Canada Reports: The Bank of 'Mom and Dad'

Originally a Facebook post - apologies for short catchy phrasing. 

Sometimes I'm awfuly harsh about Leftists - often in very polemic ways. I'm not very concerned with inequality or class systems - that's not my prime motivation. But for anyone who IS, however, I beg you to hear me out on this one.

Our Central Planning Board (=Central Banks) choose very low Interest rates little over a decade ago. This fueled a MAJOR Asset price boom, creating a major divide between haves and have-nots. People owning shares predominantly the wealthies) and people owning their homes (=middle class and above) suddenly had assets worth 2x, 5x, 10x their initial purchasing price. = a massive increase in wealth over a very short time period.

In 2008, after perverse U.S governmental incentives and GSEs, combined with collectivisation of mortage-debt spread across the financial world, the party was over - rapidly reduced demand for loans, the value of properties dropped and companies whose Income Statements were doped by too-low interest rates, and Balance Sheets heavy with debt went out of business.

What did Central Planners do? If your only tool is a hammer, every problem tends to look like a nail; so, they lowered interest rates AGAIN + printing trillions of dollars to effectively create negative interest rates, hoping that price indexes would skyrocket - some of that new money did put pressure on prices, but most of it went to properties and shares. Again, property prices bounced; share prices reach all-time-high even though the economies of US, Canada and western Europe are not much better than 5 years ago. Again, the haves are benefited while the have-nots can't afford neither house, nor savings, because their wages (=productivity) didn't increase because the government printed more money.

So the older middle-class generation, now safely and comfortably retired in debt-free high-priced dwellings pass on some of their assets to their children, so that they can get even a humble home for themselves. Again, have-nots don't have that luxury, and instead have to rent low-quality homes in neighbourhoods they don't like.
"Chances are being inherited", McLaren says; the younger generation's spending powers are artificially propped-up by the older ones who were lucky or insightful enough to be on the Boom to begin with. Now they're all tied to housing prices with new loans, and it's way harder for have-nots to get on the property ladder than 15 years ago.

""And don’t even contemplate a housing crash. If that happens, we’ll all be screwed.", McLaren finishes. Indeed. But Central Banks would rather repeat the cycle than let the inflated prices crash down to reasonable levels.

======= Interest Rates must up to prevent repeat of last 15 years. But Central Banks won't raise them, because majority of population are addictively dependent on them for their mere day-to-day survival. So interest rates will stay down, creating the same Asset Price Booms we've seen, forging the divide between haves and have-nots.

My point is: Seeing as how Central Banks and Governments over the last 15 years made a mess of asset markets, disproportionally harming the poorest in society, increasing the wedge between haves and have-nots, all of it being done to help the poorest to more employment - SHOULDN'T YOU ALL LEFTIST AND INEQUALITY-PEOPLE BE ON MY SIDE?!

FemiNazi!

We're back in business, after last week's discharge of Rebuttals, William Easterly's Tyranny of Experts (Review available shortly) and a few days contemplating the fate of Jan Palach, in Prague. 

Today's accusation is a severe one - one might even call it absurd. But, as Deidre McCloskey often repeats, do hear me out. Consider that I might have a point. FemiNazi.

In my country, there's been a major feminist revolution over the last decade, intensified in the last few years. This, in a nation where gender equality has reached further than perhaps anywhere else. One, particularly awful accusation laid against these proclaiming feminists are the combination of their ideologi with Hitler's, to form the FemiNazi - allegedly it's just a word to describe a radical feminist.

That's of course absurd. But hear me out (though I have to pay homeage to my sister for unconciously pointing this out).

Feminists, quite understandably, don't like views as the ones below.

It consolidates the idea that women's value lies in the beauty and sexiness of their bodies. It's repulsive. It confines the idea that females are for sale, alluding to arranged marriages, prostitution or trafficking. So Feminists want to ban such commercial activities. Ok, sure.

