An open letter to Angela Merkel

I know you're probably fed up with Alexis Tsipras. You know, that irritating Greek demagogue who can't afford a tie? I can quite see why you want rid of him.

But I urge you - I beg you - please stop pandering to your own voters. Yes, I know you have to bring them along too. I know you can't keep giving their money to the Greeks. That's not what I'm asking for.

First, let's consider Mr Tsipras's position. As you know, the job of a head of government isn't easy at the best of times, and Mr Tsipras was catapulted from relative obscurity into his current role at a moment when the difficulty slider was already pegged at '11'. He has no friends, no substantive supporters, and no resources.

Yes, it was dishonest of him to call his referendum when he did, instead of a week earlier, before the IMF default. And it is obviously dishonest of him to offer concessions at precisely the moment when he knows you (and your friends at the ECB) can't accept them. But - setting that aside for a moment, because it's no more than you'd expect from a politician of his questionable training - would you not agree with me that the referendum itself is not only the right thing to do, but the only thing he can do?

His voters hate austerity. That's his party's entire raison d'etre; for him to cave on that would be political suicide. And yet his voters love the euro. For a long time now, it's been obvious that Greece can't preserve the euro without sharp austerity; but for almost as long, it's been equally obvious that austerity is not, contrary to what certain technocrats on your own side would argue, "expansionary". Quite the reverse. If it were, Greece would be doing fine by now.

Calling a referendum was the only way to square that circle. This is a decision that absolutely should be made by Greek voters - not by their government, or by the ECB or the IMF, or even by you. The European Union is supposed to be fiscally sound, honest and transparent, but above all it's supposed to be democratic. That means, nobody is fitter than the Greek people to make a decision about their future. And that is why the rhetoric of some Eurocrats who have described the proceeding as "irresponsible" or "in bad faith" is both unfair and unhelpful.

Making Mr Tsipras an offer he couldn't accept - accept precisely the same terms that he'd just won an election on the basis of rejecting - was also cackhanded. If you want to finish him off - and as I said up front, I completely understand that impulse - you need to be a lot more subtle about it. It's not your job to pressure him - leave that to his own voters.

The jackbooted approach you're currently pursuing is profoundly damaging not just to the euro, but to the EU itself. If the EU isn't democratic - to the very core of its being, overruling every other consideration - then it's basically just a rebranding of the Holy Roman Empire. And it will die the same way, with blood and iron.

And that death may come quickly. Britain's referendum is only two years away. Press the Greeks too hard, and the British will take notice. The euro can, probably, survive Grexit; but can the EU survive Brexit?

If it comes down to a choice between saving the euro and saving the EU itself, which would you pick?

Of Greeks and gifts

I'm rapidly coming to the opinion that my father was right about Germany.

When the Berlin Wall came down in 1989, he was the only person I knew who didn't think it was an unreserved blessing. As he saw it: for the past 40 years the whole of German policy had been focused on the single goal of reuniting the country, and with that achieved, it would soon turn its attention outward. The rest of Europe had reason to fear.

In the 1990s, when "European integration" was in vogue, he shook his head and muttered darkly about German imperialism. Something about the country's geography and history. I got a glimmering of what he meant when I briefly studied the life of Frederick the Great, but I still thought that tying it to the present day was paranoia. Besides, I reasoned: as long as they didn't start building an oversized army, what's the worst that could happen?

Then came the Eurozone, and he threw up his hands in horror and prophesied doom and catastrophe and the next European war. Those with long memories may recall that, in the beginning, there were "strict rules" about who could join the Eurozone: you had to have public debt below something, a defecit consistently below something else, exchange rates stable over N years and so forth. He predicted - correctly - that those "strict rules" would, quietly and without fanfare, be relaxed, because otherwise Italy wouldn't get in, and without Italy, the Germans wouldn't see the point. It's the Holy Roman Empire all over again.

Again I laughed at his fears. Clearly, his generation has a chip on its shoulder about the Germans, but that was all a long time ago. Me, I've been to Germany several times and I've met any number of Germans, even known a few. They're perfectly normal people. Nothing scary about them.

Now we have the Greek crisis. And suddenly, it's Germany that's playing the heavy.

The Greeks have created an economy where they can run a primary budget surplus (i.e. before counting debt repayments) even with over 25% unemployment. That's no mean feat.

More importantly, though, it's stupid. Governments are supposed to increase spending in recessions (defined loosely, but "over 25% unemployment" would qualify by just about any plausible yardstick) and reduce it afterwards. But the terms of the Greek bailout allow no such latitude. Greece is required to run a primary budget surplus - a large one - every single year for the next 20 years, come boom or bust. The Germans should know from their own history what happens when you impose terms like that on a country: it happened to them in 1919, and within ten years they were setting a benchmark for hyper-inflation that stands to this day.

Realistically, I think the Greeks have two options: they can leave the Eurozone peacefully, or they can declare war on it. I'm honestly not sure which outcome the ECB is currently trying to trigger.

Envy is the same colour as money

The New Zealand Herald, the other day, published a story about how much John Key was spending on a hotel room.

Well, not really. Mostly they cribbed the story from the UK's Daily Mail, which was more interested (and it shows) in what David Cameron was spending to attend the G20 summit. Turns out, Cameron is the third-biggest spender after Presidents Obama and Xi. While the leaders of such also-ran countries as Germany, Italy and Japan, and even the king of Saudi Arabia, are slumming it at $400-600 a night hotels, our Mr Cameron is splashing out A$1250 a night for his bed in Brisbane.

(Actually, we don't know that - not from this story, at least. He might be accepting a bribe from the hotel so it can advertise that he stayed there. Or he might be accepting bribes from other hotels to keep him away. Who knows? So long as he declares them, it's all good.)

But the Mail, I guess, is more concerned with the look of the thing. Is it Right, for Mr Cameron to be spending like this abroad after four years of preaching austerity at home?

Which just goes to show what a tediously snobbish little rag the Mail really is. Because as Cameron surely knows, if you want to make money, it's essential to spend it as if it meant nothing to you.

