How to become a student

One of today's 'shock headlines' in the UK is a report on university admissions that shows that several universities have failed to meet targets for 'fair access'.  'Fairness' in this sense means 'making places available for students with inferior results in the qualifying examinations whose relatively poor scores can be attributed to the inferior quality of the schools that they have attended'. The quota system means that students who gain satisfactory results at good schools could be disadvantaged to the extent that they do not get into their preferred universities.

The problem is principally ascribable to the fact that Britain has three parallel schools systems. One group is schools where the great majority of pupils have the cost of their education paid by their families [though almost all such schools have some scholarships for a few children from less-affluent homes]: in most such schools teaching methods are traditional, discipline is firm and there are ample resources for science and sport and out-of-class activities: many such schools are residential so that they offer a total educational environment.

Second there are a few districts where the local authority provides different sorts of schools: traditional grammar schools which are day schools with most of the attributes of private schools; a few technical schools; and 'secondary modern' schools with a less-demanding curriculum. Selection between the three school types is made at a set age - often eleven years - usually by examination.

Third are comprehensive schools, providing the only education that is available for the overwhelming majority of children over eleven years. While some of these have excellent standards of teaching and discipline, the majority do not. An establishment of politically-correct writers, university Education professors and head teachers has wantonly ignored [or actively denigrated] the example of private and grammar schools. In most comprehensives lax discipline is commonplace and this ensures that disruptive and arrogant children can deny their colleagues any serious educational opportunity. 'Hard' subjects - notably mathematics, serious science, modern and classical languages - are largely ignored in favour of simplified generalised 'science' and 'vocational' subjects like journalism, film, elementary psychology and book-keeping.

Good universities concentrate on 'hard' subjects that are likely to benefit the economy most, as well as giving their graduates the best employment opportunities. It is a simple coincidence that entrants from private and grammar schools are prepared to undertaken 'hard' courses, while most comprehensive school leavers are not qualified to embark upon them without special extra coaching within the university; which is an extra cost of their attempts at 'fair access'. The best - and most popular - universities make very serious efforts to achieve 'fair access' targets, even at the cost of diverting resources from developing the best students to remedial work for the 'disadvantaged'. Every move for greater 'fairness' has a tendency to remove resources from the education of the best-prepared students, regardless of their access route to university: and this conspires to reduce standards and thus the future quality of the national skills base and thereby disadvantage the economy.

Almost everybody in the university system agrees that remedial work is needed in the ethos and standards of comprehensive schools: but that issue is put by politicians and self-styled educationalists into the 'too-difficult' tray; so the chosen 'solution' to a real national problem of educational opportunity is to reduce the quality of the best universities and thereby further reduce the future competitiveness of the country.

Milliband and Markets

The uninspiring person whom the unions inserted a year ago into the Labour Party leadership made his first ritual annual speech yesterday. It had, as usual, been painfully constructed by a committee and yet because the event is a Labour Tradition it is treated as Significant
The core of the speech was a repudiation of market Economics: explicitly denying thirty years of all parties' policies and arguing that other principles should determine what is 'good' economic activity and what is 'bad'. This concept can easily be fitted in with the recent fashion in politics on both sides of the Atlantic to argue that 'fairness' should transcend market outcomes.
Examples of 'constructive' and 'destructive' behaviour can be dredged from recent business news: but the elucidation of principles for making the distinction right across the economy is far away. If 'fair' means 'making incomes equal by imposing a pattern of high and progressive taxes and handouts' where is the incentive that drives people to excel, to innovate and to take risks; without which no economy can survive.
The more people become interested in yesterday's retro-Labour, the more its easy assumptions must be challenged.
Market Economics is obviously a busted system: it needs to be replaced: but Milliband has not signposted the way forward.  

Europe, China, Credit and Debt

At the time when markets in the west are tentatively welcoming a putative resolution of the Greek crisis, which is also relaxing the demand for gold, reports from China feature the statistic that sales of second-hand homes in parts of Beijing are fetching prices 73.7% below the peak. Superficially this can seem to mean that China faces a prospect of massive market volatility, which doomsayers recklessly compare with the collapse of the Japanese property boom that triggered a twenty-year period of supposed depression in Japan.
Looking behind the headline statistics the facts are very different.
Greek debt can sink the entire European banking system: by contrast Chinese borrowing to fund house purchases is such a a tiny proportion of the Chinese economy that it is immaterial to the balance of the economy when a credit squeeze [carefully orchestrated by the government] temporarily checks the housing bubble. It has no material impact on economic growth, or on the living standards of the vast majority of the population.
The Japanese squeeze on finance for property lasted right through the 'nineties and it meant that Japan had no reckless boom in property prices in this century, while it retained a strong balance of payments surplus. Japanese national debt is very high in proportion to the strong national income, but it is overwhelmingly composed of savings by Japanese residents: it is not a piggy-bank for international speculators who can just whisk their deposits away and create a panic.
The realities behind the statistics matter more than the numbers; and Economists have failed to explain this to the politicians whom they lulled into the cloud-cuckoo land of the credit bubble.

