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Newspeak – for emotional populists

Some people seem to get extremely upset when faced with some rather pedestrian ideas. And no wonder, because they are speaking a different language, literally!

Here is how I understand some of the expressions being used, and what these emotional populists actually interpret them to mean…
(Entries are in alphabetical order)

Term/Expression What I understand: What emotional populists understand:
“I disagree”
I don’t think that’s entirely correct. You oppose everything I stand for. Maybe you even hate my very being.
Authoritarian
Wanting to centralise power and control in government. A new Hitler/Stalin or even anyone who dares to take a strong position/statement on controversial issues.
Capitalism
Advocating of free trade and private ownership of the means of production (capital); so that they who work hard and takes risks will be the one to reap the rewards.

Opposite of Socialism.

Greedy rich people who want to get rid of rules that protect society, so that they do not have to contribute to society.
Centrism/Centrists
Being unconcerned with the ideologies pertaining to the political left or right, and only concerned with producing results. Pragmatism. I find your opinions completely reprehensible, but I’m willing to tolerate them. In other words, Libertarianism.
Communism
Imposed equality of outcome. State ownership of all capital. Socialism taken to its logical conclusion. Evil dictators. Or idealistic good lefties corrupted by power.
Conservatives
People who want to retain tradition, either out of habit/comfort, or out of caution of the danger of changing society too quickly, or even out of recognition the strengths and benefits of inherited wisdom. Backward bigots/greedy Tories/Republican gun freaks.
Crony capitalism
The antithesis of free market capitalism, aka Kleptocracy: The abuse of government influence to gain wealth, such as state-sponsored monopolies. The bigger the government, the greater the abuse and wealth gained – a particular vulnerability of socialism. The inevitable consequence of capitalism.
Democratic / Democratised Socialism
Exactly the same as socialism – because the economic nature of state control over production is not dependent on whether or not it was democratically supported. The idea that socialism can be rendered benign by virtue of its democratic establishment.
Discrimination
Distinguishing between different things. Hate against those who are different.
Diversity
Being different, or having different backgrounds. Anyone that is not white, heterosexual, or male
Emigrant
Someone who has migrated out of the country. An “outward migrant”. Is that a misspelling of “immigrant”?
Equality
Giving everyone equal rights, and equal treatment. Ensuring everyone has the same outcome in life.
Establishment
A term describing people or organisations who have gained widespread recognition and long-term endurance – such as a big multinational business, or an entrenched political party. Anyone with substantial wealth. Usually conspiring to oppress the poor.
European Union
An ambitious project of political power play, seeking to consolidate control of European nation states into a massive global superpower (that rivals the USA, Russia, and China), to achieve through politics what the instigators of WW2 failed to achieve through military might. Trading with Europeans, travelling in Europe, and European countries. Anti-war.
Ex-pat
Someone who lives outside the country they were born in. Short for ‘Ex-patriate’, meaning “outside the land of the father”. Rich white people from the west who move to poorer countries, who benefit from the glamour of being a foreigner and increased spending power due to advantageous exchange rate.
Exchange rate
How much a currency is valued compared to a different currency. A figure that is caused by the interaction of supply and demand, with no direct meaning in absolute terms. A measure of personal wealth relative to foreign wealth; ipso facto – the direct representation of a nation’s wealth.
Extremism/Extremists
The taking of an ideological principle to its extreme conclusion without moderation. E.g. totalitarian communists, anarchists, or religious fundamentalists. Extremely bad people with a penchant for aggressive behaviour. Usually right-wingers. Fascism manifested in violence.
Far left
Totalitarian communists Idealists
Far right
Libertarian capitalists Totalitarians/Nazis/Fascists. The epitome of evil.
Fascists
Authoritarian nationalists. Anyone who disagrees with a liberal.
Free speech
The right to say anything you want, no matter how controversial, for the sake of facilitating public debate, challenging social mores, and protecting individual freedoms. The right to slander people based on limited understanding of their views, to say only socially acceptable things, and the legal obligation to stop people saying or writing things that hurt your feelings.
GDP
Gross Domestic Product – essentially how much monetary value is being added by a country’s economic activity, whether by business, consumers, or government. An indicator of economic activity, which correlates with a nation’s economic health. The cumulative wealth of a nation.
Going on strike
Industrial action of last resort, the last course when conventional negotiation fails, designed to hit the profits of the employer by killing productivity. Political action designed to raise awareness to the plight of the ‘working class’, by hurting the middle class public who rely on public transport to earn a living, and whose jobs are not protected by trade unions.
Health tourism
The deliberate travel to a country to make use of, and pay for, the superior health service available in that country. The deliberate travel to a country to abuse its state-funded health provision.
Immigrant
Someone who has migrated into the country. Literally an “inward migrant”. Someone who is poor and undoubtedly skilled and hard-working, who thus deserves a resident visa because this country wouldn’t survive if there are no hard-working immigrants.
Invest
Putting money into an endeavour to give it capital for growth and building up productivity, in the hope of redeeming the investment at a material profit or otherwise gain in value. Spending money on government provision of services, regardless of whether or not the funds are available, and with no regard for economic sustainability or return on investment.
Left-wing
Advocating increasing the reach of government, centralisation of control, and state control of industry.
Liberal attitude to social values/traditions.
Ideas by people who care about improving the country. Everyone else is either narrow-minded, backward, or selfish.
Left of centre
A lean toward government provision of services at the cost of higher taxes. The idea that the government should pay for everything that I think the public needs, and to always intervene to prevent people from making poor choices.