I have no idea where I first heard that bit of wisdom, beyond "somewhere in my youth". I don't think the person who told me had any idea why it worked, but I've given it a couple of decades' thought now, and I've worked it out. See, the most important thing about money - as every economist from Micawber to Friedman agrees - isn't how much you have, it's how fast you spend it. "Velocity of circulation", it's called. And in the interests of the economy, it's better for everyone that it should be spent as quickly as possible. Money changing hands is a good thing.

And therefore, when people make decisions that affect who gets to be rich - all other things being equal, they'll tend to favour the big spender. This is the real reason why political campaign ads work. It's not the content, it's the demonstration value: "See, this is how I splash money about! Vote to give me more money, and some of it might splash on you!"

So, David, congratulations on doing your country proud. Now I trust you'll take the next logical step and strike the word "austerity" forever from your political vocabulary, and that of your party.

The only leader who deserves higher marks (Obama spends more, but let's face it, the US genuinely is richer and bigger) - is the president of Burma, who is staying in a $1300 hotel despite Burma not even being in the G20. Now that's ballsy.

Artificial work

Remember the financial crisis? How many millions of people whose only real crime was "believing what they were told by the politicians they elected to lie to them" were faced with losing their homes, or worse? Yes, the fallout is still going on - but the main thwump of the collapse is, let's hope, behind us now.

And it's left in its wake stories like this. On the face of it, it's a tawdry and depressing tale of political incompetence, corporate corruption and human fallibility. But I think there's another angle here, which no media outlet is likely to spot, because they're all deeply embedded in the same demented economic system that gives rise to it.

Just in case you didn't click on the link just now: it's a story of how Bank of America outsourced some of its complaint-handling functions to a variety of private companies, and those companies proceeded to systematically screw customers by making a series of procedural "mistakes" that were, to all intents and purposes, embedded in the procedure itself. For example, they'd demand paperwork, but had no procedure in place to check whether the customer had already supplied it; so the poor sods were sending in copy after copy of the same paycheck, and all these copies would just pile up unopened somewhere. Then the customer's "failure to meet requirements" would trigger some other process, which basically meant they were booted out of their homes.

"People went through years of sending documents in," said Daniel Ellersdorfer, 37, a customer advocate who left Urban Lending after 13 months in September 2012 and is now a scuba-diving instructor. "There were people who did everything right and they would still get screwed over and have to start the modification process all over."

Like I said, it's not an edifying story. It hints - in a way that could get it into big trouble, if the publisher and targets were in the UK - at large-scale malpractice at BoA and its contractors, but it also provides plenty of ammunition for those who want to criticise President Obama and other politicians. Looking at the measures they put in place to "protect vulnerable borrowers", the phrase "half-arsed" springs irrepressibly to mind.

But more disturbing than all of this, to me, is the evidence it provides of two things that I've suspected for a while.

First is that the feudal system is alive and well in modern America. It's clear that everyone concerned takes it for granted that the only way for a pleb to have any chance at all in a difficult situation is for them to seek patronage from their betters (e.g. congresscritters); people didn't even get referred to the process unless there was a letter from Someone Important. Letters from people not of the noble class, apparently, don't even get opened.

Second is that - one faction of the Tea Party is 100% on the money. As far as the government was concerned, the plan to rescue people from the financial crash wasn't so much about "helping the helpless borrowers" as "using government patronage to create jobs". Thousands of jobs were created in these private companies that BoA hired to screw up its paperwork, and the fact that these jobs created no value and did no good for anyone except the job holders themselves (who got a paycheck out of it) doesn't seem to bother anyone.

Now, I'm all for the government giving people paychecks. Where I part company from this scheme is that these job-holders were required to turn up in an office every day and put in eight hours of grind at a task that they knew to be futile. They knew their jobs were worthless. What's worse, they knew there was valuable, useful work right under their noses that needed to be done, but they were powerless to do it - because if they did, they wouldn't be doing their paid jobs, then they'd be fired and stop getting their paychecks.

"Everyone knew that we weren't helping people," said Erik Schnackenberg, a customer-service manager who left Urban Lending in 2011 and now runs a yoga studio in Longmont, Colorado. "They were giving us all the pressure and none of the power to change anything. It was this absurd, self-contained ecosystem of worthlessness."

That's a broken system.

I've come to the conclusion that every government benefit (or tax break, which is the same thing) that's contingent on the recipient actually having to do something - look for work, turn up at a location, go through an interview process, have babies, earn money, get married - is a misguided attempt at social engineering. Much better if the government just gives everyone a paycheck for breathing, then lets them decide for themselves what to do with their time. Then people wouldn't have to take soul-destroying, dead-end jobs like these; they'd be happier, more free, and ultimately more productive work would get done, because thousands - probably millions - of people would be free to do something useful, instead of pointless make-work.

What are we all waiting for?

The boy stood on the burning platform

When I read that Stephen Elop is to be paid $25 million for his three years architecting the downfall of Nokia, the outrage across the internet was palpable. And I must confess, I fell for it. As I considered how this once-proud brand had been brought so low, and now the architect of its downfall is to be so rewarded, I felt almost physically sick at the sheer injustice.

But, I wondered, where was the political angle? How could the government of Finland just stand by and watch this - pillaging of their national flagship? Where was the doomsaying, the demagoguery, the raging anti-Americanism that should have heralded the announcement of Microsoft's takeover?

Which led me to think that, just maybe, people who paid attention may know more about this story than random internet blowhards. Which prompted me to do a little - just a little, mind you - further research.

And looking at the record, I notice that when Elop became CEO of Nokia in September 2010, the firm was already in grim shape. Share price, market share and profitability were all dropping rapidly. True, the company still had its own distinctive platform, it still had an unrivalled reputation for quality, particularly in the low end of the market, and it still shipped more phones than anyone else on the planet. But all those positions were under strong attack, and it was rapidly running out of resources with which to defend them.

