Polly on Savings

Not quite sure where to start today, the logic running through this piece is so tangled.

The subprime savers are the wretched Farepak people who were not even borrowing money, only saving for zero interest. How can a company fail when all it did was take in poor people\’s money for a whole year, pay them no interest, in exchange for an above-high street-priced catalogue of goods at Christmas time? There was no credit or interest offered, only a "safe" place for cash. Families living on the edge want to put Christmas money out of reach. Why ordinary banks aren\’t offering the same fixed-date deal, with no or low interest, is a mystery.

I\’m pretty sure that you can in fact deposit money in a bank account at no interest you know. Not 100% sure, but pretty certain.

No government will give a blank cheque against every failed enterprise, but the difference was in the instant reaction to Northern Rock. Overnight all bank savers got a cast-iron £35,000 guaranteed – a sum unimaginable to Farepak or First Solution savers.

Wasn\’t actually much of a change though. £32,000 or so was already guaranteed .

In the 10 years since Labour came to power promising to start a people\’s bank to give modest access to credit to those in most need, nothing has been done. Basic bank accounts now receive benefits, pensions and wages, but they offer no credit, not the smallest overdraft facility.

See, Polly agrees, you can deposit money at no interest in a bank account.

People on low incomes need ordinary bank accounts with easy access via cash machines, and a credit facility at a fair interest, like everyone else.

Ah, now we\’ve morphed to offering credit, rather than a safe place fo savings. Something a little different, isn\’t it?

Poverty is their problem: most are relatively prudent, or else they\’d starve (benefits for a family of four total only £200 a week).

I beg your pardon? Is that really the number? Including housing benefit? Seriously, I don\’t actually know and would like to.

That\’s where this always returns. People on subprime pay and benefits are just too poor to save – and yet they have to borrow when minor mishaps cause financial catastrophe. So loan companies can charge what they like – check out the Provident\’s site for loans at 183% APR – often with worse rates door to door.

Mhmmm. 183% APR eh? Wonder how they\’re making money on that. There are in fact non-profit lenders in the US who offer this sort of credit to the poor:

But alternative payday loans have also drawn criticism from some consumer advocates, who say the programs are too similar to for-profit payday loans, especially when they call for the principal to be repaid in two weeks. At GoodMoney, for example, borrowers pay $9.90 for every $100 they borrow, which translates to an annual rate of 252 percent.

Sounds like Provident is offering a good deal really.

Err, No.

While new forms of community localism are necessary in England, this is no substitute for making accountable, via election, the existing intermediate tier of regional government. At the same time this tier needs to be given at least those regional powers over transport, regeneration and planning enjoyed in Greater London.

Let\’s start with England getting those powers shall we? Then we\’ll work out what we want to do next ourselves, thank you very much.

Most Odd

Dean Baker:

Of course the idea of Medicare beneficiaries flying around the world for healthcare is ridiculous. The rational solution is to fix the US healthcare system.

I\’m not sure I remember the last time I saw an economist arguing against trade.

Wintering about Homeopathy

Right now, though, a fierce debate is raging between those, like me, who trust homeopathy because it works for them, and those who call it shamanistic claptrap, without clinical proof or any scientific base.

Err, Jeanette, it\’s possible for both to be true. That it is shamanistic claptrap andthat it works for you. Because you are gullible to shamanistic claptrap.

Changing the Rape Law

One solution would be for specialist jurors to be brought in to try rape cases – people who won\’t assume that rape only happens between strangers.

Ouch! No, no, no!

For who would actually become these specialists? Sadly, only those with an axe to grind on one side or another of the argument. It would, by definition, no longer be an impartial jury.

Ghost Planes

So BA is running ghost flights, empty planes, so that it can keep its slots at the London airports:

Some of the aircraft are thought to be Boeing 747s, which when full carry between 500 and 600 passengers. Every return flight from London to New York generates about 1.3 tonnes of CO2.

That would be 1.3 tonnes per passenger they\’re not carrying actually.

A spokesman from Greenpeace said: "It\’s pretty outrageous that BA are flying these empty flights half way across the world whilst saying they’re trying to cut down on CO2 emissions.

"They should be setting a leading example. Thousands of tonnes of carbon dioxide are being leaked out needlessly just so they can keep their slots."

"Just so they can keep their slots" is not "needlessly". It might be a need you don\’t understand, it might be a need you don\’t approve of, but it\’s not "no need".

