Soft Signs of Economic Revival in the Developed World

2013 was a painful year for developed economies, particularly those in the Eurozone. Finland, Greece, Holland, Ireland, Italy, Portugal, Slovenia and Spain all saw their GDP shrink. France and Germany just barely avoided the same fate. But the latest International Monetary Fund projections for 2014 economic growth are better news for those ailing economies, as well as for the non-Eurozone G7 nations. The chart below ranks these countries from greatest projected 2014 growth (The United Kingdom) to worst (a tie between Finland and Slovenia). Although none of them has a red-hot economy, neither is any of them projected to contract.

IMF Growth Projections for 2014

The biggest projected turnaround from 2013 is long-suffering Greece, whose economy shriveled by a ghastly 3.9% in 2013. The Greeks must also feel relieved that investors seem willing to lend them money again. However, the end of economic contraction does not necessarily mean an end to misery for most people in an economy. Ryan Cooper glumly points out that Greek unemployment is at 27%! That grim statistic underscores how far Greece remains from a healthier economy like the U.K.’s, where respectable economic growth is being projected concurrent with a 5-year low in unemployment.

Still, as a whole, the developed world seems poised to move ahead economically in 2014. That’s encouraging news for the millions of its people who spent 2013 hanging on by their fingernails.

p.s. In case you are wondering why I use “Holland” instead of “The Netherlands”, it’s because Holland is an ancient Dutch word that translates roughly as “Name for our country that fits on a PowerPoint slide”.

Want to Save Pubs?: Support Minimum Unit Pricing of Alcohol

13jour600.1The Economist is among the world’s indispensable newspapers, but it has a University of Chicago-style blind spot concerning any restrictions on psychoactive drugs. I therefore generally regard it as an endearing British relative who has one annoying quirk, but now I can be unambivalent in my affection: The Economist has endorsed minimum unit pricing of alcohol.

I describe the policy in detail here, but the gist is that regulators set a floor under the price of alcohol. The Economist describes this as a “windfall” for producers and retailers but this is not correct: The increase in price lowers volume of sales to the point that it’s a wash for sellers (fewer sales, but higher profit per sale). The true windfall goes to the public, who benefit from decreased deaths, accidents, crimes and emergency room visits.

Minimum pricing is also, as a member of the UK Parliament and I pointed out in submitted evidence, exactly what the ailing UK pub industry needs to get back on its feet. Some critics of minimum pricing howl that “responsible pub drinkers should not have to pay for the damage of boozing by violent yobs”. This is completely wrong-headed, because alcohol prices in pubs are already far above even the highest proposed minimum price. Minimum pricing is directed at rock-bottom price sales of alcohol in supermarkets, which are killing the pubs by undercutting the price of their number one product.

Pub-goers who are losing their beloved watering holes are thus suffering not from minimum pricing, but from a lack of it. Andrew Sullivan laments, as I do, the decline of British pubs, but his series of posts on the topic has not highlighted how Tesco and similar supermarket chains have hurt pubs by flogging high strength, low cost alcohol. Sullivan passed along the claim that anti-smoking legislation is one cause of pubs’ declining fortunes, which sounds like tobacco industry propaganda and has been empirically disproven. The return of customers who don’t like tobacco smoke isn’t hurting pubs; alcohol being sold at ultra-low prices by competitors who can make up the lost revenue on other products is.

A Shameful Christmas Memory

A Christmas Day chess match in London leads to social disaster

Some part of me cringes internally with the approach of Yuletide because it reminds me of an inexcusable social gaffe I committed on Christmas Day a few years ago. They say confession is good for the soul, so perhaps if I write out what happened my sense of deep embarassment will be relieved.

OLYMPUS DIGITAL CAMERAIt all started here, in the smoking room of my club, normally a place of complete contentment for me. The smoking room has been non-smoking for some time and is thus comfortable for hosting many events, including the London club chess championship. Each club has a team of 6-8 players, and we round-robin compete each year to determine who is London’s best.

I co-captain my club’s team along with Professor Lucy Warriner of Imperial College. She is one of very few people who ever beats me at chess, and I am one of very few people who ever beats her. I suppose that sounds smug and I confess to that. Indeed my arrogance about my chess playing abilities was in retrospect at least partly the underlying cause of the social disaster I am about to describe.