And while Elop's performance was, by the numbers, gruesome, it wasn't as bad as it's now routinely depicted on partisan blogs. The oft-quoted "87% share price decline", for instance, is based on measuring from peak (just after his arrival) to trough (July 2012), but it fails to consider that if you bought stock in July 2012, you'd be looking at a 250% return by now - the end-to-end drop is a mere 40%. Of course that's still not good - unless, that is, you compare it with the 3-year period before Elop's arrival, when that same stock dropped by an eyewatering 75%.

If Elop's job was to arrest the decline, then he failed. But if his job was to prepare Nokia for its only viable future, as part of a hideous multinational empire, then he's done it well. Rather than a "trojan horse" - the popular image right now - perhaps we should be seeing him as a port pilot - the guy who comes on board just before the ship enters a harbour, to steer her past the hidden shoals into a safe dock.

Viewed in that light, Elop's initial appointment makes a lot more sense.

Has he earned $25 million? I have conceptual problems with the thought that anyone can "earn" that sort of money in three years; but I can imagine it wasn't a fun three years. And so long as it's not my money, who am I to judge?

Giving prostitutes a bad name

Good news from the homeland, for a change: it looks as if the government may be forced to recant on the madness of privatising the handling of prisoners.

It's telling, I think, that when I was a kid, if someone used the phrase "the prison service", they'd mean "service" as in "to one's country" - like military service, or - no, actually that's the only example I can think of where the meaning of the word is still reasonably close to what it was pre-Thatcher. Nowadays, it means "service" as in "service industry", as in "we may not create any actual output but we're no less commercial for that". Or to put it another way, "our business is modelled on the proud tradition of the world's oldest profession".

I was a firm believer in privatisation in the 80s. Unquestionably it was the right thing to do with manufacturing and mining industries, and with real services (defined as "things that I can be billed for personally, like telecoms or banking or travel"). But some "services" have a fundamentally different character. Policing, prisons, poor relief, public health, justice, fire and medical services, even politicians - these are "public services" that need to be paid for collectively, because any other system lends itself either to gross inequity, or the worst sort of corruption.

Of course corruption happens in non-privatised services too. However, it seems to me that it happens more, since the word "service" got divorced from "public" and shacked up with that slut "industry". That may be just a perception based on reporting/exposure, but if so it's a very widely shared perception.

The difference is that a service that is "public" can, in principle, be cleaned up. Given sufficient political will (read: outrage or scandal), you can appoint a new chief with the skills and determination to root out this sort of abuse. It doesn't happen often, and when it does, it doesn't generally last all that long.

But in a "service industry", the very concept of such "cleaning" makes no sense. When all incentives, both benefits and penalties, are expressed in terms of money, it follows that anything you can do to get more money is, by definition, not wrong. In these cases, moral bankruptcy isn't a failure or a collapse of anything - it's the baseline assumption of the system.

Quantitative unease

Memo to the Bank of England:

If you must print more money, for the love of all that's good and holy, don't give it to the banks.

You got £75 billion and want to stimulate the UK economy? Fine, give every Briton £20 a week for a year. The poorest will spend it (thus stimulating the economy), the richer will save it (thus improving bank liquidity). Everyone wins. Even the people you're robbing (savers) get some compensation.

And maybe the unwashed masses won't be quite so quick to blame you and your cronies for robbing them of their chance to have a stake in society, if you cut them in on the loot.

By giving the money to bankers, you miss all of these opportunities. All you're doing is bribing your own key constituents. That's very nice for you, but at this stage it might not be greatly overstating the case to call it "fuelling the boilers of the revolution".

Mugged

In the face of extreme provocation from the media, I've refrained from venting my opinions on the astonishing implosion of western civilisation as it's unfolded, over the past month, in the USA, Europe and the UK. There's no shortage of people closer to the action who are doing quite enough commentating for all of us.

But just so's you know it's not just you...

Last Wedneday was the bondholders' meeting, at our local racecourse, for those who'd lent money to Blue Star Print Group.

(A brief diversion here: Auckland has several racecourses. Where I used to work, in Epsom, was just down the road from a racecourse. Where I now live, in Ellerslie, is just round the corner from a racecourse. Gambling is big. Sadly we don't have British-style betting shops; even more sadly, we do have the tallest freestanding building in the southern hemisphere, and it belongs to a casino.)

And since it was just round the corner, I thought I'd go along and cast our vote in person.

My first impression was - familiarity. As a magazine editor in the 1990s, I attended scores of press conferences by well-heeled consultancy firms, and those events looked very much like this. I saw a phalanx of spotless business suits. The occupants, none aged over 35, clustered in groups based on what was clearly, among themselves, a well established pecking order. With my years of journalistic training, it was the work of moments to elbow my way through the crowd to the coffee dispenser.

This crowd, however, was not what I expected to see. There had been much talk of "mum and dad investors", and my mental image had anticipated that the suits, and the bodies inside them, would be rather more worn. Clearly, these were accountants - either here as representatives of the auditors or the consultants, or simply drawn to the smell of blood in the water.

Ah, there they were - beyond this antechamber in the main conference room. A scattering of middle-aged, middle-class people, all smartly dressed. I took a moment to wonder why they troubled to dress up in order to be robbed. Must be a colonial thing. I sat down next to a red-faced gentleman in his 50s, who looked fit for a bit of barracking, and waited for the entertainment. After all, I was paying for it.

Proceedings kicked off with an opening statement from the referee - sorry, chairman - who invited some preliminary questions from the floor. Of these, the only controversial one was "will you tell us how many proxy votes you're holding?", which he twice refused to do. Looking back, we should have pressed him on that. He was, he explained, on solid legal ground - but when you're asking people to trust you, surely it's no time to hide behind legalities. He added that he didn't want to prejudice our votes, then went on to introduce a series of presentations plainly designed for no other purpose.

The presentations were slick and, up to a point, persuasive. They pointed to a glowing future for the company, if we would just help them over this little temporary difficulty. But what struck me was that they didn't really seem to be aimed at us. We, the bondholders, still wouldn't get our money back even if this rosy future came to pass. There was a clause specifying, in so many words, that even if the company was sold for its weight in uncut diamonds we still wouldn't get more than about half our money back: the shareholders would keep it.

