Economics and Ecology - Differing points of view ...

A recent article in the Wall Street Journal entitled “The World’s Resources aren’t Running Out” made very interesting reading. The author, Matt Ridley, is a journalist with a background in economics, and takes a look at a number of statements made by ecologists and scientists on the “Global Warming/Human is using up the planet’s resources” side of the argument. As he points out, most people would agree that humans are having an impact, particularly where there is overpopulation, but the impact is not quite what so many claim.

Where advocacy groups such as the World Wildlife Fund, Greenpeace and Friends of the Earth promote to the idea that we will shortly run out of coal, oil, iron ore, etc., etc., an economist will point to the fact that using something does not mean it is ‘gone’ for good. Much of what is supposedly being ‘used up’ is simply taking a new form and can be recovered, reused, and reworked again and again. Many advocacy groups fail to grasp the difference between ‘estimated reserves’ of something and the likelihood that new ‘reserves’ are being mapped out almost daily. They also fail to take into account the recycling of these resources. Plastics are a good example, most are best described as ‘solidified hydrocarbon’ and that can be recycled to recover at least some of it. Nor is this the only area where simple economics takes a more optimistic view.

Since the rise of the ‘Green’ movements began we have been bombarded by dire predictions of agricultural collapse, warnings of ‘Peak Oil’, vanishing fresh water supplies and many more ‘tipping’ points that will wipe out our populations, our technology or our societies. Economists find this extremely frustrating, since again and a again such ‘tipping points’ have come and gone with no check at all on progress - largely because of innovations such as fertilisers, improved seeds for crops, insecticides, new technology for finding oil, gas and simultaneously reducing individual consumption through more efficient engines. Ironically, the very people who campaign so vigorously to ‘save the ecology/climate/planet’ also vigorously resist these advances. 

Mr Ridley acknowledges that he once (like most of us I suspect) carried the ‘ecology’ torch, believing in the ‘finite’ model and that growth must be restricted and limited. Since then, again like most of us, he has come to recognise that with growth comes innovation. Of necessity, we learn to do more with less. Efficiency is achieved through improved technology. Using the example of coal power stations - anathema to most ‘Greens’ - if we accept that new technology means that the waste gas in the chimney can be ‘scrubbed’ to extract that evil carbon dioxide and sulphur dioxide (actually the process is quite simple and clever and is in use at most such plants now) which can then be recycled and either ‘stored’ or turned into something else, the plant is, according to Greenpeace, still only 47% efficient. They arrive at that number by measuring the heat ‘lost’ up the smoke stack and through the condensing process which returns the steam to water for the boilers, but it is far from an accurate number in reality. 

In many dry countries that ‘waste heat’ is used to distill water from sea water. This is how many of the cities in the Persian Gulf provide drinking water for their citizenry. It is how water can be, and is, provided for agriculture in some drought prone countries as well - but is never taken account of by the ‘ecologist’ camp. There are other innovations for producing fresh clean drinking water as well, one such coming from the maritime industry. Called a ‘Hydropore’ system, it uses micro filters to remove the salts and other particles from sea water to produce vast amounts of fresh drinking water - most of it cleaner and purer than what we drink in most European towns and cities. Such plants can operate on land as well, producing fresh water for towns or agriculture. As an example of the output, one of the USN’s Nuclear aircraft carriers can produce enough electricity for a medium sized city, and enough fresh water through their hydropower systems to water it as well.

While on the subject of ships, another recent Greenpeace campaign charged that these were the ‘biggest polluters’ of the oceans and the atmosphere and demanded a surcharge on fuel for them. This on the grounds that a single ship pumps out ‘tons’ of CO2 and other pollutants on its travels. It ignores, of course, the fact that such ships enable us to feed the world’s population by moving food from a producer with a surplus, to a consumer with a deficit, but there, that is part of the problem here. It also ignores the fact that the ‘waste gases’ from the engine pass through an ‘exhaust gas economiser’ which transfers heat to the ship’s hot water systems and preheats water for any boilers. Yes, such ships also consumes fuel at a rate of ‘Tons per Hour’ but we must also recognise that an average container ship shifts thousands of tons of produce very efficiently, far more efficiently than could be done by camels, trains or trucks. And the fuel consumption when under way is around one third of what used to be consumed by a transatlantic liner such as the France or the old Queen Elizabeth which burned around 40 tons of oil per hour at cruising speeds. Once again, more efficient machinery, means greater economy of operation, less consumption to achieve more.