New insight, old hat

In today's Times newspaper the columnist Matthew Parris reveals his great discovery that politicians in the old advanced economies have for twenty years encouraged their nations to consume more than they produced. He is right;and it is a pity that he has only just come to that conclusion: which has led him to the realisation that it will take at least 25 years of austerity [i.e. massively reduced living standards] to repair the damage; if, indeed, it is repairable. He would have been a great advocate for this truth for much longer if the penny had dropped sooner.

The late Ken Watkins and I pointed out the inevitably ruinous consequences of a political  system in which the parties at each general election vied to offer more to the voters from a socio-economic system that was already consuming more than it produced by the end of the nineteen-sixties.We published Can Britain Survive? in 1971, arguing that democracy itself would be endangered when the consequences of the policy of profligacy came home to roost. The book was a failure in its mission to present the nation with a wake-up call; and poor Ken fell under the spell of Thatcher when she became the Tory leader [as did Mr Parris]. Over almost all of the subsequent forty years I have seen the system stagger on, dependent upon ever more innovative creations by the financial markets; until the inevitable crash that was miraculously delayed until 2007 derailed everything in the discredited politico-economic nexus.

The crisis in 2007-8 was not fundamentally one of financial markets; nor is the second phase that we are now witnessing  simply a failure of governments to be able to service the debts that they have guaranteed. Behind and beneath the purblindness of journalists and of politicians [both of which Mr Parris has been] is a collective failure of all those who have been well paid to manage every aspect of economic life to ask the basic question: is this all real?

Can Britain Survive? was published by Michael Joseph. In the coming days I will show what we said in that book.                                        

Crisis and Perspective

Without moving from my desk in 114 Batovce I can look down the village green past the baker's shop and the news kiosk to the church, surrounded by red tiled roofs; and beyond to the hills that mark the northern limit of the Danube Plain. In a short walk I can see the manifold evidence of an improved standard of life in the EU, NATO and [latterly] the eurozone: we have improved roads, restored buildings, an up-to-date supermarket and a useful general store that occupies the old Co-op premises. The veg man still sets up his stall three times a week, good local wine is between two and three euros a bottle and a half-litre of excellent beer in the pub costs less than one euro. We have an excellent local administration, led by a sensitive and intelligent Mayor. Economic growth is strong; and while unemployment is rising jobs are still being created in modern factories in the major cities.
Slovakia was emerging from the mire of communism - and still outside the European Union - when lying became institutionalised among the EU insiders; most obviously in the late 'eighties in the matter of the ERM [exchange rate mechanism], the scheme under which the currencies of member states were meant to 'converge' as a first step towards creating a common currency. If the exchange rate of any member currency moved to more than 2.5% above or below the average value of all the member currencies, the central bank and the government of that country had to take the necessary measures to bring the exchange rate back into conformity with the rules. There was a huge amount of fudging of figures: so although the range between the most divergent country above the average and the most divergent below the average was supposed to be a maximum of 5%, much higher diversion was tacitly tolerated. Not even that fudge could accommodate Italy, so the Italians were allowed a special range up to 7.5%: making the 'official' maximum divergeance between the lira and the currency furthest from it in strength 10%. Britain was a Johnny-come-lately into the system, tried to keep the rules with gold-plated rigidity, almost bankrupted the Bank of England in the process, and withdrew in ignomony in 1992.
The core EU countries then proceeded to create the common currency, the euro, on the understanding that the 'weaker bretheren' might not always be efficient in action or honest in their reporting of it. Member governments retained their power over taxation and spending policy, which they were supposed to exercise in accordance with the 'Growth and Stability Pact' so that the economic policies of the eurozone might converge and make the currency viable. Among the first to breach the Pact were France and Germany; and thereafter hypocrisy was institutionalised alongside making false returns and empty promises.
New members continued to join the euro, presumably hoping that there was enough validity in what was said in support of the system by the leaders of the major EU member states; and Slovakia was admitted on January 1, 2009.
Now the Slovaks have become pretty well aware of the rotten state of the EU. They presented the lowest turnout of any member state in the latest European Parliament election, and their parliament has hesitated to agree to any bail-out for profligate medacious south Europeans: they may still decide to stop any drain of their resources into the black hole created by the debts of the 'pigs' [Portugal, Ireland, Greece and Spain]. They are probably prepared to surrender more economic sovereignty to a strong and honestly-run eurozone [one national magasine a couple of weeks ago had a front cover asking 'IS THIS THE END OF SLOVAKIA?' as a sovereign state]; but that is a far cry from continuing to accept the pack of lies on which the currency was originally floated.
David Cameron is free to demand 'action' from the euro-states: but following the news from a village in one of the healthier member economies one becames aware of the seriousness of the issues that have to be resolved before the longer term future of the euro can be defined. On the same day [22/9/11], Cameron told the United Nations that they had a duty to oppose oppressive regimes that attacked their own people; and failed to mention Zimbabwe. That is the same sort of selective blindness as that which enabled European politicians and Brussels eurorats to con seventeen nations into accepting the euro: so, as usual, we have the pot describing the kettle as smoke-tarmished.