Now, let me elaborate the comparison to Hitler.

Feminists don't like images as the one above - they don't like women being exploited, as they see it. Thus, they'd want to ban it. Whatever is wrong or harms the project of Gender Equality is to be taken away, banned. Punished. Eradicated.

Nazis in the Third Reich didn't like Jews. They believed Jews to be the lowest of the low, filthy and strain on Humanity. Thus, they wanted to ban them. Punish them. Eradicate them.

Here's the similarity that justifies the label 'FemiNazi'; The will to ban, use State Violence to punish and eventually eradicate whatever you find repulsive. It's not the magnitude of the crime here, as obviously murder millions of Jewish people is a far worse action than banning sexist commercial. The point is the will to ban what you don't like. The will to hinder other people from expressing ideas, from trading or even from outright living.

The will to HINDER other people, essentially. This is always and everywhere a moral statement saying: "I know better than you, what's good for you", "My moral is preferable to yours".

Regardless the circumstances, that's a horrible stance, quite justifiably attaining the epithet 'Nazi'.
______
Disclaimer: The argument can be made for most things socialists, statists or State-embracing liberals do; they all rely on the state to forcefully remove what they dislike, meaning the epithet "Nazi" might be applicable even to them. 

[Another One] of the Inherent Contradiction(s) of the Left

I previously wrote a piece on how Lefties are contradictory when they simuntaneously protect women's right to their bodies in Abortion debates, while refrain from the same protection in Labour Market debates. Here's another amusing contradiction:

A few months ago, during my heavy rampaging at those poor Lefties at People & Planet, I made a post about feminist economics. Since there's a major wave of socialist and feminist ideas tumbling across both my native country of Sweden and my current home, Scotland, I thought to re-introduce a special feature of the Feminist argument. Here's what I wrote about the Wage Gap:

"Wage gap. All kinds of numbers are generally presented to support this idea; women make 15% less than men, £5000 less in a year; higher in private sector (19%) than public (13%) etc, etc. What does this mean? How is this measured? The simplest of comparisons are made through dividing all income by women by the amount of women to the same ratio for men. Clearly inaccurate, because that would compare the pay of a female working minimum wage at tesco with a handsomely payed lawyer. Most studies then controll for other factors, most obviously what profession you're in. But even then, same questions arise; differences in productivity, experiences, in certain education etc. Some studies controll for more factors than others, but very few of them are conclusive in the sense that they add such tiny things as choices or personal adequacy.
Truth to be told, when more factors are accounted for (education, experience, career choice or even negotiation skills) the gap narrows into virtually nothing. There is no wage gap, there's only choices. More extensive reading here."

Libertarian Uni March 8, 2014.

Also, yesterday I shared the picture below on facebook, resulting in some pretty decent discussions about related issued. Now, I'm still looking for the sources to some of these claims, such as more likely do die at work or how the 14% "more time at work" is calculated. If anyone knows, please give me a shout!

Let's Get Down to Business!

Literally, actually. So, feminists claim women earn a percentage of what men earn (77%, 95%, 85%, whatever the specific number might be, but you get the idea - it's below 1). To a superficial reader that's accurate, and nobody is actually disputing that the following calculation gives us a number less than 1: 

<Total Wages Earned by Women>

<Total Wages Earned by Men>

After giving it a moments thought, though, you realize that this calculation compares people on minimum wage with Wall Street Excecutives. Or Steve Jobs, or J.K Rowling. The rest of us are not refuting this calculation - we're just laughing at its sillyness and the conclusions drawn from it ("OMG, DISCRIMINATION IN THE WORKPLACE").

There's more to the story. You have to control for things such as location, education, productivity, presentational skills, perhaps humour, fashion or whatnot a feature employers might value in any given employee. Studies that do, generally get a smaller "Gap". As Ellen Fishbein greatly points out, though, most studies never claim that this "gap" is discrimination - their authors say it is due to measures they didn't take into consideration.

