, is that demand is being sapped by a mix of both cyclical and longer-lasting structural factors…”

What structural factors?

The biggest one is technological. The future of the automotive industry is electric, whereas the dominance of the all-important German car industry is based on its mastery of the internal combustion engine. The great shift to electric vehicles is the most disruptive change to the industry since the advent of the production line.

Vorsprung durch Technik? Absolutely, but if you change the Technik you restart the race — and that gives manufacturers in other countries a chance to steal a march. It doesn’t help that it’s not long since German industry took a huge bet on diesel engine technology. Thanks to Germany’s clout in the EU, plus blatant falsification of emissions tests, most of Europe was drawn down the diesel route. It was a disaster for air quality and thus human health, but it’s also proving to be a slow-burn commercial catastrophe. Political and consumer opinion has turned against diesel, which now looks like a dinosaur technology, its extinction in sight.

The fatal miscalculation is compounded by the fact that battery electric vehicle technology is progressing rapidly, with governments setting deadlines for a complete transition to low carbon transport. Indeed pressure is building to bring the deadlines forward.

Of course, it wouldn’t be the first time that industries have failed to predict disruption. Think IBM and the personal computer and Kodak and digital photography. However, in those cases there were other companies in the same industries and countries ready to ride the wave of change, plus a ruthlessly competitive business culture that allowed the new to replace the old.

German industry is different. Its strength lies in tightly interwoven supply chains and close collaborative relationships between business, finance and government. That can work very well in normal circumstances, but not in times of disruption when what is required is speed and agility. Some companies will adapt, a lot will be left behind – especially those that have evolved to fulfil specialised roles in long-established supply chains. Chris Bryant, again:

“…the German carmakers BMW AG and Daimler AG have issued profit warnings as tighter emission rules oblige them to keep spending heavily. Their suppliers are the ones really hurting though. At least three — Eisenmann, Weber Automotive and a subsidiary of Avir Guss — have filed for insolvency in recent weeks and investors are betting the pain will spread more widely…

“The company that best illustrates this slow-burn crisis is Continental AG. Last week the tire and car parts titan announced a massive restructuring, which it said would affect 20,000 jobs over the next decade, or some 8% of the workforce. Explaining its decision, the manufacturer warned of an ‘emerging crisis in the automotive industry’.”

Even if the German car industry fully adapts to the electric engine, things will never be the same. The fact is that the new technology is a fundamentally different beast — not only in terms of its energy source, but also its simplicity. As Bryant reminds us, “electric vehicle drivetrains have far fewer parts and the process is less labor intensive.”

In any case, I strongly suspect that we’ll see a long-term decline in demand for cars of whatever description. Electric and self-driving vehicle technology will revolutionise public transport and green-minded urban electorates are turning against the tyranny of automobile.

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Who'll have the guts to ban cars from our cities?

By Peter Franklin

More generally, an economy that’s fuelled on local supplies of polluting brown coal and Russian natural gas looks poorly prepared for the environmental and security challenges that lie ahead. And as for Germany’s once lauded Energiewende, that’s become a lesson in how not to transition to more sustainable energy sources.

There are non-technological challenges too. Let’s not forget that a great deal of Germany’s competitiveness is an artificial effect of the Eurozone — which pushes down the exchange rate at which German exporters trade, while artificially pushing it up for potentially low cost competitors elsewhere in Europe. Meanwhile the Single Market and Customs Union provide a protective shield against competition from outside the EU. However, the stability of this mercantilist super structure cannot be taken for granted. Brexit is the first crack in the foundations and others are accidents waiting to happen.

The UK’s departure will also reduce the contributions to infrastructure spending in southern and eastern Europe — i.e. Germany’s captive export markets (which also provide a source of cheap labour for German-owned local industries). Meanwhile, the Americans are calling for Germany and its neighbours make a much bigger contribution to their military defence. It’s a reasonable demand that can’t be resisted forever, but the end of sponging off America would mean higher taxes on German producers and consumers.

The most immediate threat, of course, is recession. With comparatively low levels of government debt, the obvious thing for the Germans to do is turn on the spending taps. The problem with that, however, is the Eurozone. If Germany starts splashing the cash, then other Eurozone members will demand the same freedom, starting with Italy. However, many of these countries have much higher levels of public debt, which through the common monetary policy of the single currency exposes Germany to unacceptable risks.

Brexity Britons may be tempted to enjoy that fine German export — a spot of schadenfreude. But we really ought not to. For a start we’re not out of the EU yet — and even if we do escape soon, there’s no escaping Germany’s influence on the global economy and the international order. Remember that our neighbour’s low unemployment and political stability depends on the continued success of its very special, but far from invulnerable, economic model.

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The far-Right's appeal to resentful Germans

By James Bloodworth

That still leaves a big question: which humans? Because, just like any world-changing technology, ownership and control of AI is not evenly distributed.

For at least 200 years, westerners have rather smugly assumed that we’ll be the ones calling the shots. Indeed, any instance of another culture gaining a technological edge has always been seen as a crisis — think of the Soviets and spaceflight in the 1950s, the Arab world and the oil industry in the 1970s, or the Japanese and consumer electronics in the 1980s. In every case, the West (well, the Americans) responded with a major effort to regain the initiative.

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In the race to become the AI superpower, Europe is losing to China and America

By Peter Franklin

Today, it’s China that presents the most formidable challenge — not least in the field of artificial intelligence. Last year, I wrote about the Chinese government’s impressive AI strategy, which will give America a run for its money and which leaves European efforts in the dust.

Last month, I unpacked a report by Karen Hao about China’s widespread use of advanced educational software in the classroom — i.e. the use of artificial intelligence to boost human intelligence. If you’re at all interested in the future of education — and the radical changes that Al could bring about — then I’d urge you to read Hao’s report for MIT Technology Review.

And yet, in a blog post on the same site, Hao highlights a major impediment to the Chinese quest for global AI supremacy: a brain drain. Drawing on research from the MacroPolo think tank, she notes that efforts to expand its AI expertise are succeeding, up to a point:

“The report analyzed the authorship of papers accepted to NeurIPS, one of the most prestigious international AI conferences, and found a nearly tenfold increase in the number of authors who did their undergraduate studies in China over the last decade. Whereas there were only around 100 Chinese researchers in 2009, accounting for 14% of the total number of authors, there were nearly 1,000 in 2018, accounting for a quarter.”

Taking their cue from the government’s strategy, Chinese universities are training up the AI specialists on which future progress depends. But here’s the kicker:

“Roughly three-quarters of the Chinese authors in the study currently work outside China, and 85% of those work in the US—either at tech giants like Google and IBM or universities like UCLA and the University of Illinois Urbana-Champaign.”

Now, it may be that China has a whole load of other super-geeks working on AI projects whose results aren’t being shared through international conferences and open publications. Nevertheless, it’s easy to see why the big US universities and tech companies might be in a position to recruit China’s top talent — they can pay top dollar for it. Indeed, Hao notes that part of China’s AI strategy is to lure “top scientists back home with competitive compensation packages”.

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Why the Matrix needs humans

By Peter Franklin

But it’s not just about the money. The West can offer other inducements that China can’t. For a start there’s the sweet air of freedom — and, for that matter, the sweet air of a comparatively unpolluted living environment.

Back in March, in a widely syndicated AFP article, Catherine Lai and Ruchika Chitravanshi wrote about the impact that air quality is having on recruitment and retention in Asian cities:

“According to the United Nations Environment Programme, some 92 percent of people in the Asia-Pacific region are exposed to levels of air pollution that pose a significant risk to health.

“This means that on top of large salaries, businesses are having to offer extra incentives.

“These include paying for smog breaks every few months, or allowing non-traditional working arrangements so people can commute from less polluted areas, says Lee Quane, Asia director for consultancy ECA International.

“At ‘a location with a higher level of pollution, you’re likely to see us recommend allowances of anywhere between 10 to 20 percent of the person’s base salary,’ he says.”

If ‘pollution premiums’ and ‘environmental hardship allowances’ are necessary to persuade Westerners to work in China, then it seems reasonable to assume that our (relatively) breathable air is helping to recruit Chinese talent to the West.

According to Wolfgang Georg Arlt in Forbes magazine, smog-avoidance has become a major factor in Chinese domestic and international tourism:

“Based on booking statistics, [China’s largest online travel site Ctrip] reckons that December 2016 saw more than 150,000 Chinese travel abroad specifically to escape air pollution, proving that the search for fresh air has become a major push factor in China’s outbound tourism.”

But as well as paying to travel to the breathable West, Chinese workers increasingly have the option of being paid to live there.

Strict environmental regulations are sometimes condemned as a threat to our economic competitiveness. But in a globalised knowledge economy, in which those with the most valuable knowledge and experience can choose to live anywhere they like, compromising on quality of life may prove to be a massive own goal.

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Boris should make Britain beautiful again

By Peter Franklin

There’s a lesson here for Brexit Britain. Breaking free from EU control should not be seen as an opportunity to join a race to the bottom. There are those who’d love to take an axe to our environmental and animal welfare regulations, not to mention workers’ rights. They must be resisted, and not only on moral grounds.

Instead, we should make the most of our natural, historical and cultural riches and establish this country as one of the very best places to live on Earth – the cleanest, greenest and safest of all the major economies.

Interest rates used to be big news – capable of grabbing headlines with every move up or down. But now that they’re on the floor, no one wants to know – the news just steps over them, looking for where the action is.

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The global economy has gone mad

By Peter Franklin

Interest rates aren’t dead, of course, only sleeping. Indeed, economic policy has become a dream world, filled with financial phantasmagoria like quantitative easing and inverted yield curves. And there’s fevered talk of even stranger stuff – like Modern Monetary Theory, People’s QE and ‘helicopter money’.

And yet the weirder it gets, the more disconnected it becomes from mainstream politics – and thus democratic accountability. In the past, when interest rates (as in central bank base rates) were significantly higher than zero and liable to substantial cuts and hikes (sometimes by entire percentage points!), voters paid attention because each change had a direct and understandable impact on things that people cared about – like whether they could make that month’s mortgage payment.

These days, however, esoteric policy instruments like QE lack relatability and thus don’t get the attention they deserve.

Ultra-low interest rates have all sorts of nasty side effects that impact upon us all. Previously on UnHerd, I took a look at what they do to the corporate sector (they make big businesses bigger and lazier), but today I want to focus on the banking sector and a great Bloomberg article on the subject by Satyajit Das.

The point of cutting interest rates is to encourage borrowing, consumption and investment and thus pep up the economy. And yet, since 2008, we’ve gone through an entire cycle of crash, recession and recovery without interest rates ever really getting off the floor. In fact, they’re so consistently low that at times of slowing economic growth governments can get away with selling negative yield bonds on which the buyer is guaranteed to make a loss (a seemingly crazy form of investment that I try to explain here).

And yet ultra-low interest rates as set by central banks don’t necessarily translate to a borrowing boom:

“As interest rate margins contract and profits are squeezed, banks raise fees or turn to other revenue measures to boost earnings. This keeps actual borrowing costs relatively high, undercutting the whole point of a negative rate policy.

“As the economy continues to sputter, desperate policymakers slash rates more and more deeply. Government bond yields grow increasingly negative and the yield curve flattens. Banks, which hold substantial amounts of government debt, see their profits decline even further.”

Banking is a low margin, high risk business at the best of times – so when those margins are squeezed even tighter (thanks to very low interest rates), lending policy becomes super-cautious, which, as Das points out, “perversely reduces the amount of credit available”.

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Why low interest rates poison the economy

By Peter Franklin

Part of this pathological caution is refusing to pull the plug on failing businesses:

“Negative rates distort incentives. Facing declining profits, banks grow reluctant to foreclose on distressed borrowers. They extend lifelines to zombie companies, which can service their debt when interest rates are so low even if they have no prospects of repaying the principal.”

This might seem like a mercy, but it really isn’t. For fear of recording a loss, the banks leave capital tied up in moribund, low productivity firms when it could be invested in dynamic enterprises that fuel innovation, productivity, job creation and higher wages.

Another argument for ultra-low interest rates is that they persuade savers to spend more of their savings. But this doesn’t necessarily follow either. Das reminds us that because regulators require banks to hold a minimum level of savers’ deposits, the interest rates on savings accounts have to stay high enough to keep savers saving. In any case, the sullen weirdness of the economy doesn’t exactly encourage savers to splash their cash.

Ultra-low interest rate policy, suffers the same psychological drawback as expansionary fiscal policy (i.e. government spending like a drunken sailor in port). People aren’t fools and know that the central bankers and politicians wouldn’t be resorting to such measures if they weren’t desperate – and that they wouldn’t be desperate if the underlying situation wasn’t dire. Spooked by their leaders’ rictus smiles and sweating brows, consumers and investors go to ground instead of rekindling their animal spirits.

Is there anything that can be done? Well, it’s not all the fault of the banks – because they’re not the only source of investment capital. A lot of businesses (and wealthy private individuals) don’t need to borrow, they’re already sitting on massive cash-piles – but aren’t investing the money, not even in themselves.

This points to the real problem – a chronic lack of investment opportunities. For all the talk of technological revolution, especially robotics and artificial intelligence, it seems to be making remarkably little difference to the economy.

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Sod the singularity

By Peter Franklin

It’s a point well-made in another Bloomberg article by Noah Smith:

“…if robots were taking over, there would be plenty of additional evidence in the economic data. Businesses would be investing more, in order to build and install the robots. College-educated workers (who build and run the robots) would see a growing wage premium. And most importantly, labor productivity would be accelerating, as the amount of human labor shrank and machines assumed more tasks. Yet none of that is happening.”

The ultimate proof is interest rates. If the technological potential for productivity improvements existed in more than a few specialist sectors, then there’d be much more demand for investment capital – and thus much higher interest rates.

In short, persistently low interest rates are nothing to celebrate; there’s no clearer sign of long-term economic stagnation.

Yes, if they help us explore what might have happened in slightly different circumstances; no, if they’re merely what the author wishes had happened.

There’s a ripe example of the latter in The Economist — where the Bagehot column takes the form of an imagined extract from the memoirs that David Cameron “might have written had he won the Brexit referendum”.

I’m not sure whether ‘Bagehot’ is describing his own wishes, or channelling what he imagines Cameron’s might be – but either way the fantastical nature of the scenario is revealing. Its premise is that if the referendum had gone the other way, we would have seen “the death of Euroscepticism”:

“The fever of Euroscepticism eventually broke and Britain entered its current age of Euro-contentment. Nigel Farage moved to America for a gig with Fox News and a slot on the speaking circuit. I’m told that he has built quite a place in southern Florida — a mock-Tudor mansion complete with red telephone boxes and a working pub serving real ale, pie and mash. With his guiding hand removed, the UK Independence Party was captured by people who were so nauseating and ill-disciplined that membership collapsed.”

Like a lot of ‘alt-history’, this ignores the lessons of actual history. Take the result of the Scottish independence referendum – a clear defeat for the ‘Yes’ side, but did the “fever” of Scottish Nationalism break? Did the SNP collapse? No, they were greatly strengthened as a result — the beneficiaries of a nationalism that is defiant, not defeated.

A similar example is the shock defeat of Hillary Clinton in 2016, which helped to energise and radicalise the Democrats. Then there’s the actual result of the Brexit referendum, which created a mass Remain movement, capable of getting hundreds of thousands of people on the streets — and re-animating the Liberal Democrats. Meanwhile, the evident willingness of the Remain Parliament to block Brexit has prompted a rebellion among Leave voters. Nigel Farage was able to bypass his dysfunctional old party, start a new one and take it to first place in the Euro elections. His comeback sealed Theresa May’s fate and propelled Boris Johnson into Downing Street.

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How the Lib Dems could seize power

By James Kirkup

Therefore the notion that a Leave defeat in 2016 would have prompted British euroscepticism to obediently curl-up-and-die is fanciful.

Bagehot (in the voice of David Cameron, remember) does try to make his scenario plausible:

“Millions of good people had voted to leave, not because they were fed up with Europe but because they were fed up with Britain. I tackled the Tory problem by forgiving the most talented Leavers, such as Boris Johnson and Michael Gove, while simultaneously marginalising the irreconcilables… I dealt with the problem of the left-behind by announcing the end of austerity at the 2017 party conference and encouraging Boris, as business secretary, to make revitalising the North and the Midlands his priority — or, as he put it, a matter of ‘do or die’.”

But, again, this doesn’t stand up.

For a start, an alternative history in which Remain prevailed is most plausibly one in which the likes of Johnson and Gove did not join the Leave campaign. Therefore, there are no such figures to magnanimously bring back into the fold, because they never wandered off in the first place.

Also, what makes Bagehot think that Cameron would have reached out to the North and Midlands with a latter-day Marshall Plan? The essay-crisis Prime Minister, having got away with his referendum gamble, would sink back into his habitual complacency. His Chancellor, George Osborne, though happy to devolve power to England’s cities, would have continued his strategy of targeting the local government and social security budgets for the harshest cuts. As for the “end of austerity”, any extra money to play with would have been deployed with the 2020 general election at the forefront of his calculations. For a Remain Tory government, that would have meant holding on to southern seats gained from the Lib Dems in 2015, holding off a Labour advance in London and supporting Ruth Davidson’s progress in Scotland.