A few people explored this clause in their questions, but it didn't get much attention, because everything we heard was designed to massage our expectations into a very narrow range - the range in which we would get about half our money back. The chairman said that he'd opposed the clause, but negotiations had been bitter and bloody and in it stayed. (So why would the shareholders fight for a clause that would not be triggered under any plausible scenario? - is just one of the questions that didn't occur to me until some time later.)

For the most part, questions and answers were predictable. Would management and board be taking pay cuts? (No.) Is this really your best offer? (Yes.) Will the banks really call in the receivers if we turn you down? (Yes.) There was a surprising lack of passion, but I was cheered by much talk - and applause - for "voting on principle". Surely, I thought, they can't muster 75% agreement from this crowd unless the proposition includes lynching the shareholders. (It didn't.)

After a couple of hours of this, the crowd dispersed more or less peacefully, and I went home to await the announcement of receivership.

Instead, about 2.30 in the afternoon, I saw the news that the offer had been approved.

I was stunned. I would suspect dirty work in the counting, but that was the job of those nice accountants, and surely if they were going to jeopardise their good name for a quick buck, they'd take it from someone who was more solvent than this? Surely...

Still, the message went out from that meeting loud and clear to the New Zealand exchange: "We small-time bondholders know our place, and will gratefully accept whatever crumbs our betters deign to throw us. There may be such a thing as an offer that is too unfair or treats us with too much contempt, but you haven't managed it yet. Try harder next time."

So there you go. If ever you're tempted to lend money to a New Zealand company, don't. You might as well take it to the races.

Take that, Friedman

I keep hearing about how the UK gov't is cutting spending, in a desperate and probably doomed effort to bring the finances into something like balance within a reasonable timeframe.

Meanwhile, the New Zealand government continues spending as if it seriously believes the Rapture will strike on Saturday. In the wake of economic disasters (the collapse of one mine, and the announcement after an investigation that fully half of those remaining open have unsafe working practices), natural disasters (the Christchurch earthquake) and financial disasters (still no end to the stream of financial firms needing bailouts), the government doesn't hestitate to reach for its chequebook.

Yet for some reason, the foreign exchange markets love the Kiwi dollar over the pound. Can't get enough of it.

Each time some fresh disaster strikes New Zealand, the dollar rises. It's uncanny, really.

I can only conclude that free markets (I think the forex markets are about as close to 'perfectly free' as any existing market) believe strongly in the merits of heavy-handed Keynesian economic intervention.

Think about that, next time someone tries to tell you that governments shouldn't interfere because free markets know best.

Two concepts of quality

Researchers from Rice University's Department of Luddite Apologetics have found experimental evidence for what many of us have long suspected: that video content is more important than quality. If you're enjoying the movie, you won't notice that it's grainy, scratchy, blocky or even black-and-white. Conversely, if the movie is in super-high-resolution, that won't make you enjoy it any more.

Not surprising, perhaps. We know the brain is very good at filling in detail and smoothing over cracks. That's the whole principle on which movies work in the first place - if you show a series of still images quickly enough, the brain stitches them together into a single "moving" picture.

But it's always nice to have one's prejudices confirmed.

This should be terrible news for Sony, which has staked pretty much its entire product line on the assumption that we'll mortgage our firstborn to get higher-resolution video. Conversely, great news for TV viewers: you don't have to buy that HD screen and Blu-Ray player, it won't improve your enjoyment: good movies are good without it, and crappy ones will still be crappy even with it.

Unfortunately, Sony wouldn't be Sony if its plans were based on anything as fickle as "what we want". The poor old consumer is routinely stitched up with products that they either didn't ask for, or actually begged not to get - cellphone cameras, rolling news, American Idol, movie sequels (and prequels, and remakes, and Jar-Jar), cover versions, deep-ocean oil rigs, wars, Windows upgrades...

And HDTV is one of these. We're already being forced to accept "digital TV", on the laughable pretext that it will simultaneously allow more channels and better quality (which is a bit like wiring up your aircon so that it will only work when your heating is on maximum). Within ten years, I confidently predict, non-HD TVs will be hard to buy, ruinously expensive to service or repair, and incapable of receiving anything other than rolling news and reality TV. Thus requiring more movies and programs to be remade, to meet our higher expectations.

Consumerism. Gotta love it. After all, what choice do we have?

Biblical taxation

For some reason, there's been a lot of coverage lately of an American politician named Michelle Bachmann, who favours a "biblical" model of taxation. "We render to God that which is God’s and the Bible calls for ... maybe 10%", she apparently says.

Since I was brought up to believe that everyone - no matter how stupid or insane they sound at first encounter - has something to teach me, it occurred to me to wonder what a Biblical tax model might really look like.

Sadly, Bachmann has it quite wrong. When Jesus was questioned about taxation, He pointed out that money bears the image of Caesar, not God, and therefore (He implied) it is Caesar's domain (Matthew 22:21); the church has no call on it at all. What one should "give to God" is "what is God's" - a definition that, given the context, is clearly meant to exclude money. Paul, ever the pragmatist, recommends that Christians should give a fraction of their income for the upkeep of their church (1 Cor 16:1-2) - but he never mentions the 10% figure. And money donated to the church is, in any case, entirely separate from the issue of paying taxes; the donation is, very explicitly, not a tax - it is something that must be given voluntarily, "not reluctantly or under compulsion" (2 Cor 9:7). The "tithe" is an Old Testament concept, where it's levied by the Temple to support its works - again, quite separately from what the state or the king demand for their works.

Clearly, in conflating taxes with tithes, this Bachmann is on very unsound ground theologically.

I can, however, think of one example in the Bible where a righteous figure is charged with managing a secular tax regime. In Genesis 41:33-49, Pharaoh appoints Joseph as first minister of Egypt, to establish a tax rate of 20% in years of plenty; the idea being that it will be doled out in the lean years to follow (making Joseph, arguably, the first Keynesian).

This tax is raised for one purpose: to alleviate the effects of famine (recession) by feeding the hungry. It does not include any allowance for defence, law and order, education, fire safety, maintenance of public roads or buildings, the Pharaoh's majesty, or any other kind of public service - those are all extra, presumably levied by a separate, parallel set of collectors. This 20% is taken purely for the purpose of redistribution.