Rerunning the economic crisis of the nineteen-thirties?

What an exciting day Thursday was for the monstrous regiment of economic and business commentators! With stock markets falling at a daily rate of 4%-plus and the eurozone in paralysis, the traders are demanding 'decisive action' from governments; while governments criticise each other for a policy vacuum and the media struggle to explain the fuss to a bemused electorate.
There is a consensus [on the eightieth anniversary of Britain's abandonment of the gold-exchange standard] that the world is facing a serious risk of a re-run of the political and economic disasters of the nineteen-thirties. This is a valid judgement.
The whole paraphenialia of post-war post-Keynesian and monetarist economic policy was supposed to prevent such a possibility: and in the hands of democratic politicians they have brought about a disaster that will - if it materialises - be far more severe for Europe and North America than was the crisis of the inter-war years. In 1935 the vast majority of the global population was engaged in subsistence agriculture that was largely unaffected by the movements of world markets, so they were safe from macroeconomic turmoil. Most urban Europeans were only one of two generations from their rural origins and many of them could still get food from family sources in the event of total economic breakdown.
Also in 1935, the great majority of unemployed in the industrialised regions of the world had trades and skills and experience that could be taken up again into employment in the factories and utilities that were still standing, once the economy was stimulated back into full activity.
In 2011 the mass of the unemployed in the massively-expanded urban majority of the world's population do not have skills that could immediately be applied to producing goods or services. Factories and offices no longer exist in the depopulated former 'smokestack industry' areas. For every job that might be created in 2012, a new workstation has to be created; and more often than not many months of skills training would be needed. The cost of job-creation in the countries that have got used to the highest standards of living is prohibitive for all but the highest-growth and most profitable businesses: so to say that a Keynesian stimulus is needed to resolve the economic crisis in the old, failed industrial countries is mere pie-in-the-sky.
Seventy years of misdirected economic policy - which Keynes would furiously have criticised, had he lived into the era when his name was taken in vain - cannot be corrected in a few weeks.
The formerly rich countries cannot go forward until they have a clear idea of how they come to be where they are: Economics is no help in this exercise because it is a major contributory cause of the current crisis.
For a different basis of understanding, start by reading PERSONAL POLITICAL ECONOMY.

The UK cannot twist away from its problem

August 2011 was a terrifying landmark for the British government. They borrowed more than in any previous August: a year after taking power with ringing declarations that control of spending and borrowing was their overwhelming priority.
Is it really the fault of Balls-Brown 'mismanagement' of the economy, especially of government spending, from 1997 to 2008? The answer surely is that Labour did nothing to assist the real development of the economy, but they are neither clever enough nor bad enough to get away with wantonly ruinous policies. Britain is [at least superficially] not alone: we are perceived to be in a hole that looks very similar to that in which the USA authorities have begun to panic.
President Obama is obviously unhappy as his rating with the voters plummets. The Federal Reserve is trying a new version of 'quantitative easing' called 'the twist': and commentators are highly sceptical that this will have the desired effect.
But the US economy is much better placed than the British, as will become clear in the coming months. The Chancellor says that he will stick to a failed policy: this is reckless obscurantism. The problems must be diagnosed properly before they can be addressed effectively. This blog tries to help.