Aircraft engines are going through a similar revolution/evolution. Not only are they now much more efficient, they are becoming quieter and less fuel hungry. 

Then there is the question of ‘resources’ such as iron ore, copper, manganese, chromite and many more. Extracting these from the ground is very ecologically damaging, and as the mines get deeper, more difficult, it is obvious that more efficient and less damaging means of recovering it need to be examined. And they have been. Open cast mines in operation are pretty ugly, but it is now common practice to ‘landscape’ such sites, often using them to store landfill - the rubbish generated in cities - and even restoring them to nature. Recycling is becoming much more efficient as well. Metals thrown into to rubbish are being recycled at a far greater rate than ever before. Electronic components are recovered, and reprocessed to extract the metals they contain in order to make new components. I read recently that ‘new’ appliances contain around 40% of metals recovered from old appliances thrown away, so you new iPhone/Android/Samsung probably has metal in it that cam from a reel to reel tape recorder!

Economists tell us that innovation is driven by growth and demand. If something is in short supply, two things happen, the price rises and new sources are found, and people find ways to use less more efficiently or reuse what is already available. This is the key thing most ‘Green’ advocates seem to miss. I still have reservations about the potential for unlimited growth (unless we can find ways to start to colonise planets in outer space), but I don’t think we are yet in danger of ‘running out’ of anything vital - as long as the legions of ‘Green’ campaigners can be persuaded to stop obstructing innovation and development of technologies that can and do meet the rising demand. 

Human Resources or Human Beings: The difference between 'things' and 'people'

Among my reading lately was an article on LinkedIn (which is why I cannot post a working link here) on the subject of getting “your” Human Resources Department to work properly. Obviously the article is aimed at managers and possibly at Human Resources staff, but it made interesting reading. The main thrust of the article was that many HR Departments are not functioning well or efficiently. The author flagged up several areas of concern, among them a ‘disconnect’ between the people they are supposed to be sourcing, developing or disciplining. In part this is because there are differences between what ‘Corporate Management’ think the department does, and what the HR Manager thinks it does, but there may also be a lack of certain skills within HR, or even a lack of communication between ‘cells’ within it. 

Many years ago now, I held the “HR” management function for my then employer, a Fire and Emergency Service. It was a very interesting task, and something of a major challenge, but I enjoyed it in the main. The foregoing will tell readers that I'm old enough to remember when "HR" was called "Personnel" and frankly, the change of title is part of the problem. Suddenly 'people' became a 'resource' and thus 'objects' or 'goods'. The very word ‘resource’ suggests some sort of warehouse from which ‘workers’ can be drawn at will, and which, when worn out or no longer required, can be discarded. Treat people as objects and soon their motivation to do anything more than the absolute minimum goes straight out the window. They also become very reluctant to discuss anything at all with anyone from ‘HR’ lest it be used against them, or used to impose new responsibilities or workloads on them. 

One of the points the article raised is that a properly functioning HR Department is also about ‘developing’ skills for an employer. For many corporate employers this is an ideal situation, but all too many don’t make proper use of the possibilities it offers. Coming from a uniformed service background, it is a function that is often separated from HR under the label of “Training and Development”. For a service such as mine it was and is a key function, and it can quite easily fit within a HR remit. However, I would also caution that it must be managed by someone who understands the difference between managing the kitchens of a hotel and being able to manage a fire station with multiple functions. While some skills of management are common and therefore transferable, some of the technical skills and knowledge required to make a good Station Manager/Commander/Officer in a fire service are unique and cannot be gained through an generalised management course. Once again, my experience of trying to explain some of this to HR managers leads me to think there may be a reluctance to accept that a NVQ for managing a shop or office is not a suitable qualification for managing a crew or station in an emergency service.