What could we do with a regime like that?

The UK's GDP per head, today, is around £27,000 per annum. Imagine if the government took 20% of that money (only a fraction of its actual spending, of course) and simply paid it out evenly to everyone over the age of 18. Assuming one-fifth of the population is under that age, that'd be a shade over £120 per adult per week.

That's enough to live on. Not "live well", of course - you'd probably have to share lodgings, and you couldn't support much of a family on it. But enough to take the edge off poverty. No matter what happens - employed, unemployed, self-employed, retired, on holiday, in education, in prison - every UK citizen would have a guaranteed top-up to whatever other income they could get. For life.

I think that would be a Good Thing.

It would remove the poverty trap - no more losing benefits when you gain income, because all lesser benefits are simply abolished. It would massively cut down on the government-related paperwork that afflicts ordinary people (I've been unemployed, I remember it with horror to this day - and what I had to put up with, including the 90% marginal tax rate, was only a fraction of the ordeal that's inflicted on the most vulnerable people in society when they try to claim, for instance, disability living allowance). It would establish a base level of income for everyone, tied directly to national income, thus reducing inequality. It would allow us to forget about "fully funded pensions" - pension income would be, quite transparently, paid for out of current income (which is what must happen anyway, it's the only thing that makes economic sense, and anyone who tells you different is trying to sell you something). It would support rural areas and take the pressure off inner cities - honest people need not be quite so desperate for jobs. It would eliminate the state retirement age, and indeed the entire concept of "retirement" - you could stop working at whatever age you felt you could afford it, and change your mind at any time later, with no repercussions and no paperwork.

So how, specifically, would we go about paying for the Universal Benefit?

For starters, it's considerably more than the current jobseeker's allowance, or the basic state pension (even including the winter fuel allowance), or disability living allowance, carer's allowance, child benefit, maternity benefit... So we could scrap all of those - basically, reduce the Department for Work & Pensions to a rump department charged solely with keeping track of who's still alive and what bank account they want their money paid into. That would save about one-sixth of the entire government budget, or over 35% of the money needed, without levying a penny more in taxes.

Second, the Universal Benefit itself would be taxable. So while the poorest get the full £120 a week, a top-rate taxpayer would get only £72 (my tax rates may be a shade out of date, but never mind that for now). Let's call it, to a reasonable back-of-the-envelope level of precision, another 25% of the cost clawed back directly from taxpayers at present rates.

The remaining cost to be charged in a direct tax amounting to 8% on all UK incomes. Since the money we're still looking for is (40% of 20%) of national income, it follows that 8% of national income would fill the gap. Of course there's still the zero-tax band (below, say, £10k), so the actual rate for those paying would have to be a bit higher - say, 9-10%. We could call it "national insurance contributions", and no-one would even notice the difference.

Who'd've thunk? It turns out that Bachmann has a fantastic idea. All that's at fault is her reading of the Bible.

Rewards and expectations

So England crashed out of the World Cup, to the surprise of no-one except those few million fans who seem to have a 44-year blind spot in their collective memory. And this is disgraceful and pathetic, and shows that England's footballers, and their coach, are a bunch of overpaid, overrated pillocks.

Well, fair enough. I can't see any way of arguing that anyone who earns that much isn't overpaid. It's not as if there were a critical shortage of applicants for their jobs.

But I can't help being struck by the contrast with the New Zealand story of the 2010 World Cup. The unfortunately named All Whites succeeded in getting draws in all three of their first-round games, failing to make it to the second round. And this is a national triumph, the best result ever for New Zealand football, and suddenly the All Whites are national heroes.

Such is the alchemy of "expectations", which can transform the same result into triumph or disaster.

And salaries, of course. We are very attached to the unfounded superstition that, if we pay more for certain jobs, we'll get better people. How's that working out?

Bankrupt ideas

The Kiwi dollar dropped slightly last week, and not a minute before time. It seems the financial world is finally starting to notice that our dollar is underpinned by an economy slightly smaller than Kansas, and our high interest rate is not a product of self-confidence, but a bloody liability.

Last week Don Brash, the charisma-less banker turned National politician who in 2005 led his party into its third successive election defeat, released the fruits of the deliberations of a "taskforce" he has chaired on how to catch up with Australia.

(Excuse me: "catch up with Australia"? Why would we want to do that? Given that we have a common labour market, when Kiwis envy the Oz way of life, there's nothing to stop them from moving there. And vice versa. Take away the difference between the countries, and that choice would be meaningless. Seriously, does Kansas spend its time producing reports on how it could "catch up" with, say, Illinois?)

But anyway. It's an article of faith for Mr Brash that the one thing we all want is more money in our pockets, and we will do or support anything to further that goal.

And his prescription for achieving it is all too depressingly familiar.

First, he says, we need to cut the top tax rate. Yeah, like every right-wing politician since Attilla the Hun has promised, just before they funnelled all the cash that should be going to the exchequer into their own pockets. Speaking as a top-rate taxpayer, personally I think it should be higher. 39% is not particularly rapacious by international standards. (It's lower than Australia, for one...)

Second, he wants congestion charging to pay for new roads. As a way of improving the budget, congestion charging remains one of the dumbest ideas ever. Petrol tax is cheap to collect, hard to evade, creates a broader tax base, and encourages exactly what we want to encourage (less pollution). The only downside is that it doesn't create the same scope for outright corruption and government patronage of private contractors...

Third, and my personal favourite, "to remove the temptation for future politicians to use the superannuation fund for political purposes", we should just do it now. Steal the whole bloody thing and use it to reduce taxes, i.e. to increase the amount of money going straight into Mr Brash's own pockets.

Memo to Don Brash: This is why you lost. Most Kiwis don't want their country to be a tax haven for obscenely rich Australians. They'd prefer not to see people, even strangers, starving in the streets. If that means we live slower and have less fancy toys than Australia, that's fine.

And if you don't like it, move to Oz. We won't miss you.