In 2010, the Oxford and Cambridge Club joined our chess league. Cockily, with little investigation, I challenged their co-captains to a Christmas Day afternoon match at our club. I assumed that Lucy and I would make short work of them, thereby getting a psychological advantage over their team going into the coming year’s tournament.

Little I did know that their co-captains were Professor Sir James Blandings, author of a celebrated analysis of the Steiner-Lilienthal matches of the 1930s, and Professor George Kerby, coach of 10-time British champion Malcolm Trevor, among many others.

While sipping tea and seemingly half-paying attention, these two chess wizards annihilated us. While telling stories about their favorite world championship matches, they pulverized us again. Lucy and I switched opponents after two quick games, but it didn’t help. To put it mildly, it was humiliating.

club foyerAs it was beyond debate that no number of re-matches would change the basic result of our contest, I thanked them for their time, said I would see them out, and walked them down to the club’s magnificent entryway. I think if they had just left promptly I would have been able to keep my composure after being so soundly thrashed. But I suppose because of their being OxBridge Dons, they couldn’t help but rub it in.

Blandings opined that defeating me was easy because I made mistakes very similar to those of Kasparov — before he was any good. Kerby offered that beating Lucy felt ungentlemanly to him, given his obviously superior talents. They mentioned that they expected the chess club season to be a joy because they knew they would roll over every team as easily as they had dispatched us.

Maybe it was my bruised ego or maybe it was the irritation of the icy winter breeze coming in as people left and entered the club while Blandings and Kerby stood bragging in the entryway, but in any event I did something truly unforgivable of which I remain ashamed today.

My face burning, I blurted out: “All right you won, you pompous blowhards, now shut your gobs and go home!”.

Blandings was not even mildly disconcerted by my outburst. He looked at me calmly and said “Really, Professor Humphreys, it’s Christmas. There is no reason for you to get so upset about Continue reading “A Shameful Christmas Memory”

Quote of the Day: David Lloyd George

Should 500 men, ordinary men chosen accidentally from among the unemployed, override the judgment — the deliberate judgment — of millions of people who are engaged in the industry which makes the wealth of the country?

–David Lloyd George in an 1909 speech given in Newcastle in which he blasted the House of Lords for opposing property taxes.

The British Middle Class in One Short Paragraph

A British middle class mother explains the social realities of class to her daughter.

Harriet Walker, a columnist for The Independent, was feeling disappointed in herself for not confronting in a social situation someone who expressed political/cultural views she abhored. When she told her “resolutely” middle class British mother what happened, the latter responded:

Its always hard for the middle classes. We’re pushed from the top and the bottom, and to try to change either one’s mindset in a social situation feels rude, and it never goes down well. Being polite and going down well is what the middle classes are proud of.

Harriet reflects “This remains the best simultaneous apology for and defence of the middling sort that I have ever heard”.

Which is I think the perfect analysis of what her mum said, not least because apologizing for and defending oneself at the same time is an essential part of being polite and going down well.

Blessed Moments of Shared Silence

National moments of shared silence are opportunities for communion and transcendence, but no guarantee of them

By grace rather than planning, I was in Glasgow Cathedral at 11am on 11/11, the national UK moment of silence to commemorate the nearly one million deaths of The Great War. The cavernous building was empty save for a dozen or so tourists, most of whom, like me, had to be reminded by the presbyters of what was about to occur. Although the silence is two minutes by rule, those present stayed quiet much longer, clinging to the peace and solemnity like a dwindling but still intoxicating love affair.

In a different year, the moment of silence came when I was in Paddington Station. It was awe-inspiring in a less intimate but still powerful way as a myriad of bustlers came to a reverent halt.

These moments of shared silence are intended as communions with the dead, but they also build connections among the living. All of us, with our varied daily concerns, set them aside for the sake of a cultural moment of grief and remembrance.

I wouldn’t cheapen the slaughter of Ypres or the Somme by suggesting that national moments of shared silence be made more frequent specifically as a remembrance of World War I. But fancifully I wonder: Would there be some social good in the creation of more shared moments of national silence? What would happen if, even two or three times a year, a country asked its citizenry to take a few shared minutes from texting and tweeting and twerking to instead be silent together?