Walter Williams

Very nice indeed:

Whereas, Europeans kept my forebears in bondage some three centuries toiling without pay,

Whereas, Europeans ignored the human rights pledges of the Declaration of Independence and the United States Constitution,

Whereas, the Emancipation Proclamation, the Thirteenth and Fourteenth Amendments meant little more than empty words,

Therefore, Americans of European ancestry are guilty of great crimes against my ancestors and their progeny.

But, in the recognition Europeans themselves have been victims of various and sundry human rights violations to wit: the Norman Conquest, the Irish Potato Famine, Decline of the Hapsburg Dynasty, Napoleonic and Czarist adventurism, and gratuitous insults and speculations about the intelligence of Europeans of Polish descent,

I, Walter E. Williams, do declare full and general amnesty and pardon to all persons of European ancestry, for both their own grievances, and those of their forebears, against my people.

Therefore, from this day forward Americans of European ancestry can stand straight and proud knowing they are without guilt and thus obliged not to act like damn fools in their relationships with Americans of African ancestry.


It is a hugely subjective matter, for instance, at which point the lines representing “not wasting the Earth’s resources” and “not wasting everyone else’s time” finally intersect.

Around the time that recycling wsa based on the near religious idea that all resources are worth saving except your time.

There\’s an Answer to This One

Why don’t polar bears eat penguins? Because their paws are too big to get the wrappers off, obviously. It’s not a joke you hear so often these days, though, because polar bears are now a serious business.

Now, let me think….ah yes, it\’s because polar bears and pengiums live in different hemispheres, isn\’t it?

Sorry, There\’s an Error Here

Ban Ki Moon, the UN General Secretary says:

“I was told by scientists that the entire Western Antarctica is now floating. That is a fifth of the continent. If it broke up, sea levels may rise as much as six metres,” Mr Ban said after being briefed at the Chilean, Uruguayan and South Korean bases during a day trip to King George Island, at the tip of the Antarctic Peninsula.

If it\’s already floating then it won\’t raise sea levels then, will it?

Green Party Politics

Leader or no leader?

The supporters of the latter, led by the MEP Caroline Lucas, and Prince Charles\’s favourite Green, Jonathan Porritt, succinctly argued in a letter to this paper on Tuesday that a single identifiable leader who people recognise and trust is the best way of engaging the voters.

If they want to contest elections within the existing system, if there is going to be a Green party, as opposed to a green pressure group, they have to act like players. And in a context of minimal voter attention and celebrity politics, that means the party\’s enviably simple message has to be put across by a single leader.

The Guardian comes out on the side of two of its occasional columnists. Amazing, don\’t you think?

Ken Rogoff

We should all be worried about rising inequality, correct?

Are massive income and wealth differences an inevitable outcome of fast growth? By and large, the answer from history is "yes".

Hmm. Maybe actually we have to work out why inequality is rising first? If it is a side effect of that growth (and more controversially, if curbing the inequality led to a slow down in the growth) then perhaps we don\’t actually want to curb it?

Let\’s think of it another way. Currently the global distribution of income is hugely skewed. The World Gini is somewhere above 0.8. Global GDP, if we could share it out equally (which we can\’t, but still) would be around the $8,000 per person mark. So, I think we would agree that the world is not currently producing enough income each year for all humans to live rich and satisfying lives: that\’s why we want the growth to carry on.

Good. Now, if it is a side effect of such growth that inequality increases (remember though, we\’re not saying here that the poor get poorer: rather that the rich get richer faster than the poor do, leading to higher living standards all around, but greater inequality), is that a price worth paying for that increased growth?

I would argue yes but then agree that others differ.

We can also get into the nitty gritty of just what sort of inequality we\’re talking about. Branko Milanovic is the person to go to here. (Try this book, I\’ll review it properly sometime soon (to the extent that this isn\’t already) and thanks to Jim for recommending it and the publishers for a copy.)

We can first talk about inequality within a country. I think it\’s pretty much a given that this is increasing as a result of globalisation. Ginis are certainly going up in every country. We can then talk about international inequality in a number of different ways. Concept 1 is that we take the average income in each country and then compare them. On this measure inequality is increasing. However this isn\’t taken all that seriously any more. In our 192 or so numbers, we\’ve got 54 for Africa and only 2 for India and China. We\’re thus measuring Djibouti as being as important as China in our calculations.