As I said earlier, I am a retired senior fire officer, and one of the things one learns in 'command' is to know your people, know them, trust them, and know what makes them tick. Far to many of the HR 'professionals' I have encountered in my latter years of employment didn't understand this and could frequently undo years of trust and respect by imposing some new system or policy without consultation. This is often compounded by a refusal to discuss anything of concern to individuals with the person. Many HR Managers I have encountered in recent years insist the person must take their concerns to “their Union” so it can be aired at a “Union Consultation”. In my view, this is not the right way to handle something, the “Union” often has a wider agenda, and the individual’s ‘issue’ may not fit it. As someone who was, at best, a reluctant member of a Trade Union (I disagree strongly with their direct involvement in political ideology and links to specific political Parties), I resented being made to join one (and continuously have to explain why I refused to make a ‘donation’ to an affiliated political party) just so I could get certain concerns about the manner in which contracts were being ‘adjusted’ without consultation or appeal.

I lost count of the number of times I have been told by HR managers that the department was there to 'provide support and services to 'the management' and not to 'staff'. An employee encountering that is likely to immediately clam up and avoid disclosing anything beyond what is demanded of them. I have also found that many of those I encountered didn't know the Employment Laws as well as they should. They often made something worse when they did take a wrong turn, by trying to blame the employee, or by creating a situation which brought about a conflict with the Unions. For me the worst moment came when I was told by an HR 'Director' (who had replaced a uniformed senior officer with many years experience and success at keeping the staff happy and onside) that “no one in the fire service should expect to have a career in it” and that the “average length of ‘career’ should not exceed 12 years”. The individual concerned did not understand the fact that the fire service relies heavily on experience as well as qualification. In fact, quite clearly, there was absolutely no interest at all in even being informed of it. Remove the experience element and you have a recipe for disaster, which, unfortunately, has been borne out in reality since that discussion.

In fairness, senior management can often put the HR personnel into an unenviable position of having to implement policies which they may know will cause hardship. The management is abusing their HR Department in this case, and using them as a buffer between themselves and the difficulties their policy may cause. A typical example is the ‘policy’ that imposes some operational requirement which those who will be affected by it know is going to cause them to come into conflict with the public. Having been there, I can tell you it is useless trying to raise those concerns, so you are faced with either disobeying the policy and hoping to get away with it - or letting the proverbial wheels fall off. Either way you know you, and you alone, as the “resource” involved will be blamed, and will be punished for it having gone wrong. No wonder “HR” are frequently seen as the enemy.

It is my experience that all to often, HR managers adopt an 'adverserial' approach to legitimate staff concerns and generally ramp up the conflict. Sometimes this is down to 'management' decisions requiring the shedding of staff, but more often than not it is down to sheer bad  communications skills and sometimes to clumsy efforts to change employment contracts by stealth. For many the concept of 'consultation' is to send round a letter stating something is to be ‘changed', and when the staff object, tell them to 'like it or leave it'. As you may gather, my experience of modern 'HR' is not a happy one. There is, I feel, too much emphasis on the ‘resource’ and not enough on the people. Too much generalisation instead of addressing some of the real problems and difficulties - like bullying, or constant playing of the ‘minority’ card to cover poor skills or knowledge gaps, and not enough attention to addressing identified problems rather than, as was common in my last employer, blaming everyone for the problems created by one or two individuals instead of dealing with the individuals concerned. I still remember with enormous anger having notices plastered everywhere setting out “our core values” (the same one’s I, and every other uniformed employee had worked to our entire careers) and threatening disciplinary action if we failed to adhere to them. I should mention that the very same people who put these up everywhere, were the worst offenders in breaking them …  

The author of the article that set me off on this listed ten suggestions for improving Human Resources functions. Four of the listed items would, in my view help. They included breaking down the tendency toward isolating skills within the department, adopting a more consultative approach, getting to know peoples’ needs and development ambitions and being less remote. I think that the first step is to have an HR manager who actually understands the 'operations' the 'Human Resources' he manages are engaged in, what stresses and strains those impose on individuals and then to find ways not to compound them. All too frequently, the HR Manager is someone from outside the organisation who has little, if any, knowledge of what the resources they are managing actually do. While it would be impossible to know in detail what each and every post does and how it does it, it would help to actually talk to the individual before attempting to change it. Consulting the Union doesn’t cut it, since the Union representative probably doesn’t know either. 

How do we fix the disconnect between what management think HR does, what HR think they do, and what the staff think HR is there for? It will certainly go a very long way if "HR" stops treating people as 'assets' in the manner of 'goods' to be pigeon-holed, costed and measured all the time.