In other words, socialism in its truest sense.

Liberal
Being unfettered by social mores and traditions. Good people.
Libertarian
Desiring to protect individual liberties over state control. Right-wingers pretending to be good.
Migrant
Someone who moves from one place to settle in another place. Refugee.
Moderates
The opposite of extremism – someone who might hold to a particular ideology or principle, but is willing temper to those principles against other concerns, or to accept pragmatic concessions. Someone who used to be militant about their beliefs, but is now not so violent about it, albeit not necessarily any less invective at it.
Nationalism
The concept of prioritising the country’s needs over that of foreign interests. Racism and fascism.
President / Prime Minister
The head of government, elected to represent the desires of the people in setting policy and driving legislation. Supreme ruler, without which a nation and its citizens will fall into disorder and chaos.
Populism
Appealing to the desires of the populace, regardless of ideological principles or political loyalties. Appealing to right-wing bigots.
Progressives
People who want to change society to what they THINK would be better. People who want to change society to what they are absolutely CERTAIN would be better.
Racism
Prejudice based on a person’s skin colour, race, or ethnicity.

Somewhat related to xenophobia (the prejudiced dislike of a person based on their nationality).

Any signs of negativity toward a person with a darker skin tone.

Giving foreigners a lower priority when it comes to national interests.

Criticism of Islam (other religions don’t count).

Someone seeking refuge in another country due to persecution they face in their own country. Someone seeking to move from a poor country to a rich country.
Right-wing
Advocating reducing the reach of government, devolution of control to the most localised level possible, and private control of industry, as typified by the free market.

Conservative attitude to social values/traditions.

Selfish ideas, by people who only care about themselves. Populists. Anyone who doesn’t agree with the Left.
Right of centre
A lean toward lower taxes and less government intervention. People who still believe that the government should intervene to prevent bad choices, but who do not mind some form of capitalism.

In other words, socialists with a desire for lower taxes.

Socialism
Advocating state ownership and control over capital and the means of production, so that government bureaucracy rather than private enterprise controls and monopolises the industry. This means that nobody involved in industry is motivated by a reward, whilst the public purse takes the risk.

Opposite of Capitalism.

People who care about protecting human rights, in particular being generous toward the poor and vulnerable.
Sovereignty
The right of a country to determine its own legislation and policy without being subject to foreign control or interference. The right for a country’s politicians to make decisions for the plebeian electorate.
Terrorist
Political activists who resort to force of violence, targeting civilians indiscriminately, in order to gain widespread media and political attention for their cause. Anyone who resorts to deadly violence regardless of justification or cause (such as disgruntled employees). Definition of violence may include threat of violence or verbal aggression.
Tolerance
The acceptance of differences, whether in background or opinions. The normalisation of liberal values, where differences of opinion are not acceptable or tolerated.
Trade union
Industrial collective designed to be a balance of power against unscrupulous employers. Political activists who are protectors of the poor and vulnerable.
Violence
The deliberate application of harmful physical force on another creature or human being. Any action that can cause physical or emotional pain, such as signs of anger, threat of aggression, or verbal abuse.
World Trade Organisation (WTO)
An international organisation set up to facilitate global trade and ensure fair practices through internationally-agreed regulation. A set of rules representing the worst-case scenario imaginable for international trade, which would destroy the United Kingdom’s economy.

Lastly, a few personal bugbears not related to politics…

Term/Expression What I understand: What emotional populists understand:
Engineer
Someone who engineers/designs solutions as a professional discipline. Technician/ mechanic/ grease monkey.
Technician
Someone who works on fixing and maintaining technical or mechanical equipment. Someone with good technique.
Asian
Anyone from the continent of Asia (including Chinese, Koreans, Mongolians, Japanese, Filipinos, Arabs, Israelis, Indians…etc) Anyone brown-skinned, such as Indians and Pakistanis.

Exhausting the ‘far-right’ label

I am genuinely sick and tired of being called far-right. ‘Right-wing’ does not mean “everything that a leftie disagrees with”.

I am genuinely sick and tired of being called far-right.

I disagree with David Cameron, but I also disagree with a lot of lefties and left-wing policies, but that does not make me far-right.

Just because David Cameron has done a lot of stupid and unpopular decisions, does not make his position hard-right.

Just because you’re a leftie, does not mean all your beliefs and policies are left-wing. ‘Right-wing’ does not mean “everything that a leftie disagrees with”. There might well be some ideas you actually endorse, but which are right-wing in principle; and there might be some policies you absolutely detest, but actually have its origins in left-wing ideology.

Some lefties have argued that the left-right spectrum depends on the context you operate in; in the context of the UK, right-wing is defined by the Conservative party, and left-wing is defined by the Labour party. If that is the case, then you cannot accuse David Cameron of being hard-right, so the terms hard-right or far-right becomes meaningless. And if you want to define terms this way, then you better abandon the association of far-right with Nazi ideology. The National Socialists were nationalist first and foremost, which manifested itself through socialist policies and cronyism. The British Conservative party is neither nationalist nor socialist. The only parties which are nationalist are economically centrist (UKIP) or left-wing (SNP, BNP). Every party claims to oppose cronyism and nepotism, but every party is subject to, and some even indulge in, these vulnerabilities.