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Why conservatism is failing

By Mary Harrington

Bear in mind that even when the Conservatives have every electoral reason to make a compelling offer to Leave-voting Labour heartlands (as in 2017), they can’t seem to manage it. So the idea that this would have happened in the wake of a Cameron-led Remain victory is unconvincing.

Bagehot goes on to suggest that Cameron would have gradually patiently bent the EU to his will — for instance caving in on freedom of movement. But, most likely, the compromises would have been in the other direction. EU leaders like Emmanuel Macron, Guy Verhofstadt and Ursula von der Leyen have continued to press for further expansions of the EU’s remit.

Though Cameron’s renegotiation deal prior to the referendum included an agreement to exempt the United Kingdom from the objective of “ever closer union” — those words, in the preamble to the Treaty of Rome, are of purely symbolic significance, therefore so was the exemption.

And yet with every new directive and regulation the UK would indeed find itself drawn closer into union with its neighbours — provoking bitter accusations that the renegotiation had been violated. The same would apply to every inevitable increase in the UK’s net contribution to the EU budget.

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What's David Cameron hiding?

By James Hanning

As for net immigration (from the EU), it’s reasonable to suppose that without Brexit it would be at a higher level — especially now with several Eurozone economies slowing down again. Cameron would have come under intense pressure to activate the renegotiation agreement’s ’emergency brake’ provisions — and would have faced the possibility of humiliation given the need for European Parliamentary approval. The same goes for the so-called Red Card provision — in theory a way of sending proposals back to the European Commission, but in practice requiring the support of 15 other EU member states.

Of course, it’s also reasonable to suppose that the UK economy would have grown faster over the past three years had Remain won. But that would have meant extra pressure on the UK to pay more into EU funds, employ more of Europe’s jobless and take in more external migrants. Even without the EU-ultras winning immediate victories on federalist measures such as a European Army or EU-wide taxation, Cameron would have had to make a never-ending series of smaller concessions — each one condemned by his enemies as a ‘betrayal’.

So, no, a Remain victory would not have ended the argument over Britain’s place in Europe. As is the case with independence for  Scotland, there’d have been calls for a second In/Out referendum by now — a ‘people’s vote’, if you will.

Whether dream or nightmare, it’s nonsense – not least because Singapore isn’t the laissez-faire haven it’s cracked up to be. Admittedly, it does possess some of the qualities that free marketeers hold dear – like comparatively low tax rates, but in other respects the Singaporean state is more interventionist than anything the UK is used to.

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Singapore shows there’s more than one way of doing capitalism

By Peter Franklin

A good example is the island’s housing policy. It’s the subject of a thought-provoking piece by John Bryson for CityMetric:

“Singapore had its own ‘Brexit’ in 1965 when it separated from Malaysia. In 1960 the Singapore Housing and Development Board (HDB) was formed to provide affordable and high-quality housing for residents of this tiny city-state nation. Today, more than 80 per cent of Singapore’s 5.4m residents live in housing provided by the development board.

“These are issued by the state on 99-year leaseholds, and the value of the home depends on the inherent utility value of the property (size, type, location)…”

So Singaporeans own their homes – or at least the leasehold on their homes – but the state retains ultimate control over most of the housing stock. It uses that control to stop the island’s limited living space from being cornered by private landlords and speculators:

” … the development board prohibits Singaporeans from owning more than two residential units at any time. In the case of an inherited flat, ownership is only allowed if the inheritor disposes of their existing private or public residential property within six months of inheriting it.”

Singapore’s system doesn’t really fit into the categories we’re familiar with in Britain – it’s certainly very different from our open market in freehold and leasehold property, but it’s also nothing like the rented social housing as provided by councils and housing associations. It both encourages home ownership (the state even provides leasehold buyers with financing options), but discourages the exploitation of property as a financial asset.

This may appear to be more restrictive than, say, a pro-ownership policy like the UK’s Right to Buy, but it’s worth remembering that 40% of Right to Buy homes are now owned by private landlords – contributing to a serious decline in home ownership, especially among younger people. The Thatcherite dream of a deregulated economy and a property-owning democracy has been undone by its internal contradictions.

But could Singapore’s approach – a response to the city-state’s naturally limited land supply and hence the need for super-dense development – work in the UK?

London is a city-state, of a sort. The land supply is limited not so much by the size of the country, but by the planning system and by market demand for proximity to the city centre. Unlike Singapore, however, our capital city is full of private landlords extracting value from the productive economy.

Nevertheless, the state is still a major landowner in London – and controls large tracts of housing that could be redeveloped, densified and made available to the public along Singaporean lines. We just need a British version of the Housing and Development Board to make it happen.

Perhaps, we could ask the original version if they’d like to open a London branch. We have a Canadian Bank of England Governor, so why not pay for the services of Singapore’s world-renowned public administrators? I’m sure the British civil service, who tend to be liberal pro-immigration types, wouldn’t mind.

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More community land trusts could transform the housing debate

By Peter Franklin

Certainly, we won’t tackle the housing crisis unless government beefs up its capacity to get stuck-in directly: buying-up land, getting stuff built and enabling ownership while blocking speculation. However, there’s another barrier to progress – politics.

Our leaders extol the virtues of home ownership, but still seem to think that rising property prices are a good thing too. In fact, it’s a form of inflation – and a glaringly obvious barrier to opportunity for anyone who isn’t yet a home owner. Yes, there’s a feel good factor if you’re already on the property ladder – but, beyond that, the benefit of rising prices is either purely notional (it won’t make your home any bigger) or, if you sell, comes at the expense of the buyer (who, by the way, will be you when you buy your next home).

It’s such a ridiculous mindset – and a political sensitive one. When I worked in Government, we could use language about making home ownership ‘affordable’, but not if it suggested an ambition to see property prices fall. That’s because, unlike in Singapore, we continue to regard our homes as money-spinning financial assets.

In America, Bernie Sanders – a self-described socialist and candidate for the Democratic nomination – unveiled his housing policy last week. A lot of it is pretty radical, featuring national rent controls and curbs on speculation. However, as Emily Badger notes in the New York Times, the Sanders campaign seems to be OK with the notion of housing as a financial asset as long as it is ordinary Americans who benefit:

“Mr. Sanders’s campaign… [argues] that rich investors or landlords shouldn’t get to make so much, while ordinary American families should have a chance to make something.

“’We want to return to the notion that homeownership can be an asset builder for working people and average American families, and it is not just a vehicle to commodify to make the rich richer,’ said Josh Orton, a senior adviser to the Sanders campaign and its national policy director.”

Are Sanders’ people suggesting that he wants to hold down property prices (with the rent controls etc ), but in other cases have them go up, so that non-wealthy homeowners can accumulate assets too? 

A less contradictory interpretation is that buying a home as an “asset builder” simply refers to the equity one builds up by paying off the mortgage. I hope that’s what Team Bernie means, because the alternative of profiting from property inflation is to the detriment of people who don’t yet own their homes and perhaps never will.

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Could Boris solve the housing crisis?

By Peter Franklin

In any case, it would be great if more politicians would stand up and state clearly that they don’t want our homes to appreciate in value. At the very least, they should aim for a future in which wages rise faster than property prices, not the other way round.

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Sink schools rob kids of their futures

By Julie Bindel

What would be madness in healthcare is standard practice in education – one teacher teaching the same thing to a classroom full of children.

There are obvious reasons for the difference in approach. Above all, there’s the factor of time: for pupils, going to school is a full-time occupation; for all but the sickest patients, seeing a doctor isn’t. In contrast to the occasional ten minute slots that doctors can devote to individual patients, there aren’t remotely enough teacher-hours available to individually tutor every child.

But how much of a difference would it make if there were? In 1984, the educational psychologist Benjamin Bloom decided to find out. Studies were conducted comparing the performance of pupils who received personal tuition using ‘mastery learning’ techniques (i.e. totally nailing each bit of the curriculum before moving on to the next thing) with a control group receiving standard whole-class teaching.

The difference that the tuition made was huge – amounting to two standard deviations i.e. enough to take a mediocre pupil to the top of the class or thereabouts. The mathematical symbol for a standard deviation (a measure of how much variation there is from the average of a group of values) is the Greek letter sigma – hence the name for the phenomenon that Bloom discovered: the ‘2 sigma problem’.

It’s a ‘problem’ because it suggests that most children have the potential to do much, much better than most schools enable them to do.

This makes a lot of sense to me. When I doing my maths O-level, I just couldn’t get the hang of quadratic equations. My classmates seemed to have grasped the principle, so it wasn’t the teacher’s fault – just mine. At the time, I simply assumed that anything more than basic algebra was beyond me. Years later I came across a teach-yourself-maths book. Sitting down with it for half-an-hour, I found that could solve quadratic equations after all. That was thanks to a clear explanation (which I obviously hadn’t paid attention to in class, and which was missing from our useless school textbooks).

Think of anyone alive in the world today. Apart from the rest of humanity, what’s between their ears is the most complex object in the known universe. It’s almost certainly capable of things it’s never been adequately taught to do. Now multiply that up by all the other millions – indeed billions – of under-cultivated minds. What might we achieve if unlocked that latent potential?

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The truth about the female brain

By Saloni Dattani

It’s all the more frustrating because, as Bloom demonstrated, we know how to do it – but can’t. Even if we could somehow find the money for a massive investment in one-on-one tuition, where would we find the tutors? There are ten million pupils in the UK – giving them just one day’s tuition a week would require two million tutors. Currently the UK has something like a half-a-million teachers – hence our dependence on whole class teaching.

But there is one way in which we could provide much wider access to personalised, responsive tuition – artificial intelligence. AI-powered teaching software promises something more than a mere electronic textbook. ‘Adaptive learning systems’ promise not only to monitor pupil progress – but to identify particular strengths and weaknesses and respond appropriately.

Karen Hao of MIT Technology Review has a must-read report on what AI educational software can already do:

“A student begins a course of study with a short diagnostic test to assess how well she understands key concepts. If she correctly answers an early question, the system will assume she knows related concepts and skip ahead. Within 10 questions, the system has a rough sketch of what she needs to work on, and uses it to build a curriculum…”

Major investments are being made in this rapidly advancing technology and one country in particular is taking a lead. Needless to say, it’s China:

“Experts agree AI will be important in 21st-century education—but how? While academics have puzzled over best practices, China hasn’t waited around. In the last few years, the country’s investment in AI-enabled teaching and learning has exploded. Tech giants, startups, and education incumbents have all jumped in. Tens of millions of students now use some form of AI to learn…”

One of the leading companies in the field is Squirrel AI – and it’s growing fast:

“In the five years since it was founded, the company has opened 2,000 learning centers in 200 cities and registered over a million students—equal to New York City’s entire public school system. It plans to expand to 2,000 more centers domestically within a year. To date, the company has also raised over $180 million in funding. At the end of last year, it gained unicorn status, surpassing $1 billion in valuation.”

It should be stressed this is not about replacing teachers with computers. Nor is about applying a technological gloss to failed theories of ‘child-centred learning’. Rather it’s about providing universal access to at least some of the benefits of personalised tuition that we can’t deliver any other way.

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The schools that Britain forgot

By Peter Franklin

No doubt, there could be some really bad ways of using AI in the classroom. But one way or another, we need to learn from what’s happening in China right now.

As in every other country, our future will depend on how successfully we use artificial intelligence to make the most of our human intelligence.

But there’s something odd about the perfectly choreographed, meticulously turned-out K-pop idols adorning bedroom wall posters across the planet – none of them are wearing glasses. Well not odd, because in showbiz image is everything – but, rather, at odds with the astonishingly high levels of shortsightedness among young Koreans.

Further reading

What's making Millennials so lonely?

By Peter Franklin

Back in 2015, Nature published an article on the phenomenon by Elie Dolgin – and, if you’ll forgive me, it’s a proper eye-opener. It seems that the world is in the grip of a myopia epidemic – with an especially high rate of incidence in East Asia:

“East Asia has been gripped by an unprecedented rise in myopia, also known as short-sightedness. Sixty years ago, 10–20% of the Chinese population was short-sighted. Today, up to 90% of teenagers and young adults are. In Seoul, a whopping 96.5% of 19-year-old men are short-sighted.”

It’s been getting worse elsewhere too:

“Other parts of the world have also seen a dramatic increase in the condition, which now affects around half of young adults in the United States and Europe — double the prevalence of half a century ago.”

What on Earth is going on? Variations between different populations might suggest a genetic component, but Dolgin, noting the astonishing rise in cases from one generation to the next, says that “genetic changes happen too slowly to explain this rapid change”.

We might be tempted to shrug our shoulders – after all, it’s a pretty minor condition, isn’t it? Well, not for everyone:

“In severe cases, the deformation [of the eyeball] stretches and thins the inner parts of the eye, which increases the risk of retinal detachment, cataracts, glaucoma and even blindness… about one-fifth of university-aged people in East Asia now have this extreme form of myopia, and half of them are expected to develop irreversible vision loss.”

A recent article in Optometry Times, by Raman P Sah, confirms the threat:

“Myopia is now one of the leading causes of vision impairment and blindness in the world… The increasing prevalence of myopia has emerged as a global health concern because of sight-threating pathologies like myopic macular degeneration, choroidal neovascularization, cataract, and glaucoma associated with high myopia.”

When a potentially serious medical condition that used to be rare (at least among young people) becomes increasingly common, we need to know what’s causing it.

Further reading

The hermit generation: The young aren’t rebelling against society, but hiding from it

By Peter Franklin

Can we blame reading for the epidemic – whether it’s printed material or, more latterly, electronic media? Is all that squinting over page and screen harming our eyesight? Dolgin argues that it isn’t – at least not directly.

Researchers believe that the real problem is not with the act of reading (or checking social media apps or playing computer games), but with where such activity normally takes place: indoors. Dolgin guides us through the compelling evidence that exposure to the brightness of daylight helps young eyes stay healthy.

Of course, humans have been spending time indoors ever since our ancestors built the first hut. But in recent times we’ve conspired to keep ourselves – and especially our children – cooped-up as never before.

Though we fret about the impact of modern life (and especially new technology) on our wellbeing, we’re rather selective in our concerns. We pay a lot of attention to some potential threats (e.g. smartphone addiction) and surprisingly little to others (see above).

Yes, it’s true that social media exposes young people to pressures and influences that previous generations did not experience, but what about all the other ways in which we’ve altered the physical and social environment in which children grow up? I’d say that any factor that prevents children getting enough sunshine is worth worrying about.

Back in the 1990s, I got chatting to a very nice bunch of Seventh Day Adventists. They were missionaries, of a kind – dedicated to a Biblically-based programme of health and well-being. They summed up their approach in the acronym NEW START, which stands for Nutrition, Exercise, Water, Sunshine, Temperance, fresh Air, Rest, and Trust in God.

Decades on, it strikes me that contemporary culture is now very keen on the NEW part of that formula (even if the ‘water’ bit is now called ‘hydration’). However, we’re not so good when in comes to the START. Obviously, Trust in God is a challenge to our sadly untrusting secular society, but we could make more of an effort on the STAR. Making sure children get the sleep they need, and stay away from the alcohol and other substances they definitely don’t need, is a matter of control (and teaching self-control), but to give them more sunshine and fresh air, we need to set them loose.

Further reading

Why cities are no place for kids

By Peter Franklin

It’s time to return to a free-range childhood with plenty of unstructured, unsupervised outdoor play. Of course, that requires reasonably clean and safe places for them to play in, but adults (including parents, teachers and the various regulators of the public realm) also need to get over their paranoid, risk-averse mind-set.

In over-protecting children and over-organising their lives, we may be doing them real physical harm.

If we really care about our kids, we should kick ’em out.

Suggested reading

Why high-rise farms could save the world

By Peter Franklin

Consider the following, from the BBC‘s Lucy Hooker, on the slaughter of pigs:

“Pigs are stunned using a 70% to 90% carbon dioxide concentrate. They are typically loaded in groups of about half a dozen onto something like a paternoster lift, which lowers them gradually into ever higher concentrations of the gas.

“Once the animals have been stunned, they must be bled within 15 seconds to avoid the risk of them regaining consciousness.”

Remember, that’s in a country (the UK) that does more than most to minimise the distress and suffering of livestock.

Yet, viewed in purely economic terms, one can make an argument that there’s no such thing as factory farming. However much we think we’ve industrialised the production of meat, it is fundamentally unlike the manufacture of most other products.

It’s a case argued by Liz Specht in an eye-opening article for Wired. She explains that the transformative economic power of the modern production line doesn’t just lie in the sheer quantity of goods turned out, but also in three other vital factors.

Firstly, there’s the speed of the manufacturing process from raw materials to finished product. Depending on the industry, a shop-ready item, or batch of items, can be made in hours, minutes or even seconds – allowing supply to match any fluctuation in demand. An animal, though, is different. For all our use of selective breeding, antibiotics and growth promoting hormones, there’s only so far we can go in rushing the rhythms of life:

“Even the fast-maturing chicken is subject to these relentless cycles. Today’s chickens reach slaughter weight about six weeks after hatching, but the lag also needs to account for time in the shell and the hens’ laying rate, meaning the broiler supply must be predicted 18 to 24 months in advance.”