Trust me, I'm a blogger

Apparently, the pope doesn't approve of the Twilight series of books and movies. The Vatican feels it's morally unhealthy for millions of teenage girls to be lusting after soulless monsters.

The only person I know who's seen the latest movie agrees that His Holiness has a point. Vampires have always had erotic undertones, from Dracula to Buffy, but at least they had the decency to remain undertones and subplots in an Epic Tale of Heroic Resistance to Ancient Supernatural Evil. Whereas Twilight, from what I hear, has abandoned most everything but the sex.

Of course, vanishingly few teenage girls are likely to care what some decrepit crossdresser thinks of their favourite soft-porn fix. The pope still carries some influence, but not as much as he'd probably like. Which brings me to today's ramble.

There was a report on Slashdot the other day of a survey that said that more than one-third of employees surveyed (in Canary Wharf and Wall Street) would sell confidential customer data, if the price was right. Of course the penalties for that sort of thing are pretty stiff, and it's unlikely they'd ever be offered enough to offset those. But it's still preying on my mind.

It seems to me that there's been a sharp drop in trust. And with trust goes loyalty.

It's not so much that, once, we would have "trusted" bankers to be honest. Really we had no choice. Bankers - like butchers, bakers, priests, auto mechanics, lawyers, computer programmers, farmers, manufacturers of everything from airliners to zip fasteners - most everyone, in fact - did their work, or at least the important bits of it, behind firmly closed, opaque and soundproof doors. Even journalists, those apostles of openness and transparency, kept their own work to themselves.

Now all that has changed.

Take itemised billing. We got into the habit of checking our bills. And occasionally there would be a mistake - not often, but it seemed often enough to make it worth the trouble. Banks and credit cards led the way, followed by phone companies, shops, restaurants, professional services, hotels... slowly but surely, we reached the point where nobody just says "That'll be four hundred and seventeen dollars thirty-two, please" any more. We get itemised bills... and we're expected, nay, actively encouraged to check them.

The Internet has spread this 'doublecheck' attitude to all walks of life. Now you're considered a chump if you believe a news report, without cross-checking. You're supposed to check prices before shopping for anything that costs more than groceries. Check reviews of consumer goods, movies, hotels. Follow every link. What we get then is a barrel of conflicting reports. And none of them is authoritative, because what we've done now is to reject the very idea of authority. We don't trust anyone to tell us "the truth".

All of which is just the way we thought we wanted it. We're all economically rational beings in pursuit of the perfect information that will enable us to make the optimum decisions about how to use our resources. We're all smart enough to make our own decisions - aren't we?

But now we don't expect the truth, most people have given up even the pretence. Politicians and corporations openly talk about "spinning". Journalists increasingly disclaim responsibility for the truth of what they say. With the notable exception of FOX News, most media make some effort or pretence to tell "the truth" - but the best they ever manage, the best they can ever manage, is what we've learned to call "spin": a single view of "the truth", which may make perfect sense within itself, yet still look entirely different when seen from a different angle.

And so the "perfect information" that, economic theory says, we need to make our decisions, is more elusive than ever. The people qualified to make decisions are the ones who not only have, but also understand, all this information. Authority figures. The very people whose advice we no longer trust.

Even this could work, in theory. Instead of letting the professionals get on with their work, we watch them with the intensity of a child watching an ice-cream cone being filled. Unfortunately, also like the child, we have only a very superficial understanding of what the cone is being filled with. This doesn't matter to the child, because she trusts the ice-cream vendor...

What really screws us up is, as always, human nature. When someone says to you "I don't trust you, I'll be watching your every move", what's your natural reaction? Do you think of the person as a friend, one of us, someone you want to help? Or is there a part of you that starts to think: how much can I get away with, can they really tell what I'm doing anyway, damn' know-it-all prodnose...

When you treat someone as your enemy, over time, they'll start to think of themselves that way.

And yet it seems that, increasingly, that's the expectation for how we should treat one another. Employers monitor their employees' activities; and worse, that's increasingly seen as "reasonable". School-age children are told to include references and citations in their work - an undreamt-of requirement in my day, until I reached university. Parents are supposed to monitor their kids, not just outdoors, but increasingly in school, on the bus, on the Internet, you name it. In the UK now, you need to be registered on a central database if you want to work anywhere near children. In the USA, I'm told, you need to show photo ID to enter a government building.

I was listening to a BBC podcast recently, which talked about the policing of political demonstrations. Protesters complained about the practice of "kettling" - corralling people in a limited area and not letting them leave for a certain time - a practice that, not infrequently, scoops up and seriously inconveniences innocent passers-by. Then there's the practice of police systematically photographing demonstrators (try to photograph a cop, on the other hand, and you stand a good chance of being arrested on the spot).

The police superintendent wheeled out to defend the Met talked about the "small minority" of "troublemakers", whom, apparently, the police can't distinguish from the eternal "law-abiding majority". And so, he concluded, the fuzz have no choice but to treat everyone as a potential terrorist.

That officer, I thought, was missing the point in the same way I've been talking about here. By casting "police" as "us" and "protesters" as "them", the police have made their job a hundred times harder. Police are supposed to see all law-abiding people as "us"; only criminals are "them". If they didn't treat every protester as a criminal - an enemy - then maybe the protesters themselves would be more inclined to help the cops do their job.

Mistrust leads to resentment. Resentment leads to hostility. Hostility leads to enmity. The pursuit of economic rationality has led us into a deeply dysfunctional world, one in which everyone really is our enemy.

Somehow, we need to rebuild trust.

A good starting point might be to rethink what we mean by "trust".

If someone lies to us, and we know they're lying to us, does that mean we shouldn't trust them?

"What are you thinking about?"

"Oh, nothing."

There are times we choose to accept the lie, knowning full well what it is, because we trust the liar.

Catholics are familiar with this concept. They've long since accepted that the fairy-tales told in the Bible are not "true" in the strict sense of being literal descriptions of actual events as they happened. But that doesn't matter. What actually happened to a bunch of ancient Jews is not important to us, now, today: what matters is how we live our lives and bear ourselves to God, and the stories in the Bible (they believe) are the best guide to how we should do that. "Truth" is immaterial - only "faith" matters. That's what our sceptical age has forgotten.