Myself, I have no interest in nationalism, and I despise cronyism. I am neither right-wing, nor am I left-wing. I am pragmatist, and will go with whatever ideas and policies most capable of delivering results. In traditional parlance this used to mean that I am a centrist. However, such an expression is no longer helpful – this is because in modern British political parlance, ‘centrism’ is actually closer to populism, which usually means right-wing social attitudes (traditionalism) and left-wing economic attitudes (statism).

I joined UKIP because they were willing to disregard political ideology and political-correct terminology. They were willing to confront the hard truths and take a stand on politically sensitive issues, because they were prepared to stand up for the citizens of their country. This has resulted in them making controversial statements attracting support from hard-line or otherwise ‘colourful’ characters, but this is not an accurate representation of the party.

Every time you refer to me right-wing/hard-right/far-right, you tell me you are politically ignorant, and so I cannot take you seriously. Please educate yourself before you cast such judgement.

If there is anything you disagree with, please raise it with me directly, instead of calling me names behind my back or making passive-aggressive snipes. I have a strong interest in science, economics, and philosophy, and will be willing to pursue discussion in any direction, on almost any subject.

How Brexit would benefit the UK’s finance sector

Being free from EU regulations would benefit the finance industry of the UK.

Ever since the results of the United Kingdom’s referendum on EU membership was finalised, much has been made (particularly in the City) of the impact on the UK’s financial sector. Indeed, I myself held a similar opinion: Regulatory Passporting: The killer argument against Brexit

Much of the UK’s success in the finance sector comes from trade within the EU (including the UK). As I (and others) wrote before, these passporting rights allows financial firms to access the entire Single Market with minimal regulatory checks. Outside of the EU and without passporting rights, financial firms wishing to trade within the single market would be subject to many more bureacratic hurdles. These would subject financial institutions to costs that would significantly impact their competitive edge.

On top of this, we have the upcoming enforcement deadline of the EU’s MiFID ii directive. This new directive enforces regulation on the finance industry on a vastly greater scope. Eventually, MiFID ii will be superseded by MiFID iii, legislation that is almost certainly guaranteed to be even greater in scope.

Some of the biggest financial institutions are already moving their base of operations from London to Frankfurt, Paris, or Brussels. This activity seems to provide evidence in support of the idea that Brexit would hit the UK’s finance sector.

However, I think a few questions that would greatly refute this theory have gone unanswered :
1) what is the nature of the City of London’s finance sector?
2) what is the cause and driver of MiFID, and how effective is it?
3) how will the City be affected by the upcoming iterations of MiFID?

London: Europe’s finance centre
The City of London is the home to the greatest financial sector in Europe. The London Stock Exchange itself is by far the largest stock exchange in all of Europe, with a market capitalisation of over £6 trillion. It is almost twice the size of the next largest stock exchange in Europe: Euronext, which itself has a significant base in London too. Another enormous exchange is the London Metal Exchange, the world’s largest market in options and futures contracts on metals, with over £10 trillion worth of contracts being exchanged every year. There are many other major financial marketplaces based in London include Lloyd’s of London insurance market, the Baltic Exchange, Tradeweb, and The Intercontinental Exchange (which owns the world’s largest stock exchange, NYSE).

What does this mean with regards to the loss of passporting rights? Yes, trade with Europe would be affected. But trade works both ways. The European finance sector who wish to trade on London marketplaces would also be hindered by this loss. An important factor is that exchanges cannot relocate – they are the market. Thus traders who wish to trade on a marketplace need to be where the exchange is. Just as London traders who wish to trade on European exchanges have to go to Europe, so do traders who wish to trade in London marketplaces need to come to London from all over Europe. Yes, some financial institutions in London will take action to set up branches in Europe to take advantage of passporting rights, but at the same time, financial institutions throughout all of Europe would move to set up offices in London to trade in London’s markets. This is simply an administrative exercise. The key difference is the sheer size of London’s finance sector. The gains in incoming businesses setting up branches will likely offset the losses in businesses moving branches into Europe.

MiFID, MiFID ii, MiFID iii – origins and efficacy
MiFID stands for Markets in Finance Instruments Directive. The first iteration (2004) superseded the Investment Services Directive (1993), itself the EU’s early attempts at regulating the finance sector. MiFID was supposed to ameliorate risks within the industry. MiFID was developed by a committee in consultation with industry players, who of course implicitly lobbied the system to favour their institutions, before passing through the legislative houses the participants of whom acted in their own political interests regardless of expertise. This government-led regulatory process is in contrast with industry standards and practices, which are jointly developed by experienced industry players independent of government interests, to benefit the industry without being encumbered by legislative processes.

The shortcomings of MiFID came to light in the wake of the 2008 financial crunch. In a rather phlegmatic knee-jerk response, the EU enacted MiFID ii in 2010, which for practical and politically expedient reasons would not apply until 2014, and then not be enforced until 2017. In comparison to its predecessor, MiFID ii vastly increased in legislative volume, scope, coverage, and detail. In the meantime, individual governments started cracking down on ‘bad’ players in the finance sector in their own knee-jerk political response to public reaction.