The lead-in time for meat is so long that matching supply to future demand is a risky business.

Secondly, there’s the fact that, with meat, the unit of supply (individual animals) is not the same as the unit of demand (cuts of meat). From the producer point of view, those cuts also come bundled up with all sorts of low value by-products – offal, viscera, excrement etc – that have to be disposed of somehow. These factors make it even harder to match supply to demand – an issue grimly referred to within the industry as the “carcass balancing problem”.  Specht provides an illustration:

“The slaughter of a single cow produces only about 28 T-bone steaks, ten sirloins, and eight filet mignon. So the order of the 29th T-bone or ninth filet would drive the slaughter of an entire additional cow.”

The third inflexibility concerns product variation:

“Meat companies large and small typically specialize in one to three species (chicken, cows, and pigs). This lack of diversity is due in large part to the fact that the production and rendering process for each of these species is radically different. Everything from feed composition and barn layout to transport vehicle configuration, slaughterhouse equipment, and staffing is different for chickens, turkeys, cows, and pigs.”

There is of course the possibility of product variation within a particular species. However, switching between different rearing methods and feeding regimes is a lengthy process – and selectively breeding for a newly desired characteristic takes even longer. It’s not like tweaking the formula of a soft drink or changing the colour of the paint used on a car production line.

Suggested reading

Animals. Are they so different from us?

By Ian Birrell

Liz Specht goes on to argue that hi-tech alternatives to meat – i.e. plant-based meat substitutes and, somewhat further into the future, vat-grown meat produced from cultured animal cells – are not subject to these inflexibilities. As well as removing slaughter from the equation (plus various other animal welfare issues), the economics of production are fundamentally different. The new technology makes ‘meat’ a truly manufactured product – conferring advantages of efficiency and agility. Specifically, these will come from dramatically shorter lead-in times; the ability to supply products in exactly the quantities required; the minimisation of low value by-products; and the capacity to develop variations of flavour, texture and nutritional content.

Whether or not veganism continues to gain popularity doesn’t really matter. The alt-meat industry doesn’t require people to believe that meat is murder – cold hard economics is all it needs to kill the competition.

You can already see the supermarkets preparing for what’s to come. Over the last few years the range of substitute meat products has grown in quantity and quality. Expect this trend to continue to the point when real meat becomes the niche product (and probably quite an expensive one).

Is it credible that a global industry that rears and slaughters billions of animals every year could all but disappear? The answer is yes, because something very similar has happened before.

Horses were once integral to our way of life – long into the industrial era they were absolutely critical to our transportation systems and other economic activities. In fact, ‘peak horse’ for the western world was the early twentieth century. Both the countryside and the cities were full of them – indeed, they were designed around their use. The sound of modernity was one endless, reverberating clip-clop.

But then the internal combustion engine roared into our lives. Apart from a few specialised uses like mounted policing, horses disappeared from the cities – and in the countryside have survived mostly as pets (the less said about their culinary uses, the better). Draught horse breeds that once propelled the economy would be extinct were it not for the dedication of enthusiasts.

Suggested reading

New gene editing techniques could multiply the dangers of GMOs

By Peter Franklin

All this happened not out of a desire to free these noble animals from our exploitation, but because new technology and hard economics meant that it was simply too expensive and inconvenient to stick to the old ways. It’ll be the same with the species we currently rear and slaughter for their meat. Their numbers too will dwindle away. The land and buildings they currently occupy will be put to other uses.

Over the decades, we’ll forget they were ever there – and what we did to them.

Suggested reading

How the Right lost faith in capitalism

By Giles Fraser

If you doubt me, take a look at the bond market. A bond is a tradable slice of government (or corporate) debt. In normal circumstances, a bond ‘matures’ after a fixed period of time, when the holder gets paid what the piece of paper originally sold for, plus the ‘coupon’ (i.e. the interest on the loan). This determines the bond’s yield. And this is where the madness comes in.

Bonds with negative yields – i.e. that pay back less than the original purchase price when they mature – not only exist, they are becoming wildly popular. Here’s Stephen Letts of ABC with the jaw-dropping numbers:

“The weirdness in financial markets at the moment seems boundless.

“In the past two weeks the proliferation of negative-yielding bonds has erupted — 30 per cent of the global, tradeable bond universe is being sold with a guaranteed loss attached to the coupon. 

“That’s an eye-watering $US16.7 trillion dollars’ worth”

Governments are, in effect, charging lenders to lend them money.

This invites an obvious question: why would anyone agree to a deal like that? Wouldn’t they be better off just sitting on the money?

I’ll try to explain by analogy.

Have you ever had furniture stored in one of those out-of-town warehouses? If so, you’d expect to get your sofa and armchairs back in one piece, but you wouldn’t expect to get, say, an extra armchair by way of ‘interest’ on your ‘deposit’. In fact, you’d have to pay the storage company for the service of looking after your stuff.

That’s the logic behind a negative yield bond – it’s a payment to the issuer to look after your money. But, hang on, why can’t the money be lent out at interest – so that you earn a positive yield upon it?

Well, you could say the same about your surplus furniture. Instead of paying to have it stored, why not hire it out and make a profit?

The answer is that there’s no shortage of furniture; most people have too little living space, not too few things to fill it with. Moreover, the hassle and risk of hiring out your stuff is too much trouble – especially if you might want it back at short notice. It’s just much easier and safer to pay the professionals to store it for you.

Of course, there are many more uses for surplus money than surplus furniture – moving it around is easier too. However, the fact is that there’s more capital floating around the world right now than we can find (profitable) uses for. If this weren’t the case then interest rates wouldn’t be so low.

Suggested reading

Is too much money a bad thing?

By Peter Franklin

Like furniture, bad things can happen to financial wealth that isn’t looked after. It can be stolen, investments can fail, banks can go bust, asset prices can collapse, stock markets can crash. These risks need to be managed – and for institutions like pension funds with vast sums of money under their care, and powerful regulators to satisfy, the cost of that management adds up. By buying bonds for their investment portfolios, they are in effect getting governments (plus some corporations) to manage part of the risk for them. Indeed, demand can be so high and suitable alternatives so unavailable, that bonds sell at zero or negative yields:

An excellent briefing for Bloomberg by John Ainger shows where this is happening:

“Investors have to pay to own more than 80% of Germany’s federal and regional government bonds; almost the entire Danish government market is negative. The U.S. is one of a dwindling number of nations with no negative-yielding sovereign debt.”

In the short term, the recent rapid growth in demand for negative yield bonds is being driven by declining confidence in stock markets and property markets – with investors expecting stock and property values to fall in the near to medium term.

There are other signs that the money market expects a downturn in the economy. For instance, it’s normally the case that yields on bonds that mature in, say, ten years are higher than those that mature a lot earlier. That’s because long-term debt is seen as riskier – there’s simply more time for things to go badly wrong. However, at the moment, it’s the other way round – the short-term yields are higher than the long-term yields. This is called an inverted yield curve. (Don’t confuse ‘inverted’ with ‘negative’, in this context inverted just means that the market is pricing short-term debts as riskier than long-term debt.)

Yield curves have inverted at various points in the past. It’s a classic sign that the market is expecting a recession. However, there’s nothing classic about the current craze for negative yield bonds – the phenomenon barely existed more than a few years ago. What’s happened since is without precedent. As unpleasant as recessions are, we should be much more disturbed by the fact that $16 trillion dollars (and rising) are currently invested in products guaranteed to make a loss.

Suggested reading

Are we due another recession?

By Peter Franklin

A healthy capitalist system is one that can both make a profit and reinvest it profitably. The corporates are still making money, but they no longer seem to know what to do with it. Things have got so bad they’re literally paying the state to take it off their hands.

They’ll be paying their taxes next.

In a previous article, I mentioned a series of graphs – based on the American Time Use Survey – which shows the number of hours the average American spends each day with different categories of people, for instance, their friends, partners, co-workers and so on. The final graph is for time they spend alone.

Suggested reading

Boomer populism is a warning from the future

By Peter Franklin

This last measure is at its lowest level in childhood. It hits a minor peak in early adulthood, then dips a bit as people start jobs, form stable relationships and have children of their own. In middle age, however, the line turns upward and keeps climbing as the impact of divorce, retirement, bereavement and infirmity sever the links that keep people together. Only death interrupts the inexorable upward trend (after which, one way or another, you’ll never be alone again).

Of course, solitude and loneliness are not the same thing. Indeed, as Brian Resnick reports for Vox, those most likely to say they feel lonely are not who one might expect:

“Today, members of the millennial generation are ages 23 to 38. These ought to be prime years of careers taking off and starting families, before joints really begin to ache. Yet as a recent poll and some corresponding research indicate, there’s something missing for many in this generation: companionship.

“A recent poll from YouGov, a polling firm and market research company, found that 30 percent of millennials say they feel lonely. This is the highest percentage of all the generations surveyed.”

As Resnick reminds us, the Millennial generation is now composed of twenty-somethings and thirty-somethings. It’s a phase in life in which time spent with friends falls away rapidly. The responsibilities of adulthood displace the easy companionship of one’s youth – and suddenly life seems like you alone against the world.

Was ever thus? Resnick mentions a study from 1990 which found that loneliness was highest among the young adults of that era. And yet, returning to the recent YouGov poll, there are hints that the Millennials have it especially bad:

“22 percent of millennials in the poll said they had zero friends. Twenty-seven percent said they had ‘no close friends,’ 30 percent said they have ‘no best friends’…

“In comparison, just 16 percent of Gen Xers and 9 percent of baby boomers say they have no friends.”

As the internet meme has it, ‘the miracle that no one talks about is that Jesus had 12 close friends in his thirties’.

Suggested reading

The bitter truth about Millennial burnout

By Peter Franklin

One might have thought that the social media age would have made it easier to make and keep friends. Perhaps it has for some people, but as tends to be the way with digital, the rewards are unequally distributed. Social media amplifies the advantages that the most socially adept and superficially attractive individuals already possess. The competition for peer group popularity is further sharpened by the fact that ‘friend’ and ‘follower’ counts have become monetisable commodities.

In a 2015 essay on friendship for The Atlantic, Julie Beck points out another double-edged effect of social media:

“Social media makes it possible to maintain more friendships, but more shallowly. And it can also keep relationships on life support that would (and maybe should) otherwise have died out.”

This is an under-appreciated point. In the pre-modern world most people stayed in the same place for most of the time, making friends (and enemies) that would stay in their lives until the grim reaper intervened. With the coming of modernity, life became more complex, more mobile – people moving on from one social context to another, making new friends, but then losing touch. In the absence of proximity, it took a real effort to maintain a friendship over time and distance.

Not anymore. Our lives are as complicated as ever, but for digital natives, staying ‘in touch’ has become much easier – in fact, practically automatic. These may be the flimsiest of relationships, but a life lived in part through social media is cluttered with these online revenants. “Auld acquaintance” that would have once been “forgot and never brought to mind”, now lingers on, scrabbling for attention.

No human capacity is unlimited – and that includes our capacity for friendship. I wonder if social media isn’t imposing a parasitic load on our social lives and getting in the way of maintaining real friendship, which gets harder as one gets older.

Suggested reading

Who are you calling a snowflake?

By Tom Chivers

Of course, it can’t all be blamed on technology. Friendship requires proximity and continuity in the real world – and modern life has many ways of disrupting that. For instance, there’s the regular upheaval of moving from job to job, city to city, country to country in search of economic opportunity. Then there’s the increasing numbers of people who stay single and/or childless – either later into life than previous generations or permanently. This has been identified as the cause of the so-called ‘sex recession’ among Millennials; but as well inhibiting romantic and family relationships, there is the loss of the platonic friendships that depend on the wider connections forged when you settle down and have children.

It would be nice to think that this is all a matter of choice – and that such freedom provides opportunities for different kinds of friendship and social connection. As the old saying goes, you can pick your friends, but you can’t pick your relatives.

Then again, the reality may be that friendship and freedom are in tension – and that, in some way, one needs to be stuck in a situation with others to connect to them. Biology does the trick when it comes to family, but to nurture friendship in today’s world of unlimited choice, we need to commit ourselves to enduring communities and institutions.

These are increasingly thin on the ground – especially for a generation that’s been taught to mock and distrust them.

Suggested reading

Why cities are no place for kids

By Peter Franklin

But what happens when Right-wing governments end austerity, turn on the spending taps and cut taxes? Given the expectation that Boris Johnson and Sajid Javid will come up with a giveaway Budget, the Left is having to ready a new line of attack. There’s an early taste of it in a recent New Statesman editorial:

“In common with Donald Trump, who has presided over the largest US budget deficit since 2012 (4.7% of GDP), it would be unsurprising if Mr Johnson allows government borrowing to rise by cutting taxes and increasing spending – one could call it reactionary Keynesianism.”

Keynesianism refers to the economic theories of John Maynard Keynes. Rather more loosely, it’s also used to describe any policy of stimulating the economy through higher expenditure and/or lower taxation. It’s a label and approach typically championed by the Left, so what might make Keynesianism reactionary?

Further reading

Why low interest rates poison the economy

By Peter Franklin

As far as I can tell, the first person to write about reactionary Keynesianism was the American Socialist Michael Harrington. In a 1966 Encounter article (and also in a 1972 piece for the New York Times) he credits the concept to JK Galbraith. Basically it means a government giveaway that fails to achieve progressive purposes.

Examples might include blowing a surplus on tax cuts for the rich or a war in the Middle East. Then again, the Left would probably deem any expenditure signed off by Johnson and Javid to be either inadequate or misdirected, so they might as well blow the lot on a 500 ft statue of Margaret Thatcher.

There’s another pre-emptive strike on Conservative economic policy from Larry Elliot in The Guardian. But more than a mere critique of what the Conservatives might be about to do, it’s a devastating analysis of both Conservative and Labour economic policy since the 1990s:

“For decades Britain has consumed more than it has produced, with the result that the UK has the biggest deficit on its current account of any member of the G7…

“The economy was kept going through the boom years of the 1990s and 2000s because cheap imports meant inflationary pressure was weak and interest rates could be kept low, allowing consumers to load up on debt to buy ever more expensive real estate. Rising property prices made people feel richer than they actually were. They borrowed to trade up to bigger homes and they borrowed to fit them out. Personal indebtedness soared.”

This economic model has biased opportunity to the South (especially London) and to the asset rich baby-boom generation – who have run up debts while making precious little provision for their impending old age. Younger generations, already struggling with the rent and mortgage payments, are poorly placed to shoulder the burden.

As Elliot puts it, “Britain has a trade deficit problem, a London versus-the-rest problem, a debt problem, a housing problem and a care problem.”

Further reading

Why aren't the Tories talking about economics?

By Peter Franklin

He’s absolutely right to take the long view. The new economic policies unveiled at each Budget or even at the start of a new government are less important than what doesn’t change, i.e. the prevailing economic orthodoxy. If that is fundamentally flawed, and the government does nothing about it, then everything else is just sticking plaster.

I do differ from Elliot in his analysis of what happened in the crucial decade of the 1990s, though. His chain of cause and effect (cheap imports → weak inflation → low interest rates → borrowing boom → runaway house prices) doesn’t tell the whole story.

Another way of looking at it is this: to pay for the persistent trade imbalance, there had to be a compensating inflow of foreign investment – the current account deficit can only be as big as the capital account surplus. Successive governments encouraged the inflow by promoting the UK as a place to buy up assets, e.g. British property and British companies. This increased demand for sterling, pushing up its value on the currency markets. This in turn meant lower interest rates, cheaper imports and less uncompetitive exports – thus further exacerbating the trade gap. For a while, the vicious circle can be sustained because loose monetary policy allows more borrowing and thus rising asset prices, which attract further foreign capital.

Though it has precedents in the Thatcher era, this is essentially a New Labour economic strategy – exactly what one would expect from a government committed to a major expansion of the welfare state, but without the growth rates or tax rates necessary to pay for it. That left public sector borrowing as the only way to raise the money directly – plus the indirect boost provided by private sector borrowing.

Of course, to keep the money flowing in it has been necessary to turn the British economy and property market into a convenient piggy bank for the world’s loose change – with all the damaging consequences described above.

The austerity (plus quantitative easing) of the Cameron and Osborne years may have seemed like a change of direction, but in fact it was just a reaction to the financial crash they inherited from Gordon Brown (borrowing booms tending to end badly). They left the underlying economic model largely untouched – which is why they moved so quickly to get house prices inflating again.

Osbornomics was followed by Theresa May’s “economy that works for everyone”, but was nothing much of anything really. Now we’ll have to see whether the “end of austerity” under Boris Johnson amounts to anything more.

If all it provides is a Brexit-ready stimulus without underlying structural change then the charge of reactionary Keynesianism will be well deserved – though equally applicable to previous governments.

Further reading

Ten years after the crash, we should still be terrified

By Peter Franklin

Larry Elliot sets out a test of the current government’s willingness to tackle the country’s deepest economic problems:

“Being tough on the causes of Brexit means changing the culture of business so that it boosts investment. It means rethinking the role of the state so that Britain leads rather than follows in the fourth industrial revolution. It means spending more on infrastructure, especially in the north. It means a mass housebuilding programme. Put simply, it means doing stuff not normally associated with politicians who think the free market is always right.”