Blood money

There's one of those sad stories on Slashdot, today, illustrating the real purpose of the Iraq war...

It points to a New York Times story about how the Iraqi army is using, basically, divining rods to detect explosives at checkpoints. There's a predictable slew of comments attacking unscientific methods in general and dowsing in particular, uncited studies supposedly debunking unverifiable anecdotes, all of it illustrating the boundless arrogance of random people on the Internet. But what really strikes me is the price of these divining rods.

Apparently, the Iraqis buy them for anything between US$16,500 to US$60,000.

That's a lot of money for a stick.

And they bought them - 1500 of them, so far - from a British company. That is to say, from one of the occupying powers.

I don't know how much Britain has spent on the invasion and occupation of Iraq. Billions, I presume. So it's nice that they've got $50 million or so back like this. Except, of course, that the money came from the taxpayers, but the return is going into the pockets of private investors. In other words, it's yet another redistribution of cash from (everyone) to a very select group of people.

It'd be vastly more efficient, to say nothing of costing many fewer lives, simply to let them dip their hands in the till directly. Looked at in that light, the "MPs' expenses" business looks positively enlightened.

Personally, if someone offers me a dowsing-based bomb-detection system, I'm perfectly willing to listen. If they put on a good demo, I'll even set up some tests of my own. But I also have this belief, which I can't quite shake, in the concept of a "fair price" - something that is at least vaguely related to the cost of production. Don't tell me that price was set in a free market.

Back-of-the-envelope economics

It's almost like being back home. In the 80s. Auckland is in the eighth day of a paralysing bus strike.

Well, "paralysing" might be overstating things a tad. Most people drive themselves anyway. I, swelling with ecological smugness, walk to work. Only an unlucky minority, such as Susan, are really affected.

It's also not a strike. What happened was that 875 drivers and cleaners, wanting better pay, notified their employer that they would work to rule; and their employer, NZ Bus, responded by locking them out.

To me that makes the whole issue cut and dried. Working to rule is about the mildest form of industrial action it's possible to take; if I had my way, it should be the norm for everyone everywhere. Any company that feels threatened by a work-to-rule - is exploiting its employees. To retaliate with a full lockout, completely shutting down your services for over a week - that's a huge escalation.

And most people seem to agree. The (Auckland-based) New Zealand Herald has been squarely behind the drivers. Even Auckland's city government, such as it is, has mostly aligned itself the same way, threatening to cut off $58 million in subsidies to NZ Bus unless it gets back to delivering the services it's supposed to.

Now, we're told NZ Bus normally carries approximately 80,000 passengers per day. Since Susan is one of them, I happen to know that a standard, full-price season ticket costs around $110 a month. Allowing for concessions, let's say the average passenger pays about half that much. That's a monthly income of $4.4 million from fares. Add $58 million in subsidies from the city, and we're talking about an annual income (not counting advertising) in the ballpark of $110 million.

There are 875 drivers and cleaners - let's guess that there are 400 actual buses, each costing (let's say) $25,000 per year in tax, maintenance and depreciation - that's $10 million. Fuel - maybe as much again. That leaves $90 million to pay for advertising (minimal - mostly done by the city anyway), premises, wages, parking and other running costs and overheads. Let's say 40% of that should be going to the people who actually do the work - $36 million between 875 people comes to just over $40,000 per year, or (assuming a 40-hour week) about $20 per hour.

But NZ Bus pays its drivers $14-16 per hour. Susan tells me that other bus companies are significantly more generous. (Although how she knows this, I don't know. All I know is that they're not having these problems, at least not at the moment.) Which suggests my calculations aren't too far out.

It's enough to make me want to start my own bus company. If only I knew where I could lay my hands on 400 buses and a bunch of spare subsidies...

Celebrity v talent

It's been a bad couple of weeks in reality TV. Well, arguably it's been a bad ten years, but the last fortnight or so has given us two big-time, internationally-reported upsets.

First there was American Idol. Searching Google News for 'American Idol upset' gives 1,167 results in the past month. The front runner lost in the final vote, and at least 1,167 journalists worldwide have written about how surprised they are.

Then came Susan Boyle's breakdown on Britain's Got Talent. Ms Boyle blows Adam Lambert clean out of the media, with a phenomenal 29.846 news mentions worldwide in the past month. (Numbers correct at time of writing, but likely to go up for the next week or so.)

Were these results fair? Did partisans engage in dirty tricks? How much of the vote reflected telegenic cuteness, rather than actual talent? Were the votes actually counted, or did the organisers just make up the totals? Did people vote more than once? (In fact, Idol actively encourages this.)

Who cares?

Talent shows have nothing to do with talent. Look at Kelly Clarkson, first winner of American Idol: the girl has about as much talent as it takes most of us to cook our own dinner; she's a pedestrian singer and an atrocious songwriter, penning lyrics that would shame a '50s teenybopper. She's not famous because people buy her records; people buy her records because she's famous. Because she won American Idol.

That's what these shows are about. Not finding talent, but creating celebrity.

See, the problem with really talented people is that they have better things to do than bare their lives to fan magazines. Practising, rehearsing, reading, learning, dreaming, planning... being talented is a lot of work. But celebrities, now - if your sales depend on your fame, rather than vice-versa, then there is literally nothing more important to your career than keeping your face in the public eye. So instead of "entertainment journalists" having to chase and stalk and court and flatter them, these McCelebrities can be relied on to pretty much throw themselves in front of any camera they can find.

E-mail and the death of trees

I first used e-mail as a student, in the mid 1980s. Sadly I wasn't a particularly visionary type of student, and I didn't take much interest in it.

In 1997, when I got my first dial-up connection at home, things were different. By then nobody could miss what e-mail was, and I took to it like a banker to money. Within six months I had e-mail contacts on five continents, a good proportion of whom I considered "friends".

Combined with Usenet, the medium suited me to perfection. I now had a public profile and an active private correspondence. I loved to take my time writing, rewriting and polishing to put the perfect gloss on whatever I wanted to say. "Spinning", it might be called, and the medium was beautifully tailored to that. (Alas, this is no longer the case. Somehow I don't have that kind of time any more. Nowadays, even blog posts feel hurried.)