However, MiFID ii and all the government action in the same line was effectively scapegoating. MiFID ii sought to crack down on market abuse and enforce market harmonisation so that individual markets would not have an unfair competitive edge. But the 2008 crunch was not caused by market ‘disharmony’ or market abuse. It was a very clear case of overleveraging the mortgage market. Basically, in order to gain the competitive edge, banks lent out more and more mortgages to those less and less able to afford it, building up a financial bubble in property prices. The 2008 crash was a consequence of this bubble bursting, rebalancing the market to relative normalcy. No amount of market harmonisation or prevention of market abuse would have prevented such a crisis.

Seeing as players in the finance industry were the ones hardest hit by the 2008 crisis, it naturally followed that they would be the ones most vested in preventing such a crisis happening again. So the industry learnt its lessons, enacted their own checks, and the industry carried on evolving,
whilst government regulators were busy attempting to enforce the complicated details of the EU directive. After all, markets and technologies are not stagnant, and will develop quickly in any developed economy, especially in an industry so awash with money as the finance industry. Mechanisms within MiFID ii designed to reduce risk and fight market abuse were already rapidly becoming obsolete. Thus not only was MiFID ii outdated and ineffectual at its aims, it represented an ever-increasing bureaucratic burden on the finance industry that unnecessarily hindered growth without benefiting the industry.

To top it off, in an effort to chase its own tail and cover up the many problems created by MiFID ii, the EU is in the process of considering legislating for MiFID iii. In addition to increasing the bureaucratic burden, every iteration of legislative directive costs money for governments AND financial institutions to enact and enforce.

MiFID and the UK’s finance sector
In light of the doubtful benefits of MiFID (and its successive iterations), and given the great costs associated with enacting it, it is quickly becoming evident that not only does the finance industry not need MiFID; the EU’s involvement in regulating the industry is actually damaging the finance sector rather than protecting it. Outside the EU, the UK’s finance sector will no longer be subject to any further EU legislative meddling. The industry will be free to learn from its own mistakes and develop its processes and technologies to competitively flourish free from unnecessary bureaucratic burden. In contrast, financial industries within the EU will be further hindered by subsequent iterations of MiFID and its successors. This will actually make the EU less competitive in the finance sector, whilst the London carries on competing amongst the biggest international players the world over.

Progressives are not liberal

The Left may be described as progressive, but that does not mean they are liberal. Political progressivism really means nothing more than desiring change. But change towards what? Change toward authoritarianism is just as much ‘progress’ as change toward ‘anarchy’. We must never conflate ‘progressive’ with the genuine meaning of ‘liberal’.

In the days of old, progressives sought to liberate the people from the dominion of the monarchs or oligarchs. Back when politics was dominated by the strong and the wealthy, progressives could accurately be described as ‘liberal’. Liberals wanted a freer society: individual freedoms, economic freedoms, religious freedoms, political freedom, etc.

However, in modern day democracies, progressives are actually arguing for greater state/government control over behaviour and even attitudes. It appears to be a progressive cause to increase legislation over the finer minutiae of individual lives. Modern progressives have very little tolerance for dissenting opinion or freedom of speech. Take for instance prejudice or hate speech laws: conservatives tend to want to preserve individual liberties of free speech, including the right to offend, but progressives want to clamp down on hate speech, even if it infringes on hate speech. The point of contention here is not to argue over whether laws against prejudice or hate speech are effective or even desirable. The point is that progressives want to increase state influence, whilst conservatives want to preserve individual liberties.

The political opposite of progressivism is conservatism. Conservatism is about preserving traditions and not wanting to change very much. Since conservatives oppose progressives on the principle of increasing government control, it turns out is the conservatives who are defenders of liberalism. Conservatives want to maintain individual liberties and minimise government intervention in both society and economy.

The Left like to identify themselves as both progressive and liberal. But as I have explained, in the current political climate, you cannot be both. Conservatives want to preserve liberties. Progressives want to increase government control. So we are left with two options: either the Left is conservative and liberal, or they are progressive but not liberal.

The deciding factor looks to be this: the Left like to dismiss conservatives as right-wing. By process of elimination, the Left must self-identify as progressive.

The conclusion that leaves us with is that the Left is authoritarian.

This coheres with everything we know from modern history: The every single Leftist government, whether Socialist or Communist, is famed for their authoritarianism.

Can you name a modern political movement famed for protecting individual liberties? The likes of Katie Hopkins, Milo Yiannopoulos, and even Nigel Farage come to mind…

Wealth creation is not a zero-sum game

Apparently, this is what socialists believe:

“Capitalists cannot keep making money forever, because eventually they will have taken all the value from the world and would have to start taking money from the poor.” – Socialism 101

Perhaps Socialism 101 needs to take a course in Economics 101!

When someone gets rich, a popular belief is that they are achieving this at the cost of wealth taken from other people, such as by charging high prices from the consumer, and paying low wages to their employees. Certainly if the employer could get away with deploying such practices to maximise their profit, they will. But then you have to ask the question… In an open market, there is no compulsion: all transactions are voluntary. So why would the consumer pay high prices voluntarily? And why would the employee work for low wages voluntarily?