I agree with almost all of that – except that one’s attitude to the free market isn’t the real issue. Whether right or wrong, the market works within the framework of public policy and what it incentivises. So what counts is whether government seeks to support a genuinely enterprising, inventive UK economy or prefers to keep the plates spinning on what amounts to a country-sized Ponzi scheme.

Innovation or speculation? The choice is ours.

That’s the lesson I took from Tanya Gold’s bracingly unsentimental portrait of Cornwall for UnHerd. It is, she says, a “lovely but hard” place – the two qualities existing side-by-side, but experienced in differing proportions depending on whether you’re there for a holiday or to make a living.

Further reading

Why the Cornish must accept the tourists

By Tanya Gold

But what happens when the tourists don’t leave, but move in? Answer: house prices go up, even while local wages remain low. Property markets in some Cornish communities have been utterly distorted. According to The Economist, “at the last count, a quarter of the dwellings in St Ives were second homes or holiday lets”.

Gold says that fatalism is in the Cornish character. But if that’s true, then the people of St Ives are going against type:

“Locals worry that the town is becoming a playground for rich Londoners… So in May 2016 locals decided to do something about it, voting in a referendum to introduce a ‘principal-residence policy’, which stops newly built houses in the town from being used as second homes. The thinking went that by stopping holidaymakers from snapping up new-builds, housing would become more affordable to people who live in St Ives all year round.”

Three years on, has the policy worked? Yes, is the short answer:

“…official statistics suggest that excluding second-home buyers from the new-build market has removed a big source of demand. The price of new homes in the town is 13% below what it might have been if the previous growth rate had continued.”

We’re also told that “other Cornish towns have introduced their own versions of the policy”. However, there is a complication – the level of house building in St Ives has, apparently, “slumped”. The Economist describes this as an “unwelcome side effect”, suggesting that the outcome was both harmful and unintended.

Here’s an alternative interpretation: in some situations, deliberately slowing down the pace of development may be just what’s needed.

Obviously, this runs counter to the conventional wisdom – which rests on two fundamental assumptions: firstly, that the only way to solve the housing crisis is to build more houses; and, secondly, that property prices are a function of supply. Look more closely, however, and we can see that the first assumption is wrong and the second incomplete.

The housing crisis is first and foremost a crisis of affordability. The basic problem is that homes are too expensive, not that there too few of them. The basic solution, therefore, is to make them cheaper – or at least hold prices steady so that wages and savings can catch up.

Ah, but wouldn’t building more houses increase supply and therefore bring down prices? Not necessarily. Prices are a function of both supply and demand. If demand runs ahead of supply, then it doesn’t matter how much you build – prices will still go up. Because supply is physical (requiring bricks and mortar, workers and equipment) and demand is financial (requiring only the electronic transfer funds from one bank account to another) the latter always has the potential to outstrip the former. Never forget: money flows faster than concrete.

Further reading

Sun, sea, sand – and shooting up

By James Bloodworth

That’s why you see property markets overheating even during construction booms – or, rather, especially during construction booms. That’s because supply has a tendency to generate its own demand. In the context of housing, a building boom is its own best advert. It provides visible evidence of a thriving economy – and thus attracts further investor interest, which bankrolls more construction and so on and so forth.

It’s a process best served by the most noticeable kinds of development. Visibility may come from the architectural form of the buildings (the flashier the better) or the concentration of activity in certain hotspots or the already established prestige of certain locations. A measure of controversy also helps – there being no such thing as bad publicity.

Demand can be further enhanced by selling a development as a generic investment product – and not necessarily as a primary residence requiring a full time commitment by the purchaser. Hence the attraction to investors (and thus developers) of holiday homes, time shares, buy-to-let flats and so on.

When some or all of these factors align in a particular place it can be impossible to satisfy demand. Prices therefore keep rising – attracting even more speculative attention and making life ever more expensive for local people.

In these circumstances, it is entirely rational for the community to do what St Ives did and use the law to selectively curb demand – in this case by freezing out the second homers. By disrupting the circular relationship between development and speculation, prices have a chance to subside back to affordable levels.

The Economist, being a liberal publication, plainly doesn’t approve. And, to be fair, place-specific restrictions on second home ownership, buy-to-let landlords and other unwanted categories of demand do represent a barrier to the free movement of people and capital.

However, the right to free movement is not absolute. All liberals would uphold the right of individuals to restrict access to their own private property; and most liberals, apart from the ultras, believe that nations (or groups of nations like the EU) should be able to control their own borders.

And if such rights are justifiably exercised at the level of the individual and the nation, then why shouldn’t they also apply at the intermediate level – that of the community?

Further reading

Control mass immigration? Europe can’t even control mass tourism

By Peter Franklin

It’s not that video door entry systems are anything new. They’ve been available for decades. The Ring system, however, is easy to use and pretty affordable. It’s also fully digital – on your smartphone or tablet, you can look at what your doorbell sees and have the footage stored online for a modest monthly fee.

Further reading

The irresistible rise of the machines

By Libby Emmons

In America, a Ring doorbell can be yours for as little as $99 – or nothing at all if your local police force is giving them away to residents. The New York Post reports on the cops’ enthusiasm for these gadgets:

“…as more police agencies join with the company known as Ring, the partnerships are raising privacy concerns. Critics complain that the systems turn neighborhoods into places of constant surveillance and create suspicion that falls heavier on minorities. Police say the cameras can serve as a digital neighborhood watch.”

We’ve come to think of CCTV as a top-down intervention – the province of law enforcement agencies and security services. Indeed, the spread of CCTV networks conjures up the world of George Orwell’s Nineteen Eighty-Four, in which a totalitarian state has its citizens under continuous surveillance, not least through the ubiquitous Telescreens.

However, unlike Orwell’s dystopia, the reach of CCTV in the real world is limited. Indeed, the state sometimes struggles to fund installation, maintenance and monitoring – leading to cuts in coverage. But rather than celebrate their liberation from the all-seeing-eye of the state, local people tend to react with dismay: never underestimate the popularity of security.

The technology is advancing – becoming cheaper, smaller and smarter. With Amazon and other providers developing video surveillance as a mass consumer product, the old top-down model of deployment and control is giving way to something more decentralised and, some might say, insidious.

Back in 2017, I speculated that it might not be long before ordinary members of the public start creating their own surveillance networks – and joining them up through social media:

“Access to existing CCTV networks is generally controlled by private businesses or public bodies… however the ultra-cheap (and therefore widely owned) internet-connected sensors of the future may operate on a different model – feeding information into a shared system in much the same way that we currently feed our photographs into Facebook and Instagram.  

“Whichever website does the best job of integrating data from the ubiquitous sensors of the near future will become the dominant digital platform of the 21st century.”

Further reading

Kiss your privacy goodbye – CCTV is just the beginning

By Peter Franklin

In 2019, the age of bottom-up, citizen-led surveillance is well-and-truly underway. It’s not a surveillance state we’re building, but a surveillance society, catered to by a surveillance market.

A particularly interesting feature of the Ring system is the Neighbors App. It is mentioned in a report by Wesley Dockery for the International Business Times:

“One of Ring’s services, Neighbors, allows members of a community to share safety information and suspicious footage captured on their Ring doorbells in a shared network, akin to Facebook’s news feed.”

It’s easy to see the direction this technology is going in.

As it becomes ever cheaper, more homes will use it, and each home will have more cameras creating a bubble of surveillance around each property. Surveillance social media will become more sophisticated, with neighbours granting each other access to their camera feeds. The individual surveillance bubbles will thus merge – to cover the whole street and, in time, the entire neighbourhood. The police, community groups, landlords and insurance companies will encourage the process.

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Inevitably, artificial intelligence will be used to integrate and analyse camera feeds, thus eliminating the need for constant monitoring by human eyes. If surveillance bubbles are merged across wide enough an area then AI-powered image recognition of faces, objects, number plates etc. will allow users to locate, identify and track an individual or a vehicle through a neighbourhood, town or city.

So, good luck being a burglar in 10 years’ time. In fact, good luck doing anything you might get in trouble for, because within a surveillance bubble, it’s not going to go undetected. Burglars, muggers, car thieves, vandals, truants, under-the-radar adulterers and secret smokers should all beware: the streets will have eyes.

As well as looking around you for doorbell cameras, don’t forget to look up. Because, as Bobby Allyn of NPR explains, Jeff Bezos is leaving no angle unexplored:

“Going on vacation and want some extra security around your home? Someday you may be able to call Amazon’s drones.

“The Seattle tech giant is moving closer to making that scenario a real possibility after winning approval from federal officials this month for a patent for ‘home surveillance’ drones.

“Company officials stress that the plan is still in its infancy, but the patent papers describe a future in which Amazon customers order drones to hover around a home and scan for things such as a garage door left open, a broken window, graffiti or a fire.”

Ever wanted to call in a drone? One day, Amazon might be able to arrange it for you – though I imagine missile strikes won’t be an option.

Further reading

Elon Musk's extra-terrestrial threat

By Peter Franklin

The company is well placed to succeed in the surveillance society to come. It’s not just the Ring system or the Neighbors app or the vast door-to-door distribution network – or even the plans for an aerial drone delivery service. More important than any of those will be the ability to store and process the overwhelming quantities of visual data thus collected. As luck would have it, Amazon also owns AWS – one of the biggest cloud computing companies in the world. So, if anyone ends up hosting a live video feed of the entire planet, it’ll be Amazon.

In thinking about what is already possible – or soon will be – one can’t help but be impressed. That said, when one contemplates the implications for privacy, one might also feel an uncontrollable urge to sit down and cry.

But make sure you do your crying behind closed doors. You wouldn’t want the neighbours to see.

Or Jeff.

Different cultures, colours, creeds, classes, languages and identities of every kind: all are included. Except for one group of people who find themselves increasingly excluded from the urban milieu: children.

Further reading

Can you afford parenthood?

By Peter Franklin

It’s a phenomenon explored by Derek Thompson in a must-read piece for The Atlantic:

“In high-density cities… no group is growing faster than rich college-educated whites without children, according to Census analysis by the economist Jed Kolko. By contrast, families with children older than 6 are in outright decline in these places. In the biggest picture, it turns out that America’s urban rebirth is missing a key element: births.”

Consider the statistics for New York:

“Since 2011, the number of babies born in New York has declined 9 percent in the five boroughs and 15 percent in Manhattan.”

Or Washington DC:

“…the overall population has grown more than 20 percent this century, but the number of children under the age of 18 has declined.”

Or the tech capital of the world:

“San Francisco has the lowest share of children of any of the largest 100 cities in the U.S.”

The great global cities are portrayed as places of youth and vibrancy. They certainly attract ambitious, highly educated twenty-somethings – which is why big companies base themselves there: so that they can take their pick of the brightest young minds. This is especially true of the tech sector.

In 2007, it was reported that Mark Zuckerberg, founder of Facebook, told a conference that “young people are just smarter.” Zuckerberg himself was only 24 at the time and well on the way to global domination – and thus could be excused for thinking such a thing (which, in any case, is correct in some respects).

He’s also reported as saying that “Young people just have simpler lives. We may not have a car. We may not have a family.” In a long-hours working culture, that’s something that adds to their employability – and another reason why top employers love big cities.

The heaving metropolis doesn’t just concentrate bright young things in one place, it also ensures that they can be worked without distraction. The sky-high property prices that put city-centre family homes beyond the reach of most young workers are a feature not a bug. They stop reproduction from getting in the way of productivity.

Further reading

The world's most successful* people get enough sleep

By Peter Franklin

Family life isn’t solely about having children of our own, of course. It’s also about continued participation in the families we were born into – and, beyond that, a wider circle of friends and neighbours. To take one’s place in a community, to learn from others so that responsibilities can be handed from one generation to the next, is (or was) part of becoming an adult – as much as getting a job or getting married.

The concentration of young talent in big cities severs these connections too; distance weakens established old family ties just as property prices discourage new ones.

But does this matter? There’s plenty of time in one’s thirties and forties to quit the city and do the whole family and community thing somewhere less frenetic. So why shouldn’t twenty-somethings – excuse me while I vomit – ‘work hard and play hard’?

It’s a neat idea, but collapsing birthrates around the world suggest that many people never make up for lost time. I wonder where the big employers hope to find the next generation of eager recruits if they’re not even being born? Immigration is only a stop-gap because western demographic trends are spreading to developing countries.

There are political consequences too. Derek Thompson describes America’s great divide:

“With its rich blue cities and red rural plains, the U.S. has an economy biased toward high-density areas but an electoral system biased toward low-density areas. The discrepancy has the trappings of a constitutional crisis.  The richest cities have become magnets for redundant masses of young rich liberals, making them electorally impotent.”

Any group of voters (e.g. college educated urban liberals) who concentrate themselves in a few locations are not only likely to lose elections – but also to be shocked when they do. After all, almost everyone they know thinks and votes the way they do – so, how does the ‘other side’ keep winning? It must be some kind of trick!

The sense of bewilderment is accentuated by one of resentment. If the cities are generating most of the money and thus ‘subsidising’ other parts of the country, then suburban and provincial voting preferences are perceived as ingratitude if not outright stupidity.

Of course, if you’re relying on other parts of the country to supply most of the people – it shouldn’t be so surprising if they perceive you as dependent on them.

Thompson sums it all up as a “division of labour”:

“America’s rich cities specialize in the young, rich, and childless; America’s suburbs specialize in parents.”

But while a division of labour may work in a factory – different workers specialising in only one part of the job – it can’t work in a country. Each component community, whether urban, suburban or rural, has to do the whole job of being a community, finding a place for people at every stage of life.

A truly flourishing community is an extended family, joining together the generations. The childless city, however, is something quite different: an extended workplace. For all its diversity, it is fundamentally incomplete.

Further reading

How WEIRD are you?

By Peter Franklin

Of late, however, HS2’s headline stats aren’t in miles per hour, but billions of pounds. An initial price tag of £32 billion for the whole project ballooned into an official budget of £56 billion – with the BBC now reporting that a further £30 billion might be needed on top of that. Pessimists fear the final cost could break the £100 billion barrier.

Will Boris Johnson have the guts to pull the plug? Early indications suggest that he might have given way to the usual umming-and-ahhing. But with anything approaching a twelve figure number, you have to ask what we could have had instead.

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For instance, how about a hyperloop? 

A hyperloop is a maglev train that floats inside a tube-enclosed track from which most of the air is sucked out. By drastically reducing air resistance the train is able to achieve extraordinary speeds – something like 700 mph, three times the speed of ‘high speed’ rail.

Does it work in practice though? Elon Musk (who else?) has been developing the technology, and encouraging other companies to get involved with their own ventures. One of these companies is Hyperloop Transportation Technologies, which appears to be on the brink of building the first commercial hyperloop project in the United Arab Emirates.

According to a Gulf News report by Cleofe Maceda, the initial work is already underway:

“The chairman of Hyperloop Transportation Technologies (Hyperloop TT), Bibop Gresta, revealed to state news agency WAM that the hyperloop capsule that will be set up in Abu Dhabi has already left the assembly plant in Spain to the southwestern region in France.

“Gresta said the capsule will be assembled, tested and optimised in the French city of Toulouse before it will be transported to the UAE.”

If that goes well the plan is to build a 150km track all the way to Dubai – with an envisaged journey time of 12 minutes.

And the cost of such an endeavour? Well, the proof is in the construction – but this is what the company is saying:

“Gresta said the cost of the project is estimated to be around $20 million… to $40 million… per kilometre…

“However, Gresta said any money put into the mega project can be recouped in eight to 15 years.”

Let’s take the upper bound of that estimate ($40 million per kilometre) and apply it to the combined track length of phases 1 and 2 of HS2 – 532 km. That comes to $21.3 billion.

Yes, yes – I know: I’m making a back-of-a-fag-packet calculation. We’d need a whole lot of other information for a robust comparison between HS2 and the hyperloop costings: Does the latter include the cost of new stations? What are the comparative capacities of the two systems? What about the environmental impacts?

Then there’s the fact that while high speed rail is a tried-and-tested technology, the Abu Dhabi to Dubai hyperloop would be the first commercial link of its kind anywhere in the world.

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But to my mind that’s the biggest argument against HS2: for the sort of money being committed, one would expect something a bit more advanced than some increasingly standard infrastructure. The Chinese high speed rail network, for instance, is already 29,000 km in length and expected to reach 38,000 km by 2025.

Assuming no delays to the current schedule, the first phase of HS2 will be finished by 2026 – at which point it will be possible to travel from London to Birmingham half-an-hour faster than is presently the case. Wow! If we’d known the 21st century would so exciting! HG Wells didn’t see that one coming, did he?

The UK is making a habit of spending huge amounts of money on underwhelming technology. As well as HS2, there’s ‘HPC’ – Hinkley Point C, a new nuclear power station. We’ve committed tens of billions of pounds to the purchase of overpriced electricity from an already out-of-date French reactor design, with a track record of delays and cost overruns. And we’ll still be paying for it in 2060!