So we move on to Concept 2 inequality (this is associated with Xavier Sala-i-Martin) where we weight said country averages by population. We thus have a crude, but better than Concept 1, idea of changes in international inequality. This is falling, as the rise of India and China, with one third of the world\’s population between them, would make you think would happen.

However, this is a crude measure. Milanovic\’s work attempts to measure Concept 3 inequality. It\’s not an easy thing to do as we don\’t have the raw statistics but he\’s made a stab at it. Instead of using countries as a proxy and their associated averages, we actually want to measure the real inequality between the various people in the world. We obviously get much higher numbers, but that\’s not the point, we\’re interested in the direction. More or less?

Here the evidence is more mixed. Milanovic showed that in the 5 year period up to 1992 (this is from memory, so apologies if out by a year or two) global Concept 3 inequality increased. In the period following that it decreased. It\’s important to note that Concept 2 and 3 moved in different directions in that first period, which is why the distinction needs to be made between the two.

So if global inequality were indeed what we worry about, what does this tell us? I agree that my economic history is not entirely up to scratch but I seem to recall that the late 80s and early 90s contained a stuttering in both the Chinese and Indian growth rates. Certainly, in 1991, India had very serious problems: so serious that they at last led to the breaking of at least some of the Licence Raj.

So I\’m able to come back to my default position, the one I had before reading Milanovic: that it\’s the growth or not of India and China, at a respectable clip, which is reducing global inequality (ie, that if those two are growing fast enough then Concept 2 and Concept 3 point in the same direction).

All of which leads us to an interesting conclusion. Is globalization increasing inequality? Well, it depends what you mean. Within a country, almost certainly yes. Across the globe, as long as Indian and Chinese growth is high enough, probably not, it decreases it. Which means that we might be sensible to put up with the national inequality in the name of the lesser international such.

Unfortunately, that\’s not a question "economics" can answer, whether we should or not. That\’s a moral value that you bring to the table before the economic analysis. If you are an egalitarian, are you a national one (and there\’s good reason to be so: people do compare ther living standards with those around them, not with someone on the other side of the world) or an international one?

Myself, I worry far more about absolute poverty than relative. That we\’ve still got hundred of millions living on less than a $ a day, hundreds million more on $ to $2 a day, tells me that we want more economic growth and bugger the side effects on inequality. But your view might differ,



The Great Question

Janet Daley does rather hit this one out of the ball park:

It is nothing less than the question of who should have the real power in a free society – a government elected by the people, or the people themselves through their own direct agency.


When will they learn that people\’s lives are transformed not by what is done to them, or spent on them, but by what they do for themselves? Sorry about the homily but there is no other way to sum this up: your life prospects are transformed by your own attitudes – and those attitudes are formed, in turn, by the opportunities that you have for making a difference to your own life.


If you think it sounds too good to be true that a voluntary movement could transform an aspect of life, just think of the hospice movement.

Or even the lifeboats.


Hmm. Perhaps this policy of putting boys on drugs simply because they\’re boys, you know, short attention spans, fidgety and so on, might not have been all that wise?

Drugs given to thousands of hyperactive children have no long-term benefits and could in fact be stunting their development, a major study has said.

The study of attention deficit hyperactivity disorder (ADHD) found that, while powerful drugs such as Ritalin and Concerta resulted in short-term behavioural improvements, after three years those benefits had disappeared.

Children who took the drugs for the full three years were also found to have stunted growth, according to the Multimodal Treatment Study of Children with ADHD (MTA).

The MTA has followed 600 children in the United States with ADHD since the 1990s and has just published its latest findings. Prof William Pelham, co-author, from the University of Buffalo, said: "They weren\’t growing as much as other kids both in terms of their height and their weight.

"There were no beneficial effects – none. In the short run medication will help the child behave better, in the long run it won\’t.

"That information should be made very clear to parents."

I\’m unsure of the situation in the UK but certainly in the US it has been true that it\’s not actually the parents who insist upon the dosing of the children. The schools can and do at times. Happened to the child of a friend of ours. If he\’s not on the drugs he can\’t come to school.

Timmy Elsewhere

At the ASI. On the persecution of our fellow Britons by our own governments.

I\’m sometimes asked about my unremitting disdain of politicians, my default status of simply hating them all.

I can only respond that it saves time.