Ok, so where's the contradition here?

If, as the Lefties say, women 

a) are just as good as men at a particular task in a particular field, and 

b) are payed less on average because of gender discrimination, 

another one of their favorite claims would come into question: Profit-Maximization. 

If a firm, simply by substituting women for men, could save 10%, 15%, 23% on their labour costs without loosing out on productivity or output (because of a above), AND they're constantly seeking to max out profits - Why wouldn't all firms stop hiring men and substitute women for men?

They could pocket a decent profit and still lose out on nothing. 

So, if we add Profit-Maximizing to the equation, our contradiction is complete:

A) women are just as good as men at a particular task

B) women are payed less on average because of gender discrimination

C) Firms are profit-maximizing entities

The only conclusion that follows is: Women would be prefered/have higher employment in doing such a task. 

Since that is not the case, illustrated by our friends on the left, one of these premises have to go. As I explained above: if firms could have double-digit returns on substituting women for men (without losing output), and we're not seeing that happening - one of our premises are incorrent. One has to go. 

Which one is it gonna be, Lefties?

Defending the 1% - a story of legitimate wealth

This is the 5th part of the "Leftie Serie" which I created after attending the People & Planet Conference on the 8th of March 2014. 
Here are links to the other posts: Feminist Economics, Inequality, Financial Crisis, Layoffs vs. Bonuses

I hear a lot of talk among Lefties about the "top 1%", the richest in society. Especially the last few years with the Occupy movement where these issues have been heavily discussed. The idea is that the richest 1% make so much more money than does the poorest, or even average worker in a country - and for some reason that this should be unjust, unfair and bad. Fair enough: the argument has some appeal to it - why should anyone make riddiculous amounts of money, when workers at McDonalds are payed minimum wage?

The discussion can be prolonged even further, considering the 1% of the 1%, that is, the top 0,01% of income-earners. In the U.S, the limit for entering this exclusive club is around $10m/year. Quite a hefty salary. Are they worth it?

Greg Mankiw, a Harvard economist I'm somewhat in love with, wrote a longer piece about income and inequality (here), where he presents compelling reasons for why the premises of the arguments of the left are incorrect, thus invalidating the arguments. The shorter New York Times version can be found here.

Interesting is his comparison to the main actor in the block-buster Avenger, payed an astonishing 50 million dollars. However, that represents only 3% of the total revenue of that movie. Or, to put it differently, for every $8 ticket someone payed for going to the movies to watch his performance for two hours, 25 cents went to the actor. Is that "overpayed"? Riddiculous amounts? Hardly, and few people would disagree. The effect that happens, Mankiw argues, is that globalisation and technological improvements means billions instead of millions can watch such a movie; that Apple products are sold to a market of billions instead of millions. Surely, because of the pure scale itself, salaries for those kinds of people skyrocket.

Mankiws words are well-expressed:

"People are similarly unperturbed when they learn that in 2013, E.L. James, author of the 'Fifty Shades of Grey' triology, earned $95m or that in the same year the basketball star LeBron James earned $56 million in salary and endorsements. When people can see with their own eyes that a talented person made a great fortune fair and square, they tend not to resent it." - Greg Mankiw, NY Times

Problem is, the rest of the 1% (or the 0,01%), make money in ways that people don't intuitively understand, using their talents in ways people don't see how that generates a great fortune. The problem is thus not that some people are handsomely paid; the problem is that their critics don't understand why.

Hence the "Deserving 1%" or "Legitimate Wealth". 

GINI - or the increasing inequality between the rich and the poor

This is the 2nd part of the "Leftie Serie" which I created after attending the People & Planet Conference on the 8th of March 2014. 
Here's a link to the other posts: Feminist Economics

As in any gathering of political lefties, inequality is a often-discussed topic. There are very decent debates around and differences to what this actually means, what equality would be and how equality is to be gained - but generally, most lefties agree on the notion that inequality is bad. 

