Friday 18 May 2018

Footballers, vice-chancellors, London homes - why they all cost so much

This post first appeared on the Radix website...

I’ll tell you the answer straight away – they are all a result of too much money pushing up the prices. They are all a result of the most insane inflation.

It is peculiar, though, that – in a nation where the establishment is obsessed with inflation – we understand it so little. Nearly the entire discourse about UK house prices has been about the short supply of houses and almost nothing about the over-supply of property finance.

House prices tend to leap in periods of heavy lending, but not in periods of extreme under-supply (I’m thinking of the late 1940s). Yet for some reason, policy-makers only seem able to focus on the latter. There appears to be some kind of blockage in the English mind when it comes to interfering in the financial side of property booms. Yet there now, thanks to buyers from the Far East, appears to be an almost infinite demand.

Yet we naively think we can flatline house prices by building more. It might work better and faster if we could lend less – and limit the influx of foreign buyers.

And for some reason, we don’t see that – when the average Premier League player earns more than £50,000 a week – a similar phenomenon must be at work. We are clearly putting too much money into football.

When the average vice-chancellor pay at a Russell Group university is over £330,000, a similar phenomenon is at work. It isn’t that there are too few vice-chancellors. It is that there is too much money flooding into universities, and paid for by our children.

Something must be done.

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Tuesday 15 May 2018

The implications for Brexit of Chamberlain and Munich

The reason I wanted to write a book about the Munich debacle of 1938 was that I heard the novelist Robert Harris talking about it on the radio - and taking a revisionist position sympathetic to Neville Chamberlain.

Having immersed myself in the subject for some months, I came to the conclusion that Harris was wrong. Yes, the Munich summit, and the two which immediately preceded it, delayed world war for a year and gave Britain, France and the Nazis time to prepare their arsenals and procedure. Yes, Hitler himself bitterly regretted the agreement too.

But there were three elements I had not been aware of before.

1. The handover of the Czech nation to the Nazis involved the deliberate brow-beating of the Czech president - demanding an answer from him in the middle of the night before a 6am cabinet meeting, while the UK press was kept in line by Samuel Hoare. There was a kind of snobbery in the way the UK establishment treated the Czechs which lay behind one of the most unjust interventions by British diplomats in history.
2. The Sudeten areas handed over to Hitler included some of the most sophisticated tank and weapons factories in Europe. Most of the tanks which pushed the British and French into the sea at Dunkirk in 1940 were originally Czech.
3. The German generals had agreed a sophisticated plot to kill Hitler the moment he ordered the attack on Czechoslovakia, which unravelled as soon as the news of Chamberlain's plea for a third summit to give Hitler what he wanted, as Chamberlain put it, "without firing a shot".

In fact, telling the story of the 1938 coup plot alongside the Munich story was a key element I wanted to achieve in my book Munich 1938.

Chamberlain knew of the plot, but did not take it seriously and - who knows - he could have been right. Where he was seriously deluded was in his belief that Hitler respected him and would keep his word. In fact, I found myself comparing him with Blair on Iraq as I had not done since 2003. The two situations are not parallel; the prime ministerial behaviour is.

Czechoslovakia would have fought, and probably the French and Russians would have fought alongside them, if it had not been for Chamberlain's willpower. It was the British, in a determined effort not to be involved too closely with continental Europe, who forced the betrayal of a whole nation.

In fact, I suspect that history shows that the British need to be involved in Europe willingly - or at least that Europe finds itself in greater danger without us. This is not national pride - the same would undoubtedly be so of France, Germany and Italy. We are one of the guarantors of European peace.

As the eightieth anniversary of the Munich summit approaches this autumn, it ought to be marked in some way. It is the fearsome example of what can happen to Europe when we, or any of the other main players, wriggle out of involvement there. This implies nothing about the EU, but it is a warning if we use Brexit to pretend we have no responsibilities for the continent we are part of.

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Wednesday 2 May 2018

Time for our monopoly regulators to get off their bottoms

This post was first published on the Radix website...
The story so far goes back to the parallels between the campaign for free trade and the campaign against slavery, which realised - especially after the 1860s when the US slaves and the Russian serfs were both released and found themselves straight back in an economic slavery - that the two belong together.

That was free trade as Liberals understood it through the nineteenth century and into the twentieth. Free trade was, above all else, the antidote to slavery.

Then came Milton Friedman in 1962 and others since who argued that monopoly power was rarely a problem and transformed free trade into the mirror image of itself - not a means to protect the small and challenging against the market power of their competitors, not a solution to the problem of monopoly power but an apologia for it.

Then the Liberal forces forgot that anti-trust was the lynchpin of their economic credo. Conservatives think that free trade simply means letting market power rip. Socialists don't care about it either: they prefer dealing with big companies to small ones, because they imagine they can control them (they can't).

Now, bear with me, we are getting near the present day. The last supermarket inquiry (2007) dodged these issues and allowed the Big Four grocers to carry on virtually unhindered, though they have such a grip on the UK farmers that they have largely destroyed the sector except for the biggest.

And now we hear that another monstrous supermarket merger is about to be nodded through in the usual way - and the purpose, to escape the monopolistic power of Amazon, is because the UK and US monopoly watchdogs have allowed Amazon to build up an unassailable power so that now everybody has to be a bit bigger. And despite the promises, it inevitably means worse service, higher prices and bankrupt suppliers. It means less diversity and that is good for nobody.

The American political establishment is beginning to wake up to the peril they are in from allowing a dwindling number of players to dominate the markets. They have the new Open Markets Institute. They have new figures emerging too. In the UK, where the regulators are particularly dozy - and where the establishment still seems to believe, despite all the evidence, that big is more efficient - we are a long way behind the debate.

Consequently, the regulators here will undoubtedly set some minor conditions and then nod through the Sainsburys-Asda merger, citing the importance of economies of scale in order to stand up to the internet giants. Forgetting perhaps that they are primarily responsible for creating the climate for dysfunctional giantism in the first place.

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