The third of the horrible H’s is Heathrow expansion. No one knows how much this one will end up costing as they’re still working out the infrastructural and environmental implications of expanding a hub airport that was built in the wrong place to begin with. Even if the wider project (including supporting infrastructure) requires no public subsidy – we’re talking about vast sums of private investment that could be more productively (and sustainably) put to use elsewhere. But rather than properly explore options fit for the 21st century, the government decision was to double-down on the biggest planning mistake of the post-war era.

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By Mary Dejevsky

I’m not necessarily against grands projets. Sometimes a country has to gather up all its might and do something that only a great and united nation can achieve. But when we do, it’s got to produce something special – a confident leap into a better future, a wonder of the modern world.

Whether the hyperloop ventures in the Emirates and elsewhere succeed remains to be seen. But on the criterion I set out above – that of wondrousness – we can be sure that HS2, Hinkley Point C and Heathrow expansion will not – despite the colossal combined cost.

As a nation we are paying moonshot prices for mundane results.

But one thing can make it all better – the common grace of greenery. Foliage has many proven benefits – it not only shades and cools, but also improves aesthetics, acoustics and air quality.

It’s ironic that, despite all our advances in civil engineering, the force we rely on most to re-civilise the city is what we design our buildings to keep out: nature.

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In quite the turnaround, we’re now using technology to make room for nature on every available surface – and not just the horizontal ones. Writing for The Guardian, Harriet Sherwood looks at the increasing popularity of the vertical garden or ‘living wall’:

“Living walls range from simple wire structures to support climbing plants to sophisticated modular systems, using soil or hydroponic manmade substrate, and solar-powered irrigation. The cost ranges from £200 to £800 per square metre.”

These had a bad reputation for a while – thanks to to some very visible failures when expensively installed living walls (and green roofs) died off. However, maintenance systems are improving – and will only get better. Indeed, here’s a prediction: one of the most visible signs that a society has truly reached ‘the Robot Age’ will be that its cities turn green – an army of little climbing drones weeding and watering vertical gardens everywhere.

Of course, we already have a widely available system for maintaining large amounts of foliage several storeys up in the air – it’s called a tree.

On phys.org website, Ben Long describes a recent study from the University of Wollongong. The researchers found that urban tree cover had a measurable impact on physical and mental health:

“In neighbourhoods with a tree canopy of 30 percent or more, adults had 31 percent lower odds of developing psychological distress, and 33 percent lower odds of rating their general health as ‘fair’ or ‘poor’ over six years…

“The longitudinal study tracked the changes in health of around 46,000 people aged 45 and older living in Sydney, Newcastle and Wollongong. Statistical analyses took into account other possible explanations, including differences in age, sex, income, education, employment status, and relationship status.”

However, not all green space is equal:

“Urban green spaces with open grass rather than a tree canopy did not deliver the same benefits.”

Why the difference? Ben Long mentions the shading and cooling that trees provide, but also “sensory relief in urban areas dominated by hard surfaces, right angles, glass and concrete, and intrusive, attention-seeking advertising.”

The cynic might observe that trees make the urban environment better because they cover it up. Certainly, one can discern a philosophical difference between the ‘tree-lined avenue’ of traditional urban architecture and the ‘towers-in-the-park’ ideal of the modernists. With the former there is a subtle interplay between the natural and built environments; with the latter, nature is pared back to give the artificial a position of unchallenged dominance.

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By Peter Franklin

One could go even deeper and go with the theory that traditional architecture is arborial in origin and inspiration. The pillars and arches of our buildings; the perpendicular framing of their doors and windows; their vaulted ceilings and the tracery of their ornamentation: all are echoes of the forest.

Indeed, the fundamentals of a pleasing streetscape – texture, colour, variation in a pattern, the fractal order of form and structure – are essentially natural.

Modernist architecture is a rejection of those qualities – and thus of nature itself. I’m not surprised that our bodies and minds suffer in the impoverished environment thus constructed.

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Repairing the damage we’ve done is the work of many generations, but there are things we can do to start making a difference right now. Writing for The Conversation, Olivia Norfolk explains that councils up and down the country could do something important by not doing something:

“Plantlife, a British conservation charity, has called on councils to turn their road verges into wildflower meadows by cutting just once in late summer, between mid-July and September. Cutting late gives flowers time to be pollinated, produce fruit and then set their seeds in the soil, so that the meadow can grow back year after year.”

Cutting less often and later would produce real benefits for biodiversity at no financial cost – indeed, it would save money.

According to Dr Norfolk, the UK road network is 246,000 miles long – so presumably that means nearly half a million miles of verges. Obviously, not all are suitable for wildflower meadows, while others have them already. But it’s a reminder of just how extensive the built environment is in this country and its potential significance as a habitat for wildlife.

Almost everywhere we look we have opportunities to welcome nature back into our lives. And it’s not only biodiversity that would flourish, but also human wellbeing.

If our new government is looking for a post-Brexit national mission, then the greening of our towns and cities would be a wonderful place to start.

“…Spain, with its vast, sunbaked and largely uninhabited interior (and geographical proximity to Western European markets) would be well-placed to benefit from a solar-driven manufacturing revolution.”

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By Peter Franklin

I’m not the only one who sees a bright future for the nation. Bryan Caplan, who is Professor of Economics at George Mason University, has just returned from a five week stay in the country:

“The quickest way to explain Spain to an American: Spain is the California of Europe.  I grew up in Los Angeles, and often found myself looking around and thinking, “This could easily be California.”  The parallel is most obvious for geography – the deserts, the mountains, the coasts…”

It’s an intriguing comparison. In both land area and population, Spain is about a fifth bigger than California. The Golden State is much richer though. If it were an independent country, California would easily be one of the top ten global economies. Indeed, the latest estimates would put it in the top five. Spain, meanwhile, comes in 13th or 14th – with a GDP per head of $31,000 as opposed to California’s whopping $76,000. I dare say the likes of Mark Zuckerberg skew the Californian average somewhat, but that’s still quite a gap.

What could Spain do to start catching up? Caplan has nothing to say about energy resources, but he does think that Spain holds another trump card:

“Spain has more to gain from immigration than virtually any other country on Earth. There are almost 500 million native Spanish speakers on Earth – and only 47 million people in Spain… due to the low linguistic and cultural barriers, the migrants are ready to hit the ground running. You can already see migration-fueled growth all over Spain, but that’s only a small fraction of Spain’s potential.”

There’s certainly plenty of room for an expanded population – “you can see vast unused lands even ten miles from Madrid.” In fact, if you divide up the country into square kilometers, 87% of Spain is unpopulated.

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Caplan argues that Spain could unlock massive potential for growth by liberalising its immigration controls (though, of course, its borders are already open to migrants from other EU countries) – as well as by loosening up its labour market and its planning system:

“The trinity of ‘deregulate immigration, employment, and housing’ is vital in almost every country, but this formula would do more for Spain than nearly any other country.  Wise policy would make Spain the biggest economy in Europe in twenty years flat.”

Caplan does express some doubt as to whether the Spanish would ever take such a libertarian path. The renewed popularity of the Socialist Party would suggest not. However, the country’s membership of the European single currency may leave it with no choice.

When an economy is hit by a crisis, the conventional response is to cut interest rates and devalue the currency. But, for Spain, which swapped its Peseta for the Euro twenty years ago, those things are decided in Frankfurt not Madrid. So what could the country do, should it find itself in economic trouble? Assuming that a bailout from German taxpayers is not forthcoming, the one remaining option is internal devaluation. This refers to a combination of austerity, wage restraint and deregulation, all designed to restore confidence and competitiveness by cutting costs.

That’s what happened earlier this decade when the Eurozone crisis hit the countries of southern Europe. Spain made an impressive recovery – in many ways outshining the economies of northern Europe. However, as I’ve argued previously, a lot of this was achieved by squeezing workers, and there are limits to how much more they can take.

Over the last few years, we’ve seen surges of support for protest parties of the Left (Podemos), Right (Vox) and centre (Ciudadanos). At the moment, the volatile electorate has swung back to the Socialists – who look set to do well in the impending general election (the fourth in the space of five years). Should the next Government find itself strapped for cash, a deregulating dash-for-growth may be more palatable to voters than everlasting austerity and wage restraint.

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Indeed, if a renewed Eurozone crisis breaks out elsewhere and spreads its contagion across southern Europe, then such a strategy could be Spain’s only way out. It carries it own risks of populist backlash, but no other member state has a better chance of pulling it off. If anywhere in the Eurozone has the potential to become a high growth frontier economy, it is Europe’s California.

The most obvious objection to this theory is that while the Golden State is home to several of the world’s biggest tech companies, Spain isn’t. However, neither is the rest of Europe, which in this vital economic sector is hopelessly outclassed by America, China, Japan and South Korea.

So within the context of the Eurozone, this doesn’t leave Spain at a special disadvantage. Meanwhile, the country’s special advantages are there waiting to be fully unleashed – with the potential to disrupt the EU’s economic pecking order. The German masters of the Eurozone should think carefully before backing Spain into a corner again.

For instance, when westerners refer to the ‘extended family’ they do so as if it were some special feature of certain societies, as opposed to what the great majority of human beings think of as just ‘family’. It is the standard western conception of the family – one or two adults plus a small number of children – that requires a special term. Some academics refer to the ‘truncated family’.

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Test article

By JD Vance

In the not so recent past, having more than two generations (and/or more than one branch) of a family living together was commonplace, even in the West. It’s hardly unheard of today – but is regarded as a deviation from the norm, the result of some regrettable necessity or frailty. Almost always the expectation is that the ‘extra’ members of the household will, before too long, move on to somewhere else (either in this world or the next).

The ‘household’ is another concept that used to mean a lot more than it does today. In some ways, it is a broader idea than the extended family – because it doesn’t always depend on ties of blood, marriage or adoption.

In a fascinating and challenging essay for First Things, John Cuddeback reminds us just what a big deal the household used to be – and contrasts to the way we live today:

“The bustling little community that was the household—the context in which parents would raise their children to be responsible adults and citizens, even in seriously diseased polities—has practically ceased to exist.

“Not long ago, the household was a context of daily life. The arts that provided for the material needs of human life were largely home arts, practiced, developed, and passed on within the four walls, or at least in the immediate ambit of the home. Food, clothing, shelter, as well as nonessential items that gave some embellishment to life, were commonly the fruit of the work of household members, often produced with an eye for beauty as well as utility.”

He makes the provocative argument that “people [today] do not really live in their homes”:

“When we think of a family today, or even a home, we do not think of a real community characterized by substantial daily common action. Rather than a community woven together by common actions toward common ends, we have a kind of home base, a staging area in which to rest and refuel for remote daily activities. We should by all means attend to the sad realities of broken families. But too often, even married couples with children fail to live as a household.”

This isn’t entirely true, of course – but it isn’t entirely false either. Our ancestors would be amazed by the luxury of our homes, but also by what would strike them as their emptiness, passivity and disconnection.

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So many of the things that used to be the joint endeavour of the household are now undertaken separately and remotely. Not just ‘the household arts’ described above, but almost all work, education, healthcare, entertainment and hospitality.

Despite the existence of outside centres of religious practice, the home was also a place of collective prayer and worship. In ancient cultures around the world, we see people keeping an honoured place for ‘household gods‘ – an impulse faintly echoed in the present by garden gnomes and the fairy on the Christmas tree.

As well as what the household contained, there was what it kept out: at a time before modern policing, the household was the first, and perhaps only, line of defence. The single most important duty of the head of the household was to go round at night ensuring that all the doors and gates were secured and everyone safely inside.

But that brings us to the dark and stifling side of the household – its role in traditional societies as the primary instrument of social control. The modern era of individual liberty was first and foremost a liberation from the constraints of the household – for women most obviously, but also its other members too. With the partial exception of the parent-child relationship, western societies no longer expect individuals to subordinate their personal autonomy to the greater good of the family.

It wasn’t just the call of freedom that sparked the revolution, but also the demands of efficiency. We created the modern world by developing institutions that, one-by-one, supplanted the functions of the household. The factory, the office, the shop, the school, the nursery, the hospital, the police station, the restaurant, the theatre, the cinema, the hotel, the old people’s home: each offers a service that is more productive, specialised and varied than what we could ever hope to provide in our homes.

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That, by the way, includes the services provided by servants – whose role in most households was rendered obsolete by these new institutions and by new technologies. We may think of ourselves as all the more egalitarian as a result – most households now consisting exclusively of the co-equal members of the modern family; and yet we continue to be served by a multitude of poorer, less powerful individuals, both in our own countries and around the world.

The great difference is that they no longer live with us, we no longer have to look them in the eye, know their names or take responsibility for their welfare. The great retreat of domestic service was progress of a kind , but not towards a truly classless society. Indeed, one can make a case that people of different classes have never lived more separate lives than they do today.

The emergence of modernity is thought of in terms of developments such as industrialisation, democratisation and the growth of the welfare state. We shudder at the thought of living our lives without prosperity, freedom and security. And yet we so easily forget the other great change that brought the modern world into being – the unbundling of the household.

Though fond of a “so-much-for-global-warming” tweet when it’s cold out, in a heatwave they’re sure to remind us about the difference between weather and climate.

Well, they’re not wrong – an extreme weather event is not necessarily a signifier of climate change. But a warming planet does make extreme weather events more likely. When you hear about one or two degrees of global warming remember that this is an average figure – and that the extra heat isn’t going to be distributed evenly.

Remember also what each additional degree adds up to. If it helps, imagine the number of fan heaters you’d need running to warm up the entire world by that amount. We’re talking about a truly vast input of energy in a geologically instantaneous moment of time. In other words, an almighty jolt to a complex system the size of a planet. So, yes, we can expect multiple disruptions to the climate – as opposed to a smoothly averaged-out rise in temperatures.

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It all seems so overwhelming. But that only reinforces the case for preventative action. Some man-made global warming, and hence climate trauma, is inevitable – but whether or not we make a bad situation worse is up to us.

Of course, there’s a whole bunch of vested interests who’d rather we didn’t act. They’ve tried, but failed, to undermine public trust in climate science, so now the main focus is on persuading us that the challenge is too big, too costly for us to tackle.

For instance, they’d love us to be disheartened by graphs like this one, which shows global consumption of different energy sources over the course of the 21st century. The bars for coal, oil and natural gas tower over those for the low carbon energy sources: nuclear, hydro and the new renewables (mostly wind and solar). How on Earth are we going to replace so much dirty energy with clean alternatives in the little time left to us?

Well, there’s no doubting that this is the fight of our lives – but its scale is not quite as daunting as it appears. The graph above is a measure of primary energy consumption. It includes conversion losses from the combustion of fossil fuels, i.e. the waste heat that disappears out of power station chimneys, vehicle exhaust pipes and boiler vents. This is energy that we don’t need to replace with cleaner sources.

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We also don’t need to replace the energy that we can avoid wasting by making efficiency improvements. There’s a great example of just how big these could be in a fascinating article for The Economist. It’s about electric cars – whose potential goes way beyond simply swapping out the internal combustion engine for an electric motor and a battery pack. An American company called Indigo Technologies is developing a means of replacing the centralised drive system of a conventional car with an in-wheel drive unit they call the T1.

Essentially, they’re attaching an electric motor to each wheel – but what’s the advantage in that?

“…fitting T1s to all four wheels eliminates the need for driveshafts, transmissions, suspension parts and other weighty components…

“Reduced vehicle weight means also that the propulsive motors do not need to be as powerful as those of conventional electric cars—especially as the task of propulsion is divided four ways between them. Nor are any gears involved, for the motors turn only as fast as the vehicle’s wheels, which is a relatively low speed for an electric motor and further reduces its need to be powerful.”

Getting rid of the gubbins required to run a car from a centralised source of automotive power (inevitable with a combustion engine) saves a lot of weight and space, with all sorts of knock-on benefits. For instance, less weight allows a smaller battery pack and thus a further weight reduction:

“A smaller battery can be topped up more effectively by the regenerative braking built into the module, as well as being faster to recharge when plugged into the mains. Indigo has tried the T1 out on prototype cars redesigned to be more aerodynamic. It reckons these prototypes need only a tenth of the power required by a combustion-engined vehicle, even at highway speeds.”

In other words, one improvement enabled by the application of clean tech unlocks others – the cascade of efficiencies producing a much bigger energy saving than we might think possible.

Another example of “hyper-efficiency” is space heating. If you achieve high enough a standard of insulation you can not only save the cost of the energy that leaks through the walls and windows of a conventionally constructed building, but also get rid of the expensive and temperamental mini-combustion plants we call boilers – much simpler, smaller and cheaper electric heaters can do the job instead.

Suggested Reading

Why do the Greens make so many see red?

By Tom Chivers

Ever since our distant ancestors learned how to make fire, human civilisation has been organised around the combustion of biomass and fossil fuels. As a species we haven’t moved beyond that elemental fact – we’ve just become more sophisticated in our control of the things we set light to. Our heating systems, our power stations, our modes of transport – it’s all one long burn, one long struggle to contain and direct the destructive force of fire.

But now we have a chance to break free, to generate and consume energy only when and where it’s useful, to become a post-combustion civilisation.