At the conference these ideas were frequent. "The rich are getting richer, the poor are getting poorer" has echoed throughout the world since Seattle, "UK inequality is raising", probably been said since Thatcher or before that even, "rich getting rich at the expense of the poor" are repeated until they stick. Question is, how accurate are they?

We were presented with the following charts of  Wilkinson & Pickett showing the how more equal countries are better countries, also notions heavily worshipped within the left. The chart plots countries according to Income Inequality (measured as GINI) and an index consisting of various problems, obesity, teen pregnancy, mental health, violence etc), showing how more equal countries tend to have less of those social problems.

Discussion

This discussion is twofolded. The left argument is something like this:

P1: "Inequalities are increasing"
P2: "Inequalities are bad and must be prevented"
C = we must prevent the inequalities from increasing, preferably reduce them

I'll address these in turn.

Let's have a look at income inequalities as measured by GINI, then. Here's a chart which compares the UK (Red square) with Scandinavian countries, Germany, France and the US.

Source: Ekonomistas, based on OECD numbers. UK GINI inside the red square.

The trend for continental Europe and Scandinavia is indeed upward over the last 30 years, but from very low levels. In the case of UK, on the other hand, the income inequality has been stable since 1990, actually falling slightly over the last few years. The notion that income inequalities in the UK are increasing is simply not true. Also consider the article published in the Guardian last summer about how income gap in the UK is at its lowest point for 25 years.

The other discussion often involved here is that the rich are getting rich at the expense of the poor, as news regularly imply when posting these kinds of arguments. That discussion is wider and regards the economic foundations and structure of a company. Suffice to say that level of bonus vs layoffs have very little to do with one another.

If we turn our heads to a more global scale, Johan Norberg's In Defense of Global Capitalism, comes to mind. He shows systematically how capitalism increased the living standards around the world and made people better off. He also describes the following, taken from a Forbes article when the book was first published:

"As for the argument that the rich are getting richer, well, they are, according to Norberg: The top fifth of the population made an average $14,623 in 1998, a 75% increase over 1965 wages. But the poor are getting richer faster. The bottom fifth, making $1,137 in 1998, doubled their 1965 wages." - Forbes

That is - yes, the richer are indeed getting richer, but not as fast as the poor. Yet again the Leftie's notion is inaccurate.

Is inequality bad?

Following the first section, the second becomes more philosophical; if inequalities aren't increasing, it matters less whether or not they are bad. Even if they are, it's still less of a problem than the global left claims. And surely, if the levels of inequalities experienced in the UK in 1990 were sustainable, given the increased living standrads since then, surely UK 2014 would be a better place than 24 years back. 

Anyway, the discussion finds most of its academical value in Wilkingson & Pickets work, which relies entirely on correlation. They plot their charts and break law #1 in Academia: don't mix Correlation with Causation. But the Left, hardly creditted with academical excellence or consistency, takes their research and use it for certain proof that inequality is bad. 

How would that even be possible? Inequality is a strictly relative term, not too different from Relative Poverty (which I wrote about some time back); that is, indicators of inequality could be up, even though everyone in a society was better off. Besides, all the effects discussed occur on individual levels (obesity, violence, mental health etc) - why would I suddenly become more violent because a banker across town gets a bonus or because cleaners in a different part of the country suddenly make more money than me? Inconceivable.

Defending the 1%

In addition to all of this, the recent discussion in US media about the top 1% should be taking into consideration. The Harvard economist Greg Mankiw published an article in the NY Times a few weeks back vividly defending the 1% and their contribution to society/world. He also provides compelling reasons to why the Lefties' notions about the richest of the rich are incorrect. More extensive reading can be found in his article 'Defending the 1%'.