Capitalism or Communism?

The polarisation of this question generally provides only the answer the particular protagonist wants and that is an absolute. Sadly this always masks several important points, one being that neither is actually 'perfect' for everyone or for every economy. Both have serious flaws in practice. So I was recently very pleased to see the following answer to an online debate.

118

 

Eivind Kjørstad, 

Communism and Capitalism are abstract ideas. None of them can function in a hypothethical "pure" form, because both of them carry in them the seed to their own destruction: "pure" capitalism unhampered by restrictions or government oversight would lead to crises and excesses that makes the current financial crisis seem like peanuts; you'd have people starving on the streets, and a handful of people owning everything. We already live in a world where the wealthiest 85 people on the planet own more than the poorest 3.5 billion. A world where it instead was the wealithest 10 people on the planet owning 99% of everything would not be desirable. 

But pure communism is also unworkable: attempting to remove the profit-motive never works, and if it did, the result would be a catastrophic fall in productivity and a world of poverty as a result.

Real economies are a mixture of ideas from many different inspirations, including communism and capitalism. Good governance is not about finding the ONE TRUE ANSWER and then implement it in it's purest form. Good governance is about finding a reasonably good balance between the many competing priorities.

Enough capitalism to make people productive. Enough communism to avoid having people starve on the streets. Enough capitalism to make it worthwhile to start businesses, yet also enough of a social security-net that even if the business fails, you'll still not need fear for your basic nessecities.  

It's not always a conflict, sometimes there's synergies: A good social security-net makes it easier to start a business, because that's always going to be a risky thing to do (most businesses fail in their first 5 years), and knowing that you'll still be fed even if you fail, makes it easier to accept that risk. 

So the question should not be: What is better, capitalism or communism ? 

The question should be: What is the right balance of ideas ? What are the good parts of communism, and how can we incorporate them, while minimizing the downsides ? What are the good parts of capitalism, and how can we benefit from them while reducing the downsides as much as possible?

I find this writer has summed up my own feelings on this question perfectly, the only problem is that, at present, both the 'capitalist' and 'socialist' political party types are too close to, if not in thrall too, the absolutist proponents of both philosophies.

Rearranging Deckchairs ...

I have been watching with some amusement, the latest efforts by the Home Office to 'do something' about the 'flood' of immigrants they expect to get from Romania and Bulgaria. The Home Secretary has been making noises about 'capping' the number of immigrants from within the EU, which, as the Deputy PM has pointed out is illegal and discriminatory. It seems to have escaped the notice of the British Press however, that the Danish Interior Ministry, and the Danish EU Commissioner free movement of workers within the EU has nailed the flaw in Mrs May's arguments.

The problem is that Britain has become a magnet for those looking for handouts because it has the most generous 'benefit' system in Europe, the easiest to gain access to, and the easiest to defraud. As the Danish lady said - stop trying to restrict the numbers, and fix the system that draws them in!

That, unfortunately, isn't going to happen. I know there is a huge uproar at the moment about cuts to a wide range of benefits, but the reality is that, in real terms, it is the old pea under the cup trick. While some, often the most in need of help, are losing out, the money is simply being 'rearranged' and the cheats, the idle and the manipulative aren't losing out. The 'rights' lawyers are having a ball, and raking in cash left right and centre 'fighting' for the handouts to migrants from non-EU countries and 'vulnerable minorities' while the pensioners, disabled, and chronically sick who don't have the connections, bear the brunt of it.

Parliament can, in the meantime, award itself a pay rise, bigger pension benefits and expenses claims, but is afraid to tackle the root cause of much of the UK's financial woe - the out of control 'benefit' system. To pay for this the last government raided Pension Funds, destroying some, reducing others to near bankruptcy and accusing all pensioners of 'being a drain on the economy'. A bit rich from a bunch of professional parasites sitting on gold-plated pensions themselves, especially as 'Pensions' are not a 'Benefit'. Everyone in receipt of one has contributed toward it through their employer, through their tax and through direct contributions. In my own case an average throughout my working life of 5% of salary in direct contribution, an amount matched for most of that time by my employer. So called National Insurance is supposed to pay for 'Unemployment Benefit', pensions and, some think, the National Health Service. It currently runs at 11% of earnings, plus an employer's contribution, but most of it simply vanishes into the Whitehall Black Hole. It is not, and never has been, an 'insurance' in the same sense as a policy taken out with an insurance company, nor has a single penny of it been invested for the future.