So let’s put out the fires we started – and stop burning the world before it burns us.

In British politics, the green belt is regarded with equal trepidation. Only last week, Tory leadership rivals, Boris Johnson and Jeremy Hunt, agreed that building more homes should not mean building on the restricted development zones that surround London and other UK cities.

Those hoping that a change of Prime Minister might bring change were disappointed. For instance, James Forsyth of The Spectator made his feelings known:

“Boris Johnson and Jeremy Hunt on the green belt is so depressing. If Britain ceases to be a property owning democracy, the centre right will not win elections.”

Frustration is mounting. After 13 years in which New Labour created the housing crisis, the Tories have spent the last nine years not solving it. In all that time, the green belt has remained sacrosanct – despite rising house prices and falling levels of home ownership.

Suggested reading

Slaying dragons: the stifling British green belt

By Ian Birrell

However, on the pro-development side, I fear that the green belt has become an inverted taboo, something that must be violated in order to prove one’s commitment to the worthy cause of homes for all. Indeed, the most fanatical of the anti-nimbys positively embrace the concept of sprawl.

Yet according to Ellie Anzilotti for Fast Company, public demand is shifting away from the suburbs. Instead of assuming an unchanging American dream, researchers from George Washington University and Smart Growth America took a look at where Americans are choosing to live now:

“…sprawling communities of single-family homes that require a car to navigate are not what’s drawing people anymore. What’s popular now are places where people can live in mixed-use, multifamily housing—maybe an apartment building above a coffee shop—and walk, bike, or take transit to get around.”

Their report, Foot Traffic Ahead: Ranking Walkable Urbanism in America’s Largest Metros, identifies 761 densely built, but liveable, communities in urban centres across America. Collectively, they only cover less than 1% of America’s 30 biggest metro areas, but in terms of new development they are all important:

“While sprawling, suburban districts have added no new development and in some cases, lost occupancy since 2010, nearly all new office and multifamily housing construction has clustered in these 761 areas.”

Similar trends are visible in Britain too – with the fashion for city centre living no longer limited to London. But it isn’t just a fad. The knowledge economy puts a premium on connection and therefore proximity. The plum jobs are bunched up together in the superstar cities. Moreover, there’s a growing reaction, especially among the young, against car-centric lifestyles – not only on environmental grounds, but also because of the cost and hassle of ownership.

By definition, space in city centres is constrained; and, as demonstrated by the Mayor of London’s rejection of planning permission for the Tulip tower, there are limits to vertical development. So does that mean we’ll have to default to sprawl whether we like it or not? Will the bright young things have no choice but to become the Margo and Jerry Leadbetters of the 21st century?

Further reading

The false promise of the vertical city

By Peter Franklin

I don’t think so, because though city-loving hipsters tend to grow up, start families and even buy houses and cars, they’re not going to conform exactly to the lifestyles of their parents and grandparents. They will want to maintain access to the economic and cultural opportunities to which they’ve become accustomed – as well as new priorities like good schools.

Fortunately, there is a third model for providing more homes. As Anzilotti writes “density and walkability do not have to be limited to the urban core”. The future is one of ‘polycentric development’ – i.e. not just one focal point right in the middle of the metropolis, but other hubs further out – “connected to both the urban core and each other by sustainable transit.”

What does this mean for planning policy? For a start it doesn’t mean replacing the green belt with carte blanche for piecemeal, build-what-you-will development. That would just add up to sprawl.

Further reading

Ten vested interests the Tories failed to tackle

By Peter Franklin

Achieving polycentric development will require direction – and, indeed, intervention – on the part of government to ensure density, good design and the provision of supporting infrastructure.

It also means biting whole chunks out of the green belt – but only where it prevents necessary development in strategic locations. If we’re truly serious about providing enough new homes without sprawl then we need to do things like build sustainable urban extensions to cities like Oxford or garden villages around rural railway stations – just the sort of smart development that our taboo-laden planning system currently makes impossible.

We urgently need an honest, open debate about how, where and when to make this happen.

With the normal business of government paused and the attention of the nation’s press undivided, the Conservative leadership contest might have been an opportunity to have that debate. In the process the candidates might have sent a message of hope to the younger voters without which the Party is finished.

But Messrs Johnson and Hunt obviously didn’t want to go for that.

So, manned spaceflight: been there, done that, let’s not go again. Rather, let’s pay more attention to the hugely more consequential business of unmanned spaceflight and satellite technology.

There’s important stuff happening over your head right now – and you need to know about it.

Suggested reading

Why we need a moratorium on manned spaceflight

By Peter Franklin

For instance, that irrepressible scamp Elon Musk has been up to his tricks again. This time he’s only gone and launched a ‘train’ of 60 satellites into space – and obtained the authorisation to launch thousands more. Indeed, the plan is that the SpaceX Starlink fleet will consist of nearly 12,000 satellites with the objective of providing space-based internet services anywhere on Earth.

This would be of great benefit to unconnected parts of the world. However, it’s widely reported that astronomers are not happy – believing that Starlink and other satellite ‘constellations’ will interfere with their observations of the night sky.

A report for Forbes by Jonathan O’Callaghan conveys their mounting alarm:

“SpaceX is one of nine companies known to be working on global space internet, and already concerns have been raised about space junk. Now astronomers too are worried about what the future may hold.

“‘The potential tragedy of a mega-constellation like Starlink is that for the rest of humanity it changes how the night sky looks,’ says Ronald Drimmel from the Turin Astrophysical Observatory in Italy. ‘Starlink, and other mega constellations, would ruin the sky for everyone on the planet.’”

But while the proliferation of satellites may make it harder for us to look up, they’ll make it easier for us to look down.

There’s nothing new about satellite imagery, of course. It’s been around for decades. However, according to Christopher Beam in MIT Technology Review, the intensity of space-based surveillance is about to hit a whole new level:

“Every year, commercially available satellite images are becoming sharper and taken more frequently. In 2008, there were 150 Earth observation satellites in orbit; by now there are 768…

“Maxar, formerly DigitalGlobe, which launched the first commercial Earth observation satellite in 1997, is building a constellation that will be able to revisit spots 15 times a day. BlackSky Global promises to revisit most major cities up to 70 times a day.”

Suggested reading

Why we need a moratorium on manned spaceflight

By Gerard DeGroot

It’s not only the frequency of coverage that’s going to increase, but also the detail of the images:

“Commercial satellite imagery is currently in a sweet spot: powerful enough to see a car, but not enough to tell the make and model; collected frequently enough for a farmer to keep tabs on crops’ health, but not so often that people could track the comings and goings of a neighbor. This anonymity is deliberate. US federal regulations limit images taken by commercial satellites to a resolution of 25 centimeters, or about the length of a man’s shoe.”

With so many more satellites in space owned by interests all over the world, it’s going to be increasingly difficult for the American and other western governments to restrict the availability of espionage-grade satellite images.

Conceivably, every location on Earth will be photographed at high resolution, many times a day – and not just in the visible part of the spectrum, but also other wavelengths capable of gathering other kinds of data – heat signatures, for instance. AI-powered advances in image analysis will mean that ever-greater levels of intelligence can be derived from what the eyes in the sky see of our daily lives.

Worried yet? You should be.

Suggested reading

Who’s that watching your every move? Don’t worry, it’s only everyone...

By Peter Franklin

Of course, there are privacy concerns surrounding other surveillance technologies – CCTV and, more lately, drones. However, as Beam reminds us, these are subject to regulation by sovereign states. Space, however – the high frontier – is pretty much a free for all:

“The Outer Space Treaty, signed in 1967 by the US, the Soviet Union, and dozens of UN member states, gives all states free access to space, and subsequent agreements on remote sensing have enshrined the principle of ‘open skies.’”

My guess is that we’ll respond to the threat of space-based surveillance with ground-based counter- surveillance. Beam paints a scenario in which satellite imagery is used to analyse patterns of light spilling out from windows, from which one could work out which buildings are most likely to be unoccupied at any particular time. Vehicle movement analysis could yield the same information – which would, of course, be of great interest to burglars. In all likelihood, criminals and terrorists will soon know a great more about our daily routines than they do now.

So what do we do about it? The obvious answer is to build-out CCTV and drone networks so that the authorities charged with our protection know more about what the bad guys are up to than the bad guys know about us. Burglary, for instance, would be rendered unviable if, from the moment of a break-in, the burglars were inescapably captured on camera – all the way from our houses to their houses.

It’ll be some time before satellites are sufficiently numerous and powerful to provide continuous real-time video coverage of the Earth. However, in particular locations, this is already possible using ground and air-based technologies. Expect the threat from space to accelerate the spread of defensive surveillance across entire cities, regions and nations.

Let’s hope those in charge have our best interests at heart.

No, I don’t mean the weather, but the incessant arguments about the rights and wrongs of air conditioning.

Further reading

Why air-conditioning is making us hotter

By Peter Franklin

It all kicked-off again on Twitter after Taylor Lorenz, a staff writer at The Atlantic, let off some steam:

“Air-conditioning is unhealthy, bad, miserable, and sexist. I can’t explain how many times I’ve gotten sick over the summer b/c of overzealous AC in offices. #BanAC”

The blow-back was fierce. A number of men pointed out that while female workers can don more layers if they’re feeling cold in the office, restrictive dress codes leave male workers sweltering in their suits and ties. That’s true in some workplaces, but perhaps those affected should man-up and tell their bosses where they can stick their antiquated rules.

Then again, it isn’t just men getting hot under the collar. A number of women also replied to Lorenz, insisting that they too were OK with AC. Some of them came from America’s Sunbelt states where ‘central air’ is an essential; others said they worked in stifling environments like warehouses and would kill for some chill; and then there were people of both sexes with heat-sensitive medical conditions.

Of course, all of this is rather anecdotal. Is there any hard evidence that air conditioning is sexist? A balanced piece in the New York Times by Penelope Green examines the issue:

“There is an oft-cited study published in Nature.com that notes how building temperatures, once set to the comfort preferences of 1960s-era men in suits, disregard the ‘thermal comfort’ of female staffers.”

This would fit with the long established practice of designating the adult male as the ‘standard human’ – and designing the modern world accordingly. Invisible Women by Caroline Criado Perez has chapter and verse this phenomenon, but how relevant is it to air conditioning in the 21st century?

Further reading

The inescapable misogyny of the modern world

By Tanya Gold

If I understand Green correctly, the reality is that thermostat settings have not been frozen in time:

“Building temperatures are largely controlled by building managers, to industry standards that aim for the thermal comfort of 80 percent of a building’s occupants — which means, of course, that 20 percent will be uncomfortable, if not miserable.

“Those standards are updated regularly by the American Society of Heating, Refrigerating and Air Conditioning Engineers, which suggests that building temperatures range from 67 to 82 degrees Fahrenheit and be set according to an enormously complicated calculus.”

Research appears to suggest that there is no great battle of the sexes on this issue:

“It turns out gender is less a predictor of thermal comfort than other factors, like age, activity level or, tellingly, the relative wealth of the society surveyed, according to studies conducted by researchers at the Center for the Built Environment at the University of California, Berkeley.”

In any case, many modern workplaces – especially those divided into smaller units – have controls that can be adjusted room-by-room by whoever’s working there. This allows small groups of people, who’ll have to live with the consequences, to reach common sense compromises. I’m glad to say that’s how it is at UnHerd HQ, where tempers remain cool throughout the summer.

I suspect that conflict is most likely to arise in buildings where temperatures are set remotely (possibly by a facilities management company) and imposed without variation across a large area. As in so many other contexts, this is a great way of making really stupid decisions.

But if setting the temperature for one building is a fraught exercise, imagine the same challenge on a planetary scale.

Air con is supremely symbolic of the dilemmas presented by climate change. As a rapidly growing source of energy demand, it is both a contributor to, and made necessary by, rising temperatures. But it is about to acquire added symbolism.

Until now, action against global warming has been all about reducing greenhouse gas emissions – an unintended side-effect of various economic activities. However, even under the most optimistic decarbonisation scenarios, there will be significant additional warming over the decades ahead and thus an increasing pressure to actively cool the planet by means of geoengineering.

This, as I’ve written previously, is the riskiest of propositions, only worth contemplating as a last resort. And yet, some of the possible methods are surprisingly affordable – as in not requiring a multinational, multi-trillion dollar effort. In theory, a big company or a billionaire could bankroll enough geoengineering to have an appreciable influence on the global climate. So could all but the smallest and/or poorest of the world’s sovereign states – any of which could choose to take matters into their own hands if the conventional fight against climate change falters.

Further reading

What will survive global warming?

By Peter Franklin

Of course, rather like the warring factions in an open plan office, a global temperature drop that suits some players (e.g. the too hot countries) won’t suit others (e.g. the too cold ones).

It’s one thing to stop heating up the Earth accidentally, quite another to deliberately cool it down. If we’re foolish enough to build a thermostat for the entire planet, expect a world-wide fight for the controls.

That requires a map, but what kind? The infamous Mercator Projection presents a highly distorted view of our planet. Land in the northerly latitudes is massively stretched out – Alaska, Canada, Greenland, Europe and Russia all appear much bigger than they actually are. To get an idea of how distorted a map is, compare the size of Greenland with that of Saudi Arabia. In reality, the two territories are almost identical in area. On a Mercator Projection, however, the cold place appears to be several times bigger than the hot place.

Further Reading

Why doesn't geography get the respect it deserves?

By Peter Franklin

Of course, there’s no way of displaying the surface of a sphere onto a rectangle without distortion. Using a globe instead of map avoids that problem. Suddenly you notice things that most world maps obscure. Africa, for instance is really, really big – twice the size of the Russian Federation (which itself is absurdly large – stretching from the borders of the EU almost all the way to Alaska.)

But even an accurate representation of size and distance is misleading. Population, much more than territory, is what makes somewhere ‘big’. Elie Wiesel once said that “we must see in every person a universe”. In that respect even the smallest human settlement is immeasurably bigger than a vast and empty desert.

It’s worth looking at a map that resizes each country according to its population. Suddenly one sees a new view of the world – dominated, of course, by China and India, while thinly populated Russia and Canada shrink away.

But even this exercise is misleading because it doesn’t account for variations of population density within countries. If it did then London would be as big as Scotland and Wales combined. Furthermore, it’s not just the number of people who count, but the number of interactions between them. That’s why cities tend to be more productive per person than smaller settlements, because proximity facilitates interaction.

Of course, there’s more than one way of overcoming the tyranny of distance. Along the all-important dimension of human experience, transport links shorten and thicken the connections between the people and places at either end.

That’s why one of the most important, but under-reported, stories in the world today is China’s Belt and Road Initiative – a programme of infrastructure investments that spans the entire Eurasian continent plus Africa. Without moving a single border these links are redrawing the real map of the world – not so much by extending China’s reach, but by shrinking the effective distance between it and its ostensibly far-flung partners in global trade and geopolitics.

Further Reading

The jaw-dropping scale of China’s global ambition

By Peter Franklin

The really scary thing is that the Western powers act as if it isn’t happening. It’s an argument made in the New York Times, by Robert D Kaplan.

Europe (the UK included) is now so self-obsessed that we barely noticed that America almost went to war with Iran last month. The US, unlike Europe, has the means to project power around the world, but it uses it foolishly. In the last decade the invasions of Afghanistan and Iraq greatly strengthened Iran; and now in this decade confrontation with Iran is strengthening China.

In siding with the Saudis against the Iranians, the Americans think they’re intervening in a regional conflict. What they’ve missed, however, is China’s global strategy.

Using our western categories of ‘Middle East’ and ‘Far East’, we easily think of China as a Pacific power for removed from events around the Persian Gulf. But look at the map: only one country separates China from Iran – Pakistan, a Chinese ally:

“In the southwestern corner of Pakistan, close to the Iranian border, China has completed a state-of-the-art container port at Gwadar, which Beijing hopes will eventually link up with roads, railways and pipelines to western China. And from Gwadar, the Chinese can monitor shipping traffic through the Strait of Hormuz.

“In other words, China is already in the Middle East.”

Belt and Road infrastructure across the Central Asian states provides further links between China and Iran. The latter, as the bridge between China’s immediate sphere of influence and the Middle East is therefore of great strategic significance:

“Iran is at the very center of 21st-century geopolitics. It dominates Central Asian trade routes and sits at the hydrocarbon nexus of the Indian Ocean, with a coastline of over 1,500 miles stretching from Iraq to Pakistan. Iran is the key to China’s plans, just as China’s plans are key to Eurasia’s destiny.”

Kaplan says that, together, China and Iran make an “unbeatable combination in Eurasia”.

Iran, however, is not completely in the Chinese camp. For instance it cooperates closely with India – an important counterweight to Chinese power in Asia and the Indian Ocean.

Kaplan warns the US government against its “myopic war-by-choice strategy with Iran” and its obsession with “the Persian Gulf as a small, distinct region”. He argues that the Chinese “see the larger, more fluid geographical picture” and notes America’s lack of a “big idea” to provide any positive competition.

Further Reading

Europe no longer exists – our future is Eurasian

By Peter Franklin

As to what that big idea might be, I don’t see the US launching its own Belt and Road Initiative. It has enough trouble updating its own infrastructure, let alone anyone else’s.