What would people contemplate in the absence of all the quotidian distractions? Would they reflect on whether they were living their life in keeping with their values? Would they pause to feel grateful for what they have and resolve to be more compassionate towards those who have less? Or would they just dread the lacuna in the otherwise ceaseless cacophony and plan their next stock trade or iTunes download?

Pass the Popkern*

The British approval of the costly Hinkley nuclear power station still faces major obstacles in Brussels.

* Explanation of awful bilingual pun at end

While my American readers settle down on Tuesday night to enjoy the end of the political ambitions of Ken Cuccinelli at the hands of a Democratic party hack with zero experience in government, I’m settling in for a long comedy serial: Sir Humphrey Appleby vs. European Commission in re Hinkley Point C.

Hinkley_we_599-300x183The dying nuclear industry (my take on the economics, politics, mascot) has just scored an extraordinary win in Britain. The government will commission EDF and its Chinese partners to build the £16bn, 3.3Gw, two-reactor Hinkley C plant. It’s a fixed-price contract: but to get this protection from the high construction risks, it has had to guarantee an FIT of £92.50 ($147.9, €109.3) per megawatt-hour for no less than 35 years from the supposed completion date of 2023, indexed for inflation. And EDF will be compensated for any curtailment from wind and solar.

The FIT is double the current British wholesale price, twice the current onshore wind FIT, and considerably higher than current German non-indexed FITs for on-and offshore wind and solar. The price of both wind and solar is bound to fall; the British government accepts this, but it lowballs the trend rates. It thinks the price of solar will only decline by 3% a year, far lower than experience and typical industry forecasts.

Whatever were they thinking of? I thought this was bizarre, but nevertheless a done deal. Not in fact. Continue reading “Pass the Popkern*”

The Greatest Threat to U.K. Economic Growth is in the U.S. House of Representatives

If the Tea Party forces default on U.S. debt, the U.K. is one of many nations whose economy will be badly damaged

After some tough times, the U.K. is experiencing some much-needed economic growth. Because the rate of growth in the U.K. is about comparable to that of the U.S. despite radically different economic policies, debate will no doubt emerge between Keynesian-types trying to minimize the U.K.’s good news and deficit-hawks overselling it. Like virtually all such debates about public debt, these battles will be boring, dumb and unproductive, so let’s debate something else: What is the leading threat to better economic times in the U.K?

Some observers would argue for unemployment, which stands at 7.8%. That’s much lower than the Eurozone but still unacceptable. British policy makers should be particularly concerned about long-term unemployment of the sort that entrenches families in a marginal economic situation for generations. Growth in employment overall does not guarantee breaking this cycle, particularly with job-seekers from the continent being highly mobile and in many cases, highly desperate. There are many indigenous Brits who were left out of the job growth of the Blair years; the same thing could easily happen to their children.

Others commentators might suggest that inflation, at 2.7% for the year, is the U.K.’s biggest economic worry. The U.K. has the highest inflation rate in Europe, which may be a result of all the “quantitative easing” they have undertaken.

But as serious as those challenges are, they pale against the possibility that a group of reckless and misinformed people in the U.S. House of Representatives may force the United States of America into default in less than a month. No one knows precisely what the worldwide financial impact of such a disaster would be, but it certainly would be felt very keenly in a country with an outsized financial sector and extensive economic interaction with the U.S.

I feel sorry for and worried about my beloved U.K. Its economy should be in the hands of shopkeepers in Brighton, schoolteachers in Manchester, factory workers in Sheffield and elected politicians in Westminster. But instead the sword dangling over British heads is held by a bunch of Tea Party lunatics who are willing to wreck the world’s economy just to stop a democratically elected President from giving health insurance to sick people.

Remembering Sir David Frost

The television personality who so famously “rose without trace” has died at the age of 74. The BBC’s potted biography gets the basic facts across without much commentary about whether there was ever really much more to Frost than some cleverness and the remarkable luck of coming of age alongside television.

Two opinions on that question come from creative artists. Ron Howard made a tremendous film about Frost’s interviews of Nixon that portrayed Frost with complexity and some sympathy. Very much worth your time, not least for the fine performances of the two leads.

A more hostile take comes from the Pythons, who worked for Frost early in their career and came away highly unimpressed. They got their vengeance in several ways, including listing his home phone number on their Mouse Problem sketch and then skewering him as “Timmy Williams”