The answer is that it benefits them
The consumer is only willing to pay a high price of the product if they perceive the value of owning the product to be at least equal to or greater than the value of the money they are paying for it. Likewise, the employee is willing to work for low wages because the money they earn is worth their time and effort. If it were not so, they would not be compelled to partake in such transactions. After all, we do not live in a communist society.

The employee
An employee will not work for an employer unless the amount they pay is higher than the employee values his time. Imagine Tom a factory operator. For Tom, the calculation is simple: unless he is so self-sufficient that he can grow his own food and make everything he needs by himself, getting paid is better than not getting paid. Of course, the owner of the factory will only want to pay Tom the lowest amount he has to. But if the owner is underpaying Tom, he can simply go and find a job elsewhere. The only way that this might not happen is if the entire industry is colluding to underpay their workers. However, this would be counterproductive, as the industry is in competition with one another, so they would raise the wage they offer if it means gaining the edge over their competitors. Thus the factory owner has to pay Tom a competitive and attractive wage to keep him from finding employment elsewhere. However, if nowhere else is willing to pay Tom a higher wage than his current employer, that means that Tom is already getting paid the market value for his work. This applies in any industry sector: if your work is competitive, you will get paid good money for it.

Conversely, employers will not be able to raise the salary they offer their employees indefinitely either. If the wage of the employee is greater than the value they add to the employer’s business, it would be more economical if the employer did the work himself, or introduce machinery that performs the same task. If the employer did not have the capacity to do so, they would simply go out of business, resulting in material loss for both employer and employee.

The consumer
A consumer will only buy a product that they value more than the money they are paying for it. So may have paid money, but they are actually adding value to their own lives. They have gained in wealth. How does this work? Imagine a seamstress named Fliss. She buys her first sewing machine, which increases her productivity by tenfold. So, Fliss may have lost money in paying for the product, but the resultant increase in productivity has vastly increased her personal wealth: she is now able to produce and many more wedding dresses for sale. Correspondingly, Fliss is able to reduce the prices of the wedding dresses she produces, making her wedding addresses affordable to more people, and increasing the volume of her sales. The reduction in prices means many more brides-to-be are able to indulge in the joy of wearing the beautiful wedding dresses made by Fliss. Thus we have a cascading effect: the sewing machine manufacturer gets rich, whilst Fliss earns more money, and Fliss’ customers get lower prices. Result: the richest get richer because everyone else also gets materially richer.

How can everybody get richer simultaneously? A popular misconception is that everybody has a limited amount of spending power, and that the way this spending power is distributed affects how some people get rich and others get poor. However, this is a horribly misguided way of understanding the nature of finance. We have to understand what money is. Money in itself has no intrinsic value. Money is a representation of debt. When someone pays you money, it means you are owed that money’s equivalent of a product or service. When you start off in life, you have no money, because nobody owes you anything. It is only when you start working that you start accumulating money, or society’s debt to you. Thus your spending power is related to how much you benefit you contribute to society.

If an entrepreneur creates a product that can materially benefit everyone’s life, they have will get rich because other people will benefit from paying for that product. The more competitively priced the product, the better off the consumers who purchase that product. This means greater the demand for that product, resulting in greater sales and wealth for the entrepreneur. The wealth that the entrepreneur has gained is representative of the wealth he has contributed to society.

How wealth creation manifests itself
When society is bettered materially, the wealth creators responsible get rich. If the entrepreneur fails to better society, they will not get rich. How society benefits is in the form of improved quality, increased quantity, and lower costs of goods. What this means is that even if an individual’s wage does not grow, the goods available to consumers will either improve or become more affordable (or a blend of both). In short, quality of life improves. Furthermore, such economic development frees up more wealth by the average consumer to spend on other things, which increases economic activity, the growth of which ultimately contributes to increasing real-time wages.

Wealth creation is not exempt from economic fluctuations
A caveat to this cascading cycle of economic development is that the rate of growth is not stable. The rate of economic development has its peaks and troughs, periods of moderate growth punctuated by tremendous booms and busts. Due to the vast complexity of the economy, these fluctuations are not preventable nor are they predictable. Though governments can set policy in attempt to minimise such fluctuations, it is dangerous to assume that governments have the power to prevent them happening. As economic downturns have a natural tendency to rebalance and stabilise the economy, government interventions have a propensity to protract or even worsen recessions out of an incomplete understanding of the economic picture.

A pretender to wealth creation: rent-seeking wealth accumulation
So far I have talked about getting rich in the form of wealth creation, or entrepreneurial spirit. However, there is another method to getting rich, or staying rich, that does not create wealth. This form is called rent-seeking. The expression comes from the old perception that landed gentry gained wealth by simply letting out their property for others to work on, thus gaining rent without actually contributing any work. The basic idea is that rent-seekers have an accumulation of resources that they leverage to increase their material benefit, without needing to add value to society. A modern example of rent-seeking: when an industry interest group successfully lobbies the government for legislation to require industry participants to be regulated by that organisation. Thus entrepreneurs in that sector are required to pay subscription fees to the interest group (now a regulator) without the interest group actually contributing any value to the economy or society. Such instances of wealth accumulation does not necessarily contribute to societal betterment, which is why I would differentiate it from wealth creation. It is also why I am highly sceptical of regulatory bodies.