Conclusions 

The notion of increasing income inequalities in the UK is incorrect; GINI has remained stable for the last 20 years, marginally falling/raising over the last decade. The rich around the world are indeed getting richer - but so are the poor, and at a rate faster than the rich.

The starting point of the Left ("Inequality is bad") doesn't have more support than the correlations provided by The Spirit Level. Since correlation ≠ causation, this gives us nothing more than a hint towards further research. Also Mankiw's arguments about the top-1% should be taking into account; why are transactions that make both parts better off and at the same time creating income inequalities undesirable?

The question I have for you lefties is simple: why exactly is inequality bad?

Feminist Economics

After the countless amount of ideas, statements and reasoning I was exposed to at the People & Planet Conference on Economics today (the "Lefties Conference", that I refered to previously), I decided to make an extended series. Every day for the coming weeks or so, I'll be posting something that originated at this conference and address the flawed reasoning and/or incorrect premises used in reaching their conclusions.

First up, in honour of the day, I'll dedicate my first blog post to Feminism. Now, I'm not a particularly big fan of feminism, depending obviously of what you choose to fill that concept with. This position I've addressed elsewhere. However, at the Conference I was introduced to the field of "Feminist Economics", and as this blog overwhealmingly focus a lot of its attention of economics, obviously I was curious.

The way I understand Feminist Economics, it includes the regular presuppositions given by marxian approach to class remade and re-organised for Sex or Gender; structure, exploitation, traits inherent to those groups that determine their actions etc. Wendy McElroy has done extensive works in that particular area. Anyways, we touched upon 3 specific areas that came up during the session.

1) Domestic work done by women is excluded from measures of the Economy.
2) Women are forced to choose between Career and Family.
3) Stats and the Wage Gap


1) Domestic Work
The argument here is that domestic work (care ex or relatives of children, household cleaning, cooking) is unpaid, doesn't involve a measurable transaction and is not included in the GDP, thus in the economy as a whole. Feminist Economics try to distinguish itself from 'Traditional Economics' by including such unpaid work into their models and measurements of the economy.

2) Career or Family?
Such an ancient question, constantly been part of the feminist movement. How is a woman to choose? Does she even have to? Can she have both? The discussion here is that there's a social pressure for women to focus on family, a structure implicitly telling women they're bad mothers if they spend too much effort/time on their careers. Because men doesn't face these questions, all things equal, women will be disadvantaged by such anticipations.

3) Stats and the "wage gap"
We had three sets of statistics presented to us. Taking them at face value, they were "Women hold 70% of jobs paying the minimum wage"; "30 000 women are sacked each year because they are pregnant"; "Average Domestic work for women are 3x the domestic work of men".

Also included the discussion about the wage gap, that is men making more money than women, within the same occupation.

Addressing these issues resolve mainly around two things; Refutal of the "Wage Gap" and the notion of Choice. In the first two areas, choice is a dominant factor, largely ignored. Let me give you a hypothetical. Let's say the entire economic society went 'equal' overnight; supply and demand randomly created an equal pay for everyone (women included) and sectorial work identital between men and women. No wage gap, no involuntary part-time work, no penalty for choosing family etc. Now then let's also say there's a change in attitude towards leisure in the case of some women whilst the pattern of leisure/work for men is held constant; these women now prefer staying home, planting flowers in the garden, watch tv, involve themselves in community work and whatnot to a larger extent than before. They substitute some work for leisure and are therefor better off (First, they had a certain ratio between work and leisure that they were happy with; now the change in preference altered that ratio, resulting in a higher rate of leisure, and they recieve more personal benefits from this - otherwise they would stay in the same ratio as before, like the other women did). 

How would we see this? We would see that 1) the wages of men would outstrip women (if women work less and pay is perfectly equal, their aggregate wage is reduced), 2) men would work more than women, 3) women would be overrepresented in part-time jobs. Not too different from the story Feminists tell us today.