A more promising avenue would be real ambition on the development of low carbon, decentralised energy and other green technologies. To reduce competition for unevenly distributed resources like fossil fuels and water would go a long way to defusing the ‘great games’ of the 21st century.

It wasn’t meant to be this way. His victory in 2016 was regarded as a freak event. Conspiracy theories were rife and allegations of collusion with foreign powers became the subject of high-powered official investigations. These haven’t produced the result that so many were hoping for. Prospects for impeachment are receding.

Further reading

What hope for America's Deplorables?

By Justin Webb

But, now, as Democrats debate the best way of defeating the President by electoral means, the truth about how he won in 2016 has come to light.

Writing for Vox, Matthew Yglesias argues that Donald Trump triumphed because he was “perceived by the electorate as a whole as the most moderate GOP nominee in generations”.

Yes, really, that Donald Trump.

Has Yglesias taken leave of his senses? I’d say not. For a start, he acknowledges and clearly condemns what he calls Trump’s “extremely offensive rhetoric on racial issues”. He then goes on to explain that, on other issues, Trump ran to the Left of previous Republican candidates Mitt Romney, John McCain and George W Bush:

“Trump ran as an Iraq War proponent who vowed to avoid new Middle Eastern military adventures, as an opponent of cutting Social Security and Medicare (and Medicaid), and as the first-ever Republican candidate to try to position himself as an ally to the LGBTQ community — going so far as to actually speak the words ‘LGBTQ.’”

The article reproduces 2016 polling from the Pew Research Centre, which shows that 40% of voters saw Trump’s views as a “mixture of liberal and conservative”. The equivalent figure for Hillary Clinton was just 28%. In fact, she was seen as liberal on “almost all the issues” by 32% of voters, while only half that share saw Trump as correspondingly conservative. Overall, she was perceived as more extreme than he was.

So Yglesias believes that the Democrats are drawing the wrong lessons from 2016. By focusing on the extreme aspect of Trump’s message and platform, they may be tempted to radicalise their own platform:

“If Trump is president, the thinking goes, it’s the ultimate proof of ‘lol nothing matters’ politics. And if anything does matter, it’s riling up your base to go to war, not trimming and tucking to persuade precious swing voters. The old rules no longer apply, or perhaps they were never true at all.”

Yglesias fears that by giving their activists something radical to fight for, the Democrats might end up motivating Republicans to fight back harder. But there is a counter-argument, one informed by events across the Atlantic.

Further reading

How Corbynomics is winning over Britain

By Matthew Goodwin

In 2015 (and again in 2016), the UK Labour Party opted for the most Left-wing leadership candidate. Yet, in 2017, Jeremy Corbyn defied expectations by boosting Labour’s share of the vote by a stunning 10 percentage points. Despite a lot of expert scepticism before the election, it was clear that Corbyn had motivated people to vote who didn’t normally turn out – helped along by an enthused army of Left-wing activists.

So, contra-Yglesias, doesn’t the example of the UK show that the best chance for the Democrats in 2020 is to lead from the Left?

Perhaps not, because there’s a different way of interpreting what happened in 2017.

Theresa May’s campaign slogan was “strong and stable” – apparently a message of continuity, subsequently reinforced by her solemn reassurance that “nothing has changed”. But continuity in what exactly? Though the messaging was meant to convey a continuation of Theresa May’s approach to Brexit (still popular at the time), it was understood quite differently.

Over the last few decades, ordinary people have been subjected to multiple forces of continuous change: Globalisation, financialisation, automation, immigration, military intervention and, in Europe, trans-national integration. With case-by-case variations, these have been presented as part of an ‘open’, liberal and centrist political agenda – when in fact they add up to a series of disruptions whose costs and benefits are unequally distributed.

It’s not that voters’ minds are entirely closed to change, just that they want it to happen at a manageable pace. They want government to act as a moderating influence not as an accelerator. Which is why Theresa May’s earlier message of an “economy that works for everyone” was such a hit with the public. The contrast to George Osborne’s Darwinian “global race” was a refreshing one – until, that is, it became apparent that nothing had changed.

More from this author

Sod the singularity

By Peter Franklin

Across the West, the established parties of the centre-Right and centre-Left have doubled down on their respective flavours of neoliberalism – presenting radical discontinuity as sensible, and calls for moderation as extreme.

Out of desperation, differing groups of voters, with differing motivations, have turned to mavericks like Trump and Corbyn. Eccentricities and insanities, which used to be thoroughly off-putting, have become signals of opposition to the establishment.

But beyond that, it is not the radicalism of such figures that wins them mainstream support, but their hoped-for moderating influence on the actual, established forces of change. Even a metaphorical spanner-in-the-works doesn’t seem so bad when your life is being disrupted by the unstoppable machine of globalisation.

That’s why Clinton lost to Trump – and it’s also why a radicalised version of the Democrats could lose too. If all they promise is a different kind of disruption, then the risk is that Americans will vote for the spanner – again.

It’s written from the perspective of a decaying civilisation awaiting the invader. A fatalistic ruling class is resigned to its fate and mounts no defence of their city – except for a display of finery, which they hope will impress their new overlords.

Suggested reading

Why the Matrix needs humans

By Peter Franklin

Their behaviour is both pompous and cowardly; and one hopes they get what they deserve (which in the poem they do, but more on that later).

‘Waiting for the barbarians’ has been interpreted as a satire on authoritarian paranoia – and its deep psychological need for a mortal enemy. But this is a misinterpretation. The poem satirises decadence, not paranoia.

The protagonists don’t so much fear invasion as long for it – seeking exaltation in subjugation. Indeed, there’s a special egotism in seeing oneself as the last in a long line – the culmination of an old order and therefore entitled to give it up without a fight.

Real world examples include the 20th century liberals who saw the triumph of socialism as inevitable. Or the appeasers who would have had us submit to Hitler. Or the post-war declinists who gave up on Britain and begat the euro-submissive establishment.

Today, we can see the same impulse in those who wait not for barbarians, but robots.

There’s a whole industry of experts predicting the obsolescence of the human workforce, displaced by the irresistibility productivity of AI-powered automation. It’s a disturbing, but also beguiling, prospect – a promise of leisure and luxury without limit. I’m half-attracted to it myself.

Suggested reading

Are you ready for 'fully automated luxury communism'?

By Peter Franklin

But is it inevitable? Writing for Bloomberg, Noah Smith sounds a sceptical note:

“The truth is, nobody knows how many jobs will be replaced by automation, or how automation will affect wages and inequality. There’s the possibility that AI, rather than replacing workers, will mostly just allow them to do their jobs more easily. And even as some jobs are eliminated, new ones will pop up, possibly at higher wages. That may involve painful, stressful transitions for people who have to switch jobs, but it doesn’t represent a robot apocalypse…”

It’s not that the relevant technologies aren’t already making advances. But whether they’re destroying jobs or not is an open question:

“…some countries that use more industrial robots, such as South Korea, Germany and Japan, have unemployment rates as low as or lower than that of the U.S.”

Exhibit A in the case that robots are replacing us is what happened to manufacturing employment in the 2000s. In America, a third of all factory jobs – nearly 6 million – were lost. As noted by Gwynn Guilford in an article for Quartz last year, there is no precedent for this rate of attrition, not even the Great Depression of the 1930s.

In seeking to attach blame, technology is an obvious suspect; but there is a plausible alternative – competition from, and offshoring to, low cost manufacturing economies (especially China). So how do we decide between them?

The standard view is that despite the job losses, there was a substantial rise in US manufacturing output in the 2000s – showing that America automated its jobs away (as opposed to exporting them to China). But as Guilford explains, the output statistics are misleading. That’s because they’re adjusted for the exceptionally rapid rate of product improvement in the computers subsector (Moore’s Law and all that):

“…the method statisticians use to account for these advances can make it seem like US firms are producing and selling more computers than they actually are. And when the computers data are aggregated with the other subsectors, the adjustment makes it seem like the whole of American manufacturing is churning out more goods than it actually is.”

Strip out this adjustment and the “apparently robust growth in manufacturing productivity is mostly a mirage”, which means we’re not looking at a productivity miracle:

“To be clear, automation did happen in manufacturing. However, throughout the 2000s, the industry was automating at about the same pace as in the rest of the private sector. And if booming robot-led productivity growth wasn’t displacing factory workers, then the sweeping scale of job losses in manufacturing necessarily stemmed from something else entirely.”

So that brings us back to China and some hard questions about the terms of trade and globalisation. This is Trump territory, but only because the ground has been vacated by more moderate politicians.

It’s all too convenient for those who do well out of globalisation to conclude that those who don’t are the victims of unstoppable technological change (as opposed to factors governments can do something about). Indeed, in the long-term, we needn’t worry about the world of work at all, if we assume there won’t be one. We can just theorise about things like ‘post-work’ and universal basic income instead. But what happens when it becomes clear that machines won’t be replacing us after all?

Sod the singularity, we must assume that the future of work will remain in our hands. When it comes, and if we’re still in charge, we’ll look very stupid if we have no idea what to do with it.

Suggested reading

The most influential religion you’ve never heard of

By Peter Franklin

At the end of ‘Waiting for the barbarians’, some terrible news reaches the city from the frontier: there are no barbarians. The confused citizens return to their home, wondering what to do now the invaders aren’t coming:

“They were, those people, a kind of solution.”

The Baumol effect has got to be in the running, because it explains one of the great economic mysteries of the modern age: in a world that is immensely richer and more productive than the one experienced by our ancestors, why are governments and individuals struggling to get by without debt?

In particular, why are certain essential services – like social care or higher education – getting less affordable? It seems odd when there’s such an extensive range of other things – from artificial lighting to basic foodstuffs to computer processing power – that have got hugely more affordable over time.

Suggested reading

The truth about inflation

By Peter Franklin

A big part of the answer is that while technology has enabled some occupations to become massively more productive – for instance, farming, mining and factory work – it’s made very little difference to others. To take just one example, a barber today takes roughly the same amount of time to cut a customer’s hair as his or her 18th century predecessor.

Yet despite being no more productive (on a hair cuts per hour basis), 21st-century crimpers are paid a multiple of their forebears – the service they provide therefore becoming correspondingly more expensive.

The Baumol effect, therefore, is the tendency of wages to rise in line with productivity improvements even in occupations that don’t become more productive.

That’s because if they didn’t, then workers would switch to occupations whose rising productivity did boost wages. As long as demand for, say, hair cuts remains steady (or increases), a diminishing supply of barbers would push up prices and therefore wages.

Governments tend to employ a lot of people doing things that technology hasn’t made massively more productive. Nevertheless, recruiting enough civil servants, police officers, soldiers, social workers, road sweepers, and so on requires that public sector wages remain competitive with the private sector. Hence the pressure on government budgets.

Much the same also applies to the public cost of supporting non-workers. To maintain minimum standards of social inclusion, things like pensions and welfare payment have to keep pace with wage levels. Obviously no amount of technology can improve the zero productivity of economically inactive individuals, so the Baumol effect applies to welfare budgets too.

Any politician who talks about cutting the size of the state or expanding access to public services needs to explain what they propose to do about the Baumol effect. If they don’t even know what the Baumol effect is then they’ve no business running our public finances.

But what about the escalating cost of things such as healthcare and higher education, where price increases have been running well ahead of general inflation, economic growth and wage levels, thus creating a crisis of affordability for governments and citizens alike?

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Is Amazon's attempt to disrupt the healthcare industry heroic or villainous?

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There are those who believe that these industries are abusing their market position to squeeze the rest of society. However, a new book by Alex Tabarrok and Eric Helland – Why Are The Prices So D*mn High? – puts the blame on the Baumol effect. Education and healthcare just happen to be labour-intensive industries where technology has not greatly increased the productivity of key workers like teachers and doctors; still, their salaries have to keep up with other skilled professions where productivity is increasing. Thus until the day we have robot teachers and AI doctors, education and healthcare is doomed to get more expensive.

On his Slate Star Codex blog, Scott Alexander says that this argument (if true) is oddly reassuring:

“It restores my faith in humanity. Rising costs in every sector don’t necessarily mean our society is getting less efficient, or more vulnerable to rent-seeking, or less-well-governed, or greedier, or anything like that. It’s just a natural consequence of high economic growth.”

Of course, not every affordability crisis can be explained by the Baumol effect. For instance, housing costs owe very little to wage levels. Though there is a problem with productivity in the construction sector, the overwhelming reason why the rent is so d*mn high is because of artificially constrained land supply and the unregulated greed of landlords and speculators.

One would prefer to believe that education and healthcare providers aren’t ripping us off in the same way – and are merely passing on unavoidable payroll costs.

However, Alexander uncovers evidence that there’s a lot more going on than the Baumol effect:

“…teacher salaries today are only 6% higher than teacher salaries in 1970. Meanwhile, per-pupil costs are more than twice as high. How is an increase of 6% in teacher salaries driving an increase of 100%+ in costs?”

Similarly, he finds that increases in doctors’ salaries appear insufficient to explain the rocketing expense of healthcare in recent decades.

Something else is driving up costs in these sectors – and ordinary Americans are paying the price:

“…in 1971, the average man would have had to work five months to earn a year’s tuition at a private college. In 2016, he would have had to work fourteen months… Student debt has increased 700% since 1990. College really does seem to be getting less affordable. So do health care, primary education, and all the other areas affected by cost disease.”

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How university re-establishes hierarchy

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As with the housing sector, the real problem is one of regulatory failure. Free marketeers blame regulators for creating unnecessary costs while state interventionists point to inaction against the exploitation of consumers.

The scary thing is that both sides are probably right.

If you didn’t know, you probably wouldn’t guess that the £ is a stylised letter ‘L’. At first glance that doesn’t make much sense, but it’s derived from the Latin libra pondo, which means ‘a pound by weight’. Strictly speaking, the first of those two words refers to the unit of measurement and the second to the act of weighing something (it’s the root of the verb ‘to ponder’). However, it was pondo, not libra, that was adopted by speakers of Germanic languages as the unit, eventually becoming ‘pound’ in English.

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Languages derived from Latin stuck with variations of ‘libra’, hence the French word Livre and the Italian Lira. Even in medieval and early modern England, it was natural for educated people (who knew Latin and French) to use an ‘L’ as a Pound sign. The libra connection also explains why the abbreviation for ‘pound’, as in a unit of weight, is ‘lb’.

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There’s now a 21st-century twist to this tale. Last week came the news that Facebook is launching an electronic currency – called ‘Libra’.

Like the Pound (£), the Dollar ($), the Euro (€) and the Yen (¥), the Libra will have its own symbol – an obscure character called the triple tilde, which looks like this: ≋

Unless you’re a mathematician studying the geometrical concept of congruence, it’s unlikely that you’ve ever seen a ‘≋’ before. However, if the Facebook project succeeds it might not be long before you see it everywhere. Though it may flop or stay stuck in some niche application, there’s a chance that Libra could become a global currency – and, perhaps, the universal means of exchange.

But why would anyone want to convert their £ or $ into ≋?

Libra is a blockchain-based cryptocurrency, and if ‘crypto’ is your thing there are various options to choose from. A few of these have become pretty significant – most (in)famously, Bitcoin. However, they also have limitations as a mass medium of exchange – including obscurity (not enough people have even heard of them, let alone accept them as payment), complexity (just too difficult to use), insecurity (vulnerability to hacking and other criminal activity) and volatility (wild swings in value compared to conventional currencies).

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Can Libra overcome the limitations? Well, for a start, it has Facebook behind it – plus Facebook’s partners in this venture, which include Uber, Vodafone, PayPal and Visa. If anyone can create and promote a digital currency that is widely used, user-friendly and secure, it’s this lot. But what about the volatility problem? What’s to stop privately controlled, electronically-issued scrip from crashing in value?

An extremely useful TechCrunch briefing by Josh Constine explains how Libra would anchor itself:

“The idea is that you’ll cash in some money and keep a balance of Libra that you can spend at accepting merchants and online services…

“Each time someone cashes in a dollar or their respective local currency, that money goes into the Libra Reserve and an equivalent value of Libra is minted and doled out to that person. If someone cashes out from the Libra Association, the Libra they give back are destroyed/burned and they receive the equivalent value in their local currency back. That means there’s always 100% of the value of the Libra in circulation, collateralized with real-world assets in the Libra Reserve.”

Assuming that all works, the next question is: why use it as opposed to all the other online payment systems out there? The big promise with Libra is that transaction fees will be much lower than for, say, credit cards. This would cut costs for vendors – and reduce the friction of online commerce. Constine points out that Facebook already has a relationship with 7 million advertisers and 90 million small businesses. The other participants in the venture can contribute millions more relationships. If transaction costs (in hassle as well as money) really are significantly lower than established systems, then that’s a potentially enormous number of vendors who’d not only accept but encourage payments in Libra.

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Then there’s the billions of people in the world who have limited or no access to financial services. The involvement of nonprofit organisations dedicated to financial inclusion (such as Women’s World Banking and Kiva) points to a global and humanitarian level of ambition. An especially interesting market is made up of the world’s 100 million+ migrant workers – who in 2018 sent $689 billion back home (including $529 billion to low and middle income countries). Transaction costs on these remittances are notoriously high and reducing them substantially would make a huge difference to the recipient countries. It would also spread Libra’s reach across the planet.