Breaking the NHS monopoly: My submission to the Richard Koch breakthrough prize

Breaking the NHS monopoly – My submission to the Richard Koch breakthrough prize

The following essay is my submission to the Richard Koch breakthrough prize… (http://breakthroughprize.org.uk/)

Breaking the NHS monopoly:
Introducing free-market competition
alongside national provision of
healthcare

The Richard Koch Breakthrough Prize
Entry number 10940

Executive summary

The NHS is a state-sponsored monopoly that is both inefficient and poorly managed. This essay describes some of the various problems encountered by the NHS that is a directly a result of its nature as a monopoly and its management by the government. It is then followed with a set of operational and economic proposals that seeks to redress these issues, by breaking the monopoly and introducing competition into the system. It describes the benefits of putting such proposals into action: 1) reducing wasted time, 2) improving working conditions, 3) increasing supply of health services. The conclusion finishes up with an example of just such an economic system working well and sustainably.

Part 1: Introducing the monopoly

The National Health Service (NHS) is amazing. It is wonderful. It is full of hard-working and knowledgeable staff, all the way from the trainee nurses to senior consultants. It has some of the most advanced medical equipment in the world. And it manages to provide all this for free.

Like all things, if it sounds too good to be true, it likely means it is not true. Like any service, the NHS cannot provide services for free. Someone has to pay for it. However, the NHS is founded on the principle that it has to be free at the point of delivery. Thus the NHS is operated at the taxpayer’s expense. In 2016, this cost of the NHS to the taxpayer is in the region of £140 billion, or just under 20% of the annual budget.

As such a significant cost to the Treasury, any issues of cost will directly affect the public purse. Improvements in savings will allow the Treasury to either reduce the burden on the taxpayer or reallocate public funds to other public services, or a mixture of both.

Part 2: Describing the problems of the NHS

2a: The operational weaknesses of a monopoly

The NHS is the UK’s largest employer. It represents a monopoly of the UK health industry. Any economist will tell you that monopolies are bad, for both the consumer and for the industry. Non-competition reduces the motivation for efficiency and innovation. This alone has numerous and unquantifiable effects on the system. In a competitive market, incompetent management will not survive because of the inability to compete. It also means doctors are unable to compete for better salaries and working conditions. Consumers (patients) are also greatly limited in their ability to choose a better service provider. Costs will not go down in line with technological and operational developments, because the lack of competition removes the primary motivation for efficiency improvements. And because the NHS is publicly funded, the service is essentially managed by the government – accountable to neither the consumer nor the employee, nor even the taxpayer.  

Multiplying incompetence

In a monopoly, the impact of incompetent management and systematic failings are multiplied many times over because they often get replicated throughout the service – a problem which can be enormously costly and damaging, due to the nationwide scale of operations. When the government recently decided to change the terms of employment for junior doctors, literally thousands of doctors, and even more patients were affected. This problem arose because there was no competition in the employment of health professionals. In a free market of independent health providers, medical staff need not go on strike if the conditions of employment were unfavourable – they could instead simply choose to work for an employer who provided better terms of employment. Not only would doctors find better pay and working conditions; patients would also be able to choose to go to a hospital who are better staffed.

Political abuse

As a government arm, the NHS is closely tied to politics, making it very vulnerable to being abused for political gains. At every general election, the issue of the NHS usually becomes a massive political football, a problem greatly exacerbated by tribal politics, the cost of which is often borne by those who actually need the health service the most. Limited funding by the Treasury has meant that not only are medical staff often underpaid, they are also put under increasing pressure to deliver services with fewer staff. This leads to highly stressful employment conditions which often drive staff out of the industry or out of the country altogether, as they pursue better working conditions.

Operational momentum

This is not meant as an attack on the Conservative government; many problems also arose under the Labour government. For example, when the NHS IT infrastructure was overhauled under the Labour government, costs spiralled out of control as the contractors were unable to implement the solution on time, nor even deliver the promised benefits of its functional aspects. Even as costs and problems continue to rise, the NHS is unable to extricate itself from this system without the further enormous cost of finding a replacement solution. The government was already committed to the project contractually and operationally. In a free market of independent health providers, the scale of any IT overhaul would be limited to the arena of operation/ownership. More importantly, the risks of such an overhaul would be borne by private investors. If the risk pays off, the hospitals who benefit from the improved infrastructure would become more efficient, improving the competitiveness and profitability of the health provider. If the risk fails to pay, or if costs spiral out of control, the damage is limited to only the hospitals involved. It will not become a problem that affects the entire country’s provision of health services.

A single point of weakness

A monopoly also represents a single point of weakness, which facilitates abuse of the industry. Consider the hypothetical example of a medical equipment manufacturer who is in competition with other players in the industry. It is not inconceivable that this manufacturer might leverage connections to win certain contracts. In the NHS monopoly, this event only needs to happen once for this medical equipment manufacturer gain a nationwide monopoly, potentially squeezing all other domestic competitors out of business. This is not to say that this has happened for definite, but we do not actually know if it has not happened. However, this certainly presents a significant weakness in the system. In a free market system where there are many players in the provision of the nation’s health sector, a single event of market abuse will be limited to a single health provider. If such an instance market abuse renders this provider uncompetitive, it will be outcompeted on the marketplace, placing a huge incentive on health providers to be actively preventing such an occurrence.