My point here is that domestic work is a choice; relationships, assumed here to be male-female, are determined by their reciprocal relations. Simply, in living together, men and women decide who is taking up what task, who is doing what. If that choice comes out with 5 vs 15 hours work respectively, what does it matter? Two people voluntarily choose to distribute domestic work in a certain pattern. No more, no less. Domistic work is, by its nature, unpaid, because it is what you do in your home. The fact that women happen to do more of such work than men means very little, especially for the entire economy. Irrelevant.

Second point: Wage gap. All kinds of numbers are generally presented to support this idea; women make 15% less than men, £5000 less in a year; higher in private sector (19%) than public (13%) etc, etc. What does this mean? How is this measured? The simplest of comparisons are made through dividing all income by women by the amount of women to the same ratio for men. Clearly inaccurate, because that would compare the pay of a female working minimum wage at tesco with a handsomely payed lawyer. Most studies then controll for other factors, most obviously what profession you're in. But even then, same questions arise; differences in productivity, experiences, in certain education etc. Some studies controll for more factors than others, but very few of them are conclusive in the sense that they add such tiny things as choices or personal adequacy.

Truth to be told, when more factors are accounted for (education, experience, career choice or even negotiation skills) the gap narrows into virtually nothing. There is no wage gap, there's only choices. More extensive reading here.

Bottom Line: if there is no wage gap due to sex, and the domestic issue is largely determined by choices, the fundamenta for "Feminist Economics" is largely pulled away.

___________________________

P.S: There was also a discussion about particular male characteristics that women allegedly had to embrace in order to become successful career-wise (ie, the idea that 'female traits' such as emotion or care is less usefull in business and career than are 'male traits' like logic or self-discipline and whatnot). A widely-used UK example is Margaret Thatcher, who, allegedly, wasn't female enough.
That's a perfect example to what I mean with "Epistemology" in my story of Feminism: how can we know that? How is such knowledge obtained? How is even 'male traits' to be defined?

Also, the idea of "Sacked because of Pregnant" faces the same issue; how do we know? Because such an action is illegal in the UK, it's not simply to gather statistics of "reason for redundancy". Furthermore, Wendy McElroy has a great outline of why exactly discrimination is justified.

Invaluable Socialist Logic - Inequality

Link to the second part of Socialist (lack of) Logic.

Socialists' main concern normally is equality, or rather its opposite; inequality. To them, it's the most horrible feature of capitalist societies, and they regularly use studies like The Spirit Level to get their points across; more equal societies are better societes (Also where analogies to Scandinavia are plentiful). They also heavily rely on the measure called GINI coefficient, which shows income distribution/equality throughout a country (0 = everyone has the same income, 100 = one person has all the income; most western countries have GINIs between 20-40)

Anyway, let's have a look at how perverse the effects of equality might turn out.

Let's say we have a country consisting of 100 people. They're all poor, with very little means to get around, living below the PPP $1,25/day (Extreme Poverty Line), with all the bad stuff associated with poverty: disease, low life expectancy, high child mortalities, undernurished etc., etc. Quite bad. On the other hand, however, because they're all more or less equally poor, this country is gonna score very low on GINI, say 5-10.

Now, let's introduce something else. For different reasons, say capitalism or globalisation, 10 of these people start selling their crops abroad, invent some machinery that's terribly useful for foreign people etc. For whatever reason, these 10 people are now a lot wealthier, makes substantially more money, build nice houses for themselves and whatnot. If we ignore spillover effects that socialists generally criticize capitalism for not having, what's going to happen with the GINI indicator? It will soar. Completely fly through the roof. We'd be talking numbers of 60, 70, 80. A riddiculous increase in inequality.

According to the socialist interpretation of GINI, this new country is a horrible place. Inequality, some rich people are extremely wealthy while others are on the brink of starvation. But what has actually changed? Capitalism lifted 10% of the population out of poverty, increasing the standard of living for 10 people - while the rest are still at their previous level. According to Socialist ideals, this country went from equal (and bad) to unequal (and worse), even though only 90 people instead of 100 are in extreme poverty. For all intend and purposes, 90 people starving rather than 100 people starving is an improvement, regardless of what the GINI says.