So now we have the spectacle of politicians having set up systems to 'redistribute' wealth from some, to those they and their civil servant chums consider 'deserving' and blaming those who have paid toward pensions and security for their families, being blamed for it being unaffordable. So now they resort to fraud and deceit to find solutions. One is the move to change the Fire and Rescue Service Pension age to 60. There were, and still are, very sound medical grounds for the present maximum retirement age being 55. The Minister is being misinformed, or possibly disingenuous when he says that any fire fighter forced to leave the service before age 60 will still get a full pension. The fact is that they won't. In fact many may have to leave the service at 50 - and will lose 10 years value from it. This is in the 'Report' the relevant department cooked up - it actually admits that potentially 91% of fire fighters won't be able to meet the fitness standards at age 50 or lower!

The fire fighters are an easy target, they're high profile, and their pension scheme appears very generous, so it is easy to spread the lie it 'isn't earned'. I note the politicians aren't admitting that the fire fighters pay 11% of income into it over their 30 year careers - money that is not - again - invested, but spent by the Local Authority concerned to 'redistribute' wealth on pet projects. I was particularly angered to note on a forum I frequent, that a non-Fire fighting "Area Manager" (Old money equivalent of a Senior Divisional Officer/DO I) 'managing' that other great shibboleth "Human Resources" was arguing that fire fighters should accept that the service isn't a 'lifetime career' any longer, and the pension benefits were too generous. Rich, considering that she has parachuted into the service at the same pay as the fire fighter who used to manage that function, and is now likely to draw the pension she and others like her are trying to deny the 'resources' they are supposed to take care of.

As I said, the fire fighters, police, soldiers, ambulance workers and other 'service' personnel are easy targets. They are relatively small in numbers, so the politicians can afford to sacrifice their possible votes. Likewise the ill, the aged and the disabled. What they will NOT tackle is the massive handout culture they have created since 1909 when the 'universal pension' was first introduced. Since then we have seen 'benefit' after 'benefit' added to the list, and alongside of that we have seen the growth of industries to preserve them. So we have the 'human rights' lawyers, the Union Lobby, the Student lobby, the minorities lobby and so on - all of whom defend their particular interests with threats of disruption or mayhem if there is any attempt to address some of the imbalances that have arisen.

Pensioners are still painted as 'abusing' the system even though they have, in the main, paid for what they get. So do many of the younger folk now facing retiring (if they can) at 67, 69, 70 or later. The Danish Minister is right, Britain needs to tackle the culture of 'benefits' that are creating the unrealistic expectation of being able to live comfortably on these handouts for life without ever having to work. Only then will the 'migrancy' problem go away.

Unfortunately, that is the least likely course of action the present or any future government will take.

Economic Disaster Looming

Yesterday's video clip from MoneyWeek got me digging. What I have turned up (far from a complete picture I confess) has got me deeply concerned. There was some further fuel added late last night when I read a report that one of the largest circulation Chinese daily papers ran an editorial basically saying that China didn't need Britain, "a small and no longer significant nation that has impoverished itself and has nothing to offer China". Sadly, I suspect they may well be right on the money despite the Prime Minister's much vaunted 6 billion pound trade deals. I note he didn't say which way the 6 billion would be going - to Britain or to China.

We should all be deeply concerned by the fact that our National Debt has shot through the 'billions' and is now over 1.4 trillion Pounds. We need to be even more concerned over the fact that, despite the much vaunted 'cuts' in all manner of 'services' and 'benefits' the overall spending in Whitehall has actually increased. This is not a new phenomenon, Whitehall 'cuts' and 'savings' always seem to translate into increases in their overall budgets. All talk of 'value for money' almost invariably means a reduction in delivery and a massive hike in the cost of whatever it is. Th awful truth of our National Debt is that it is over 9x the National GDP. Put another way, the Demand on the "Money Supply" is 9 times greater than the Supply. This can't go on.