2b: The economic problems of the NHS  

Proponents of the existing NHS system of operation often argue that it is economically the most cost-effective system due to economies of scale. Granted, the economies of scale is indeed a benefit, but effect of this advantage has to be weighed against the costs incurred, due to the problems described previously. In addition, the set up specific to the NHS gives rise to further economic problems

First consider the law of supply and demand. It is one of the first concepts taught in economics, being the foundation of most economic principles: The more expensive something sells for, the more producers want to sell it. Conversely, the less available something becomes, the more buyers have to pay to obtain it. But inversely, the more expensive a product sells for, the less people want it. This can be described as such: As price goes up, demand goes down; as supply goes up, price goes down. In a free market, price is determined by the interaction of supply and demand, so that the price of a product is the point where supply meets demand.

The first problem: zero cost = maximal demand

NHS services are free at the point of delivery. There is an interesting phenomenon known as the Zero Price Effect, where demand for a particular product or service presented at zero cost is significantly greater than when priced even slightly above zero. This can be described behaviorally as people taking something for granted. The practical outworking is this: People don’t take care of their health, partake in dangerous activities, and get drunk frequently, and expect the NHS to cover them for any related health issues. And there are even reports of people going to their GPs for all manner of unnecessary issues. This means demand for NHS services will be as high as conceivable.

The second problem: limited supply

However, we have because the UK Treasury is not a bottomless pot of gold, the NHS is limited in terms of supply. In fact, the supply of services provided by the NHS is completely inflexible to the market, because funding for NHS is determined by politics and not market forces. But demand doesn’t care about supply, it just cares about the price it has to pay, which in the case of the NHS, is zero. So we have extremely high demand and limited supply. In the meantime, the supply of NHS health services is strained far beyond intended capacity.  

In a free market, this would normally mean suppliers would take advantage of this market condition to crank up capacity to meet demand and reap the profits from it. But the NHS is a non-profit monopoly on a public service. It has a stranglehold on health services in the UK, meaning the free market is not able to step in and increase supply capacity. If the NHS was a private for-profit business it would be able to reap huge profits from this monopoly. But thankfully, it is not for profit, it is publicly owned.

Part 3: Breaking open the monopoly

Decreasing demand

As described previously, the policy of being “free at the point of use” means that demand for NHS services is excessively high due to the Zero Price Effect. A simple way of decreasing this demand substantially is to introduce a very small nominal charge. The price I propose to charge for all NHS access is the grand sum of: £1.

There is no need to charge an amount that is high enough to cover the cost of providing the service; for that defeats the point of having a NHS. Nor is there a need to fine people for failing to turn up for appointments. This charge is not intended to cover the actual cost of the service; indeed, it is designed to only deter repeated abuse of the service. The simple act of having to wait and pay for services will deter time-wasters, whether they are either short of cash or short of time.

Breaking the monopoly of private GP practices

The way funding for GP practices are set up makes it ripe for abuse. Funding for a GP practice is allocated according to how many “patients” are registered to that practice. This funding is provided regardless of whether or not the “patients” actually make use of that practice for its services. It is incredibly difficult to take a patient off your register because it is not easy to determine whether someone who has not used your GP services for many years is just someone in good health, or someone who has simply moved to a different country, or even someone who passed away unknowingly. Furthermore, it is against the GP’s interests to deregister a patient who no longer turns up, because this patient provides a zero-cost source of income to the practice.

To discourage this abuse of the system, the solution is to provide funding based on the actual services provided, such as number of people who received an appointment and subsequent treatment each year. Given that the NHS IT infrastructure keeps a record of every appointment, this method of funding would not be difficult to implement and audit.

Increasing supply through fostering competition

Instead of retaining the NHS stranglehold on health provision, the government and the NHS really ought to be encouraging competition from the private sector. This could be achieved by allowing private healthcare providers to access NHS infrastructure such as its records or IT system for a licence fee. If the NHS took advantage of its size to obtain supplies and equipment at a good price and subsequently sold the excess on to private UK health providers, the entire health sector might even benefit from the NHS’ economy of scale.

If the supply of NHS services is no longer free at the point of use, the private sector would more be more able to compete against the NHS. It might not be able to compete on cost alone, but it would be able to compete in terms of quality of service. For example, if an appointment with an NHS GP costs £1 but has a waiting time of one week, an unwell patient might be willing to pay £10 to see a GP straight away.

Furthermore, there appears to be a culture of “NHS is best” in the country, and politicians and doctors certainly try their best to maintain this mindset. A possible way to overcome this cultural allegiance to the NHS is for private health providers and the NHS to publicly and visibly partner up, for example providing an “NHS-approved” label of confidence on private hospitals who meet NHS requirements.

Liberating junior medical staff

Another mechanism by which the NHS retains its monopoly over the United Kingdom’s health sector is in the sourcing of staff. All medical staff in the UK have to go through the NHS system in order to gain their qualifications. There is currently no competition against this system. To address this, the government should allow private sector hospitals to employ junior medical staff on a training capacity, providing that these private hospitals undergo a training regiment that meets or even exceeds NHS requirements. Content of training and qualification requirements should be decided by an independent body comprised of medical professionals.