In that first rush of enthusiasm, I naïvely thought that e-mail was free; and as freely, I gave my address to everyone as my preferred contact method. Better, I thought, that I should receive junk mail in electronic form, rather than tree-eating paper.

What I hadn't thought through - and in retrospect it seems horrifyingly obvious, but the world looked different back then - was the economics of e-mail technology. It never occurred to me that people would send me e-mail without even caring whether I read it or not.



The story of my personal battle with spam is stirring, but long, and its ending is not happy. I have seldom managed to convey the depth of my hatred for spammers. I'm not talking just about pornographers, fraudsters, Nigerians offering money - that subject is quite exhaustively documented elsewhere - but the daily deluge of unwanted mails about the most tedious of subjects - drugs, holidays, used cars, penis enlargement, jobs in Chicago, Ukrainian brides, Bollywood movies, home-education courses in everything from acupuncture to zoophilia...

All of which is a long-winded way of introducing a story I noticed today: spam is "killing the environment", apparently.

That's a headline I can greet with qualified pleasure. Extremely qualified. We're talking fully bonded, industry-certified, Masters-educated pleasure here. It's nice to see an attack on the (still occasionally touted) fallacy that junk e-mail is environmentally benign, compared with junk paper through the door. But this study is commissioned by McAfee, who can't resist the temptation to imply that the problem could be solved by using their software.

Yeah, right. That's like treating depression by drinking yourself into a stupor.

No, the treatment for spam - if there is one - has to be legal, not technical, and it has to be directed at the people who pay for it, not those who send it. It's the economics of e-mail that creates the problem, and that's what has to be changed. For the recipients to have to buy and maintain spam filters - that's no better than paying protection money.

Thought for food

Remember how, last year, there was a spate of horror stories about how products made in China weren't necessarily, let's say, up to code with all those pesky rules and regulations that we cossetted Westerners insist on? Things like products not containing more than a limited amount of lethal poison.

I thought then, and I still think, that this ruckus was thinly-disguised protectionism. When I was a kid, I had a number of toys made of lead. It's an excellent material - cheap, easy to mould, satisfyingly heavy and durable. To say nothing of the paints, which (we took it for granted) would contain lead, if nothing worse. I assume that's why my parents kept shouting at me when I ate it.

Which is why, this Easter, my reaction to stories of nasty egg-related experiences was more smugness than horror. Summary: some Easter chocolate products have been found to contain creepy-crawlies.

We're talking respected brands here. Cadbury's and M&Ms are the two that have failed to keep their names out of the story - I don't know what others may be involved. Nor do I know where these products were made. But I'd bet good money it's not China.

This is not what I call consumer protection. When you bit into your Easter egg, did you think "what this really needs is something living inside it"?

Of course it could be that someone is simply taking the symbolic significance of the Easter egg a bit too literally. But more likely, they're just careless.

Food handling is a curious blind spot in the factories and supermarkets of New Zealand. We are resigned to carefully sorting through the mildewed, crushed and parasite-infested fruit; cautiously wiping the leaking blood off badly packaged meats; gently testing the temperature of milk by hand; glumly inspecting the mold on the inside of vacuum packs of cheddar; religiously checking the dates on short-life products such as coleslaw and dips. I've seen shelf stackers in the supermarkets piling crates on top of soft fruit without a thought. If I saw any of this in Tesco's in England, I would expect the section manager to be sacked on the spot; here, it never occurs to anyone that there is even an issue.

Don't get me wrong: our food is excellent. New Zealand is justly famed for its farming. Our restaurants compare well with any of the 15 or so countries I've experienced. We had roast lamb for an Easter feast - finest New Zealand-grown baby sheep - and I can officially pronounce it delicious. And the wine! - New Zealand wine, as anyone who's been paying even the slightest attention must know by now, is the best in the world. Even Foodtown can't screw that up.

It's not that hard, people. This is 2009: problems like this were already boring in the 1980s, when I studied production engineering. If you can't do it, resign, and give your job to someone who gives a damn'.

The science of karma

A fascinating new study from Germany finds that revenge doesn't pay.

In a sane world, this would be no surprise. Energy spent on making someone else's life crap, is energy that's not working for oneself, or one's loved ones. In economic terms, it's simply a waste of resources. From Othello to Captain Ahab to the Count of Monte Cristo, our culture is full of illustrations of how revenge is a dish best not eaten at all.

The fact that this isn't considered blindingly obvious is probably because there are so many batshit-insane people around nowadays. In particular, believers in that beguiling branch of maths known as "game theory" - a category that, nowadays, includes almost everyone concerned with social sciences. Game theory, as popularly interpreted, implies that if someone does something bad to you, you should retaliate proportionately against them.

As far as it goes, the theory is fair enough. But it doesn't go nearly as far as many people think it does. Game theory, like every mathematical theory I've ever heard of, is based on a vast pile of mostly-unspoken assumptions that simply aren't true in the real world. For instance, there's the assumption that all players are following the same rules, which are not liable to change. Then there's the assumption that the number of players is constant - nobody will enter or leave the game mid-way. Or that all players have the same motivation. In most economic and social contexts, these assumptions are patently absurd. But they're so seldom stated that it's easy to forget they're there.

Now, thanks to Prof Dr Armin Falk of Bonn University and his co-authors, we have concrete evidence that "negative reciprocity" is truly counter-productive. In particular, the study finds, vengeful people are much more likely to find themselves unemployed.

What does work, on the other hand, is "positive reciprocity". Turns out that, regardless of the level of motivation, returning good behaviour leads to a much more profitable relationship than punishing bad behaviour.

What I like about this study is that it doesn't care about means or mechanisms. It doesn't try to prove, or even imply, that reward is a better motivator than punishment, or that relationships based on threat of punishment are unhealthy. It doesn't even try to argue with game theory. Maybe these things are true, maybe they aren't; that's not the point here. The point is that there is a measurable difference in outcomes.