So, yes, Libra has the potential to become a global currency used by rich and poor alike. A pre-emptive backlash is already underway. The currency has acquired some unfortunate nicknames such as ‘Facebook crypto’ and ‘ZuckCoin’ – attesting to fears that the Silicon Valley behemoth and its CEO, Mark Zuckerberg, are already too powerful. Do we really want to give it – and him – control of the world’s money supply, too?

But, hang on, Libra hasn’t even been launched yet. Even if it realises its wildest ambitions, it seems unlikely that the custodians of the world’s official currencies – in particular, the government of the United States of America – would tolerate a genuine challenge to its monetary power.

Another source of partial reassurance is Libra’s ownership and governance structure. Josh Constine explains that “Facebook won’t fully control” the system:

“…but instead get just a single vote in its governance like other founding members of the Libra Association, including Visa, Uber and Andreessen Horowitz, which have invested at least $10 million each into the project’s operations.”

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Furthermore, efforts are being made to address concerns over privacy and control of user data:

“Facebook is launching a subsidiary company also called Calibra that handles its crypto dealings and protects users’ privacy by never mingling your Libra payments with your Facebook data so it can’t be used for ad targeting. Your real identity won’t be tied to your publicly visible transactions.”

Even better, the underlying software is open source. So, conspiracy theories aside, this really doesn’t look like an attempt to establish top-control over the global economy.

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So, nothing to worry about, then. In fact, something to look forward to – a super-efficient payments system minus the rip-off merchants. But before we see Zuckerberg as a Christ-like figure, over-turning the money-changers’ tables, here are three little things that might just cause concern:

Firstly, Facebook doesn’t need exclusive control over Libra to become enormously more powerful. Consider the World Wide Web, which established a user-friendly and seamless means of exchanging information. The Web is governed on a model that is even more ‘open’ than Libra, yet that didn’t stop the tech giants (including Facebook) from establishing a dominant position.

Libra, if it succeeds, would establish a user-friendly and seamless means of financial exchange. The world apart that is Chinese internet provides a model of what happens when the distinction between the tech and finance industries is erased. For instance, the Chinese mobile payments market is fifty times bigger than in America and WeChat (the closest equivalent to Facebook) has a commanding position as the “app for everything.” Libra could create similar conditions in the west and Facebook would be ideally positioned to take advantage.

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How China ditched the banks

By Peter Franklin

Secondly, the fact that Libra itself is designed to keep information about individual payments secure, anonymous and decentralised is not necessarily good news. One way of getting the notoriously undertaxed tech sector to pay its fair share is to use levies to target it’s revenues at source – e.g. as generated by advertising clicks or online sales. That could prove more effective than trying to apply corporation tax to the industry’s well-massaged and footloose profits. All the time that the tech giants know exactly where each dribble of revenue comes from, the law can be used to verify the taxes that ought to be paid on it.

That however could be rendered impossible by a completely anonymised and opaque transactional system. Expect tech-savvy governments to pay very close attention to how the technology evolves – privacy must not become the enemy of transparency.

Thirdly, what if those controlling Libra decided to behave really, really badly – i.e. like the monetary authority of a sovereign state? The early indications are that the system is intended to operate within very strict limits. As described above, Libra will only be issued in exchange for an equivalent amount in a hard currency like US Dollars. This is to create confidence in Libra as a reliable store of value, without which it is unlikely to achieve widespread acceptance.

But imagine a future in which Libra or some rival system is well on the way to becoming a de facto global currency. The closer it gets to achieving the status of a universal means of exchange, the more it will become its own guarantee of value – valuable not because it is exchangeable for other, more conventional currencies, but because enough people need and want Libra. At that point, its controllers will be tempted (or may even be pressured) to turn on the metaphorical printing presses and issue Libra backed up by nothing except public faith in the system.

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One method might be to set up a Libra bank that creates currency out of thin air, lends it out and then destroys the money when it is repaid (but pockets the interest paid by the borrower). That might seem completely bizarre, but this is how conventional fiat currencies and conventional banks already work – in the modern world, that’s where money comes from.

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To be clear, there’s zero evidence that this is the Libra masterplan. The objective is to create a cheap, easy and reliable way of buying and selling, giving and receiving, just about anywhere in the world – a bridge between countries and their currencies, not a rival source of monetary power. The irony is that the more Libra succeeds in its stated objectives, the more it will be seen as a potential threat to the established order.

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Should the rich be allowed to destroy their own wealth?

By Peter Franklin

Yes, I know the heart bleeds – but there really is a global shortage of places for the seriously rich to put their Earthly riches. There just aren’t enough alternatives to the bog standard option of the bank account.

Indeed, interest rates wouldn’t be at record lows around the world if there weren’t a global glut of cash.

Writing for Axios, Dion Rabouin notes that US companies have “record cash holdings of close to $3 trillion”. Wealthy individuals aren’t doing too badly either:

“The top 1% of U.S. households are holding a record $303.9 billion of cash, a quantum leap from the under $15 billion they held just before the financial crisis.”

Of course, most of us would love to have this ‘problem’. And, in a way, we do. Though the non-wealthy have little or no share in the global money glut, our lives are affected by what happens to it.

Those charged with managing extreme wealth are channeling the cash into places where it can do more harm than good – for instance, the property market where it inflates house prices and rental values. Then there’s the practice of share buyback – in which cash-rich companies buy up their own stock:

“Companies made a record $1.1 trillion in stock buybacks in 2018 and are on track to surpass that number this year.”

Buybacks increase demand and reduce supply, thus pushing up share prices – already inflated by the effects of quantitative easing. The executives can say they’ve ‘added value’ and are rewarded accordingly – not least in the form of ‘tax efficient’ stock options.

Admittedly, the company wouldn’t have the cash for the buybacks if it wasn’t profitable in the first place – but that’s not difficult when you can borrow money at rock bottom rates (QE again), buy up the competition and exploit a monopoly position. The company’s soaring market capitalisation means that the banks are happy to keep lending it money… and so on and on it goes, generating further surpluses of cash for the fortunate few.

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Obviously, none of this is good for the long-term health of the economy – and, for most of us, it’s of no short-term benefit either. What, then, can we do about it? Taxation is an obvious weapon, but the thing about enormous piles of cash under professional management in a borderless world is that they don’t sit still waiting to be punitively taxed.

A slightly different approach is to use tax to disincentivise some of the less desirable uses of the money glut. Property-based assets are an obvious target, because it’s not like we’ll end up with less land if we scare away the speculators. Targeting share buybacks is trickier. While we might want to discourage this and other forms of ‘financial engineering’, we also want to encourage equity investment in productive enterprise – and the finance industry is full of people who can disguise the former as the latter.

Ideally, we’d have such an enterprising, innovative economy that there’d be ample opportunities to invest in growth-generating industries. Established companies would be so threatened by new competitors that they’d invest their profits in business development instead of the complacency of share buybacks. It would also be good to have more rich people with the brains, balls and heart to invest their money imaginatively, courageously and philanthropically. That’d mop up the money glut.

Needless to say, these happy scenarios depend on culture change – which, if it happens at all, is a long-term process. So, in the meantime, is there anything that the state can do to attract excess capital into socially-useful investments?

Visionary public funding programmes of the kind that gave the internet its start are great – but, again, it’s a long-term process. Fortunately, there are some quicker wins to be had – areas where strategic state-led investment can unlock avenues for productive private investment.

Consider the decades of under-investment in the economic infrastructure of our cities beyond London. Addressing key weaknesses – like the state of our non-Londoncentric public transport system – does not require futuristic technologies, but tried-and-tested upgrades that more productive local economies already have.

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The challenge for government – including local government – is to become a credible enabler of private sector investment opportunities. That means an end to the imprudence of politically-driven mega-projects like HS2 and Hinkley point, and a pivot to smaller, less complicated, productivity improvements.

The fact that so much potential has been left locked-up for so long is an indictment of our over-centralised political system and our lopsided national economy. But that can be changed – indeed, it is being changed as local communities are re-empowered and the foundations of a modern industrial policy are put in place.

A new prime minister has an opportunity to shift this work into a higher gear.

It’s really not that long ago that the cathode ray tube was a part of everyday life – the vital component in the heavy, box-like TV screens and computer monitors sat in our living rooms and offices.

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As far back as the early 1980s, I remember people speculating that flat screens were “five-to-ten years away”. The joke was that they always would be. But then, suddenly, they arrived – displacing CRT screens just about everywhere.

The thing is that just prior to this revolution, the old technology was never more ubiquitous – thanks to multiple TVs in many homes and computerisation in the workplace.

That’s a pattern worth bearing in mind as we contemplate the puzzling phenomenon of (nearly) full employment in the contemporary capitalist economy. It may be that our robot replacements are lurking, flat screen style, just around the corner. In five-to-ten years we human beings may find ourselves joining those cathode ray tubes on the rubbish heap of history.

But, so far, there’s little sign it. That’s puzzling because even if technologies like advanced robotics and AI aren’t quite in full swing, other potentially job-destroying factors – such as globalisation – certainly are. Furthermore, we’re only ten years on from the calamity of the global financial crisis – and still propping up a low-growth economy with piles of debt, QE and ultra-low interest rates.

And yet, as a special report in The Economist describes, most western economies are generating jobs like there’s no tomorrow:

“Across the OECD a jobs bonanza is under way. In the past five years the group has added 43m jobs. The unemployment rate—the number of people looking for work as a share of the total labour force—is at its lowest in decades… In 2018, the employment rate among people of working age was the highest ever in Britain, Canada, Germany, Australia and 22 other OECD countries.”

Furthermore, the jobs boom doesn’t seem to be leaving many people behind:

“The boom is broad based. Unemployment among unskilled workers and the young is tumbling, as is long-term joblessness.”

The UK’s ‘jobs-led recovery’ is especially interesting. Prior to 2010, private sector job creation was massively skewed to the richer half of the country, but, in this decade, the North-South divide has narrowed dramatically.

Nor can the jobs-boom be explained away as a sub-optimal shift to temporary, part-time and self employment. The big picture is much more solid than that. And as for wage levels, those appear to be on the rise again after a long period of stagnation.

Even if our long-term future is one of ‘fully automated luxury communism’, the present is one of fully employed luxury capitalism.

But to some critics, the ‘luxury’ part of that formula would be better described as ‘unnecessary’:

“David Graeber, an anthropologist, goes further. In ‘Bullshit Jobs’, a book published last year which has become akin to a holy tract for millennial socialists, he claims that a big chunk of modern employment is pointless and soul-sucking. ‘Huge swathes of people, in Europe and North America in particular, spend their entire working lives performing tasks they secretly believe do not really need to be performed,’ he argues.”

Of course, “bullshit” in this context is a subjective term. Deplorably, there may be some unkind souls who’d apply it to Professor Graeber’s profession!

Isn’t it better to see our surplus-to-requirements economy as a sign of progress? One can argue about how best to achieve and distribute frivolity-for-all, but as long as we don’t wreck the planet in the process, what’s wrong with a little luxury – or, indeed, a lot?

Of course, if luxury for some is only made available through the drudgery of others, then that is a problem. The kind of demoralising service-sector jobs described by writers such as James Bloodworth are clearly nothing to celebrate. And yet, as the anonymous authors of The Economist article point out, governments across the Western world are placing stronger requirements upon employers to look after their employees – for instance, through training opportunities, childcare provision, parental leave, health and safety measures and minimum wage levels.

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Furthermore, and contrary to the prophecies of the free market fundamentalists, pro-worker regulation has not killed off job-creation – quite the opposite it would seem.

The authors offer various explanations for this jobs miracle – the most interesting of which is that technology has revolutionised the process of recruitment:

“Better tech improves the ‘matching’ of employers with potential employees. Not long ago those hiring put an advert in a local newspaper or spread the word by mouth. Now employers can shoot from the hip, posting vacancies on a slew of jobs websites. In the ten years to 2016 the cost of filling a vacancy fell by 80% in real terms.”

I suspect that we’ve hugely underestimated the significance of the progress made in solving this most difficult of coordination problems.

The perception that the digital age hasn’t made more of an impact on productivity levels is one of the great mysteries of contemporary economics. But perhaps we’ve been looking in the wrong place. Or, rather, we’ve been misled by the key statistics.

The standard measure of productivity is specifically one of labour productivity – i.e. GDP divided by the total number of hours worked. But what about hours not worked because people are unemployed – earning nothing and producing nothing? This zero productivity is excluded from the standard measure, making a high unemployment economy look much more productive than it actually is.

If the internet has enabled employers to employ more people and workers to find jobs more easily then it will show up in the statistics as a hit to productivity – because more of the least skilled workers will be included. That is perverse, because while these newly-included individuals may be less productive than other workers, they’re obviously more productive than the uncounted unemployed.

One day the robots may finally arrive with our P45s in their steely claws. But until then we need a better measure of productivity to show the job-creating effects of technology as a plus not a minus.

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By John Cruddas

Shopping centres can be a bit like that. Many are constructed behind the facades of much older buildings. Though architecturally bland on the inside, these complexes sometimes preserve historically interesting features on the outside – especially if you look above ground level.

The other day, I was exiting out the back of a 1980s era retail complex and stopped to look at the red brick Victorian facade. On the inside, the likes of Topshop and River Island were jostling for attention, but on the outside there was a stone set in the wall, on which was inscribed: “To the Glory of God.”

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I’m not sure what purpose the original building served. It didn’t look like a church, but might have been a church school. Then again it might not have been any sort of ecclesiastical building. In the Victorian era, the secular could be religious too.

Today, it’s hard to imagine a commercial or municipal building going up with any such dedication. Our society may retain the legacy of an older, more religious past – an established church, bishops in the House of Lords, a monarch “by the Grace of God” – but behind the facade its purposes are profoundly materialistic.

Does the emptying out of what used to animate our civilisation actually matter? After all, as individuals we can still search for the meaning of life – and practice whatever faith we might find without the distortions and constraints of social convention.

And as for society as a whole, not paying much attention to the God stuff doesn’t seem to have done us too much harm. On the whole, there’s been no breakdown of public order; most of us live our lives in peace and prosperity; and on various metrics we continue to make collective progress.

Perhaps, it was ever thus. Rather than depending on a certain, commonly-held set of beliefs, we might theorise that the religiosity of, say, the Victorians, was actually the product and emblem of the society they’d built for themselves – the icing not the cake.

There’s a debate in academia as to whether the idea of “Big Gods” – i.e. all-powerful, all-seeing beings who lay down moral standards and mete out divine justice – came before or after the development of complex human societies. Back in April, I unpacked an article about some research that concludes that belief in Big Gods is a development not the foundation of big societies.

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By Peter Franklin

However, not everyone agrees. In a fascinating piece for Nautilus, Brian Gallagher interviews a researcher who comes to the opposite conclusion :

“Joseph Henrich, chair of the Department of Human Evolutionary Biology at Harvard University, sees it differently. He contends that moralizing gods spurred societal complexity because belief in moralizing gods leads to success in intergroup competition.”

Henrich argues that belief in a moralising God encourages individuals to co-operate with people beyond their immediate circle:

“We’ve done experiments, where we had people divide sums of money between themselves or a member of their own village, and someone else in a more distant community. What we find is people who believe in gods that are more punishing, or more moralizing, are more equitable in how they allocate money between themselves or a member of their village in these more distant communities.”

But what about the research that draws upon Sheshat – the global history database which systematically records the social development of cultures across the world? Doesn’t it show that Big God religion emerges after the founding of big societies? Henrich responds by referring to the problem of “forward bias” – which arises from the incompleteness of historical and archeological records:

“For example, if we find evidence that humans had fire 200,000 years ago, we can be sure that, as a statistical fact, unless we think we found the actual first time anyone ever made a fire, that we’re finding it later than it actually appeared. So dates in archeology and history are always forward biased, at least statistically. One of the analyses we did was just to minimally correct for forward bias by moving back the smallest amount of time possible in the Seshat database, which is one century. When you push things back one century, it reverses the results.”

Further reading

In praise of incompetence

By Giles Fraser

So, religion enabled complex societies, not the other way round. But, in turn, complex societies enable the development of enduring secular institutions – such as systems of law and law enforcement, not to mention deeply enculturated standards of civility and other stabilising social taboos. Henrich compares traditional religion to climbing a ladder – once society gets to the top it doesn’t need it any more.

Or does it? Contemporary western societies have kicked the ladder away, but might we yet fall from grace? Can the institutions and understandings that underpin our way of life endure? It’s too early to tell. Things that took centuries to build up usually take a long time to decay – even when neglected. As Adam Smith once said “there is a lot of ruin in a nation.”

Perhaps the best place to look for portents is in those areas of our common life that are most weakly connected to our civilisational foundations. The most obvious example is digital culture – which is entirely the invention of (post) modernity and a domain that floats free of the established rules of social interaction. ‘People wouldn’t behave like that real life’, one hears people say of social media.

I’ll leave you to do decide whether that’s an encouraging sign.

Further reading

The digital revolution: a disaster for progressives and conservatives alike

By Peter Franklin