If private hospitals are able to provide the equivalent training, junior doctors unhappy with their current conditions of employment would then have the choice to seek employment elsewhere that also provides them with the training for career progression.

In addition to this, there can be further liberalising policies to empower junior medical staff even within NHS hospitals – by allowing hospitals to determine staff pay and employment conditions instead of having it centrally determined by government. This would allow individual hospitals to act in competition against one another to attract the best staff for their hospital, and to provide pay that more accurately reflects the cost of living in their particular area, rather than the strict salary guidelines that take into little account the cost of living or the available level of staffing in that particular area. In short, hospital management will start behaving as if they were competing in a free market.

Allowing hospitals to determine the employment conditions also minimises the effect of employment disputes, particularly the involvement of union action. A trade union who chooses to go on strike will only need to affect one hospital, allowing other hospitals to provide the service. This would overcome the widespread political conflict that currently affects the entire nation.

Conclusion

If the NHS monopoly can be opened up to compare fairly against the free market, not only would the availability of health services increase; even the cost of these services would decrease. Such a result would primarily be most beneficial to the ones who make use of the NHS the most: those who cannot afford private healthcare. It would also be advantageous to the general tax-paying public as their funds are more effectively utilised to give taxpayers better value for their money.

As the saying goes, the proof of the pudding is in the eating of it: In Malaysia, waiting times for public GP services are a matter of hours rather than days as we have in the UK. If you decide to pay for a private GP, it is actually in the order of minutes – waiting over an hour is unheard of. For more serious treatments such as surgical operations or x-rays, the wait time is only a matter of days. In comparison, patients in the UK suffer wait times of many months.

Provision of public healthcare in Malaysia is not free either. Unlike the NHS, it is not “free at the point of use”. Patients who require treatment pay a nominal sum of 1 Ringgit for every consultation and treatment, regardless of the nature of the treatment. That is Malaysia’s equivalent of £1 (actual monetary value: 20p). It is far from sufficient to cover the cost of the treatment, but it is a sufficient amount to deter time-wasters, yet priced at a level that even the poorest can afford this treatment.

This is because alongside publicly funded provision of health services, there is also the thriving market of private health providers. Because private health providers are operated on a for-profit basis, there is competition in the marketplace to provide the best health service at the most competitive rates to the customer. The costs are correspondingly higher of course, but this at least represents a choice for the patient-consumer. If they wish to skip the queues at a public health centre, and choose to pay for optional extras, the option is there. And in fact, a great many people do indeed decide to pay for faster and better service. Because of this, the burden on the public health service is greatly alleviated in terms of operational costs and volume of service. Those who are willing and able to pay for their own treatments can choose to do so. Consequently, public funds end up being directed at those in need of it the most – those who are unable to afford private healthcare. And in a free market, supply rises to meet demand, ensuring the sustainable growth of capacity. As the economy improves, and more people are able to pay for their own private healthcare, the health industry improves, and overall national healthcare improves.

There are many things not right in Malaysia and even more things that the populace like to complain about, but the healthcare system is not one of them.

Full document in PDF:

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Stupid immigration policies

I’m a UKIP and Brexit supporter, but government immigration policies are getting ridiculous.

As a UKIP and Brexit supporter, I do not necessarily agree with everything the party or movement advocate, but I do support the concept of immigration control.

But you know what, the current policies being implemented by the government is getting plainly ridiculous. Requiring landlords to investigate the background of their tenants in order to affirm that they have the right to reside??? It is going to make it a bureaucratic nightmare for both landlord and tenant everytime they move house or get a new tenant. This is going to really upset a lot of people in high tenant turnover areas like London. What this bureaucratic headache will do is encourage the growth of illegal letting. People are generally moral and want to do the right thing, but when doing the right thing is far more difficult than doing simply slipping in under the radar, more and more people will be inclined to sidestep due process. Everyone has different thresholds of how much they are willing to suffer in order to do the right thing, so the more work you require of them to do the right thing, the more likely they are to do the wrong thing!

I also have plenty of critique for the situation where a spousal visa requires that the resident spouse has a sufficient earning power to sponsor the immigrant spouse. Thus a working husband who wants to move to his wife’s home country in order to keep her close to her family is prevented from doing so unless she is employed, and rather gainfully at that. Immigration issues is more than just about money! Sure, the immigrant spouse should demonstrate the ability and desire to integrate and contribute. Sure, immigration should check against scam marriages. But why should there be a financial requirement at all?!? Immigration control is not about money!

Instead of making life difficult for all immigrants, why can’t the Border Force adequately control the immigration process? I have just learnt today that the immigration service doesn’t actually have definitive statistics on immigration and emigration. The ONS has to do a survey at all the ports of entry/departure, and then extrapolate the results of that survey. This is basically putting your finger into the wind! Surely the Home Office Border Force are able to keep track of the numbers of entry and exit? What’s the point of scanning the passport otherwise? Have they not heard of something called a database?

Of course I am not white nationalist (I’m not white). I think immigration should be easy where there is legitimate case for it. And at the same time, immigration controls should always be enforced. Free movement is just simply a no-go for me. We live in an age where countries have different laws, cultures and economic strengths. Borders are necessary to protect those all citizens from all countries being harmed by these differences – Free movement does not just hurt the richer countries, it also hurts the poorer countries.