But the terrible truth is that neither Parliament (the prime source of the problem) nor Whitehall are capable of dealing with it. Even if they wanted to, the truth is that the either haven't a clue as to how to do so, or, they are afraid to.

So what will happen if the country runs out of money? Who will really suffer?

My studies of the late Roman Empire and its collapse revealed that the majority of Middle and Working Class folk were the first victims. The rich and powerful carved out little fiefdoms for themselves, hired soldiers and sat tight, the middle classes and the workers found themselves being squeezed for massive tax demands, then for 'protection' and finally surrendered their property and liberty just for food and shelter. The wealthy families survived, eventually becoming, through marriages, 'little' wars and adoption of the tactics of the barbarian invaders, the 'noble' families who ruled Europe until the wars of Revolution in the 18th and 19th Centuries.

I suspect something similar is about to happen in Britain.

Let's take a look at what will happen if the government can no longer service its debt and the money supply dries up. As in Greece, the first to be hit will be those who depend on the State for their income. Civil Servants, teachers, doctors, nurses, fire fighters, police, soldiers, sailors and airmen, pensioners, the disabled, students and the unemployed. Health services will be crippled, those with debts, mortgages, loans and so on will no longer be able to pay for them. Unemployment and homelessness will soar, so will the need for food depots, child protection and so on. Some communities, where there is a strong community support ethic (the Muslim groups come to mind) will survive by coming together and taking care of their own as they do in the Middle East and elsewhere, the richer members of families providing the basics for the less fortunate. For the rest, used to "The Government" providing everything, there will be a major problem as the Greeks have discovered. You can't feed a family out of grow bags on the balcony of a flat, you might if you have a greenhouse or an allotment, but both of those will become very vulnerable to the desperate hungry who don't have access to such facilities themselves.

There will be riots over the cessation of 'benefits' and certainly the likes of the National Union of Students will embark on campaigns of anarchy over their Student Grants and Loans being stopped. They will be joined by others dependent on the hand-out culture we have created, and both will simply make the situation ten times worse. We can be sure a number of expensive projects will cease. The new aircraft carriers being one, but others will include things like road maintenance, keeping the rail infrastructure up to date and so on. Health care will become basic - unless you can pay for it yourself - and we can expect fuel to become increasingly expensive and scarce. That will mean cold homes for many, which, coupled with minimal food supplies will mean a rise in deaths from disease and the cold.

While Whitehall will desperately target all the 'High Profile' projects and Services (Fire, Military, Student Grants and Loans, Pensioners and so on) they will be saving 'pennies' simply because they will not dare to tackle the real cause of the problem - the major slice of the money we overspend from the Treasury goes on the 'Welfare Benefit' handouts and the massive Whitehall machine that administers it. Defence, even including the new carriers, is under 2% of our GDP, less than most of Europe spends, half what the US spends (in equivalent terms) and less than a quarter of what many Middle Eastern and 'Developing' nations we currently give Aid to, spend. By contrast, according to some sources (it is difficult to make sense of some figures since the 'benefits' now handed out are spread across several Departments and not, as one would think, under one umbrella) our 'Welfare' bill accounts for around 50% of GDP!

So far all the 'austerity' measures have done little more than rearrange the deck chairs on this sinking ship. The HMRC (as a friend discovered this week) is so desperate to find extra money they are now 'auditing' pensioners in the hope of finding hidden billions in undeclared savings. As my friend reported, the pennies they do find are far outweighed in real terms by the cost of these 'teams' chasing them. Those who do have the sort of money the HMRC would love to tax have it where it can't be got at, or have used all the loopholes in the Tax book to protect it. The only option now for the Treasury is to 'nationalise' all the 'private wealth' such as savings and private (invested) pension funds as has been done in some of the Eastern European countries trying to get their debt under control.

It is obvious that this situation cannot continue. We're broke, living on the Credit Card and praying for a Lottery win. Parliament can't fix it, Whitehall won't. So, sooner or later, we're going to go bust. All most of us can do, at this stage, is hope and pray we can weather the catastrophe somehow, and make sure that the government can, in the end, be remodelled, its powers to give away what isn't theirs in the first place restricted and at least some of the best of our society and culture salvaged.

It isn't a good picture, and the troubling part is that it is very likely that those who caused it all will be the ones who survive with wealth and power intact.