Since capitalism and globalisation is doing just that, why stop it?

My point here: focus on equality, income distribution or the GINI-coefficient is misleading. It doesn't tell the story and is rather useless to explain lives in different countries. Socialists should stop using it as an argument to why capitalism is bad. Especially when capitalism  over the last 20 years has lifted a billion people out of poverty.

Thoughts on Welfare Spending

Hey!

Apologies for not posting in a while - exam periods with somewhat swapped focus.

Today I have two charts for you on the development of the British Government spending. Not actually government spending, but only spending that includes 'benefits' (i.e., transfers, child benefit, jobseeker's allowance, state pensions, sick/unemployed/disability benefits etc).

First, in real terms, how the 'Benefit Spending' has increased over the last 60 years in real terms (that is, cleared for inflation).



So, the UK government spends a whole lot more money on benefits than they've ever done - essentially a constant development seen as far back as this chart goes.

Well, that's a good thing, right? Nay, not necessarily - and from a libertarian perspective, probably not.
What we have to remember here is that every £ the government spends, is a £ taken from all of us through taxation. Arguably, every pound taken up in taxation reduces the private spending by another pound, other things equal.

But the GDP has grown, we're a lot more productive than 60 years ago, thus it makes sense we spend more money?

Sure, let's have a look on the next one.





This shows benefit spending as a percentage of GDP, that is including the economic growth seen since the late 1940s*. Of all the resources we produce, the government has never used such a large portion of those to spend on benefits across the board.

Bottom Line and Question of the Day!
Leftists and Statists always call for higher benefits/tax levels and more equal distribution of means and government expenditure. As these charts show, the levels of benefit spending has never been this high before.  And throughout this period, the left flank, the labour Unions, the socialdemocratic parties have all called for increased redistribution of funds.
Question: What is a decent level? Where is "good enough" for you?

My answer: 0. Remove. Reduce. Abolish.

Have a great Christmas, you all!


_____
* Sidenote: As GDP being the nominator here, a recession/economic downturn produces a spike in the chart, as seen in late 70s/early 80s, early 90s and recently from 2008 and onward. 2 reasons: GDP drops; and spending in the UK system increases.

The Perverse idea of 'Relative Poverty'

The idea of "Relative Poverty" is normally put forward as a useful indicator and an evaluation of whether a government policy was successful or not. Especially by leftist organisations and debators, claiming that absolute poverty is not relevant, but it is relative poverty (that is, income in relation to others) that actually matters. In this post I'll explain to you just how perverse such a nonsensical idea is.

The commonly used definition of Relative Poverty is "60% of national median income", used by the EU and the UK Government. As the UK median income is something around £420/week, the relative poverty line would come down to £250/week.

The intention is to show poverty in relation to neighbours, friends and others around you. The underlying assumption is that, even if you are far wealthier than poor people in absolute terms (that is, below $2/day), you still feel poor, because everyone around you earn more than you do (adding various social implications etc).

Needless to say, this is absolute rubbish. With this definition, holding everything constant, (including my earnings, prices etc), if we'd give the poorest person a million pounds in income, so he ends up on the upper scale of the income distribution, the median income would increase, thus pushing some other person below the 60% of median income. Bottom Line: If some random people would see increased incomes, YOU'D become poorer. The fallacy is unbelievable.

Now I have a chart for you to illustrate this a whole lot better. Since New Labour came into power in 1997, they have more or less aimed for reducing poverty (Blair even commited to "Eradicate Child Poverty" at some point). Below I added numbers from the UK Institute for Fiscal Studies, showing the development of Median Income in UK and the percentage of the population at that point falling below the 60% "Relative Poverty Line".

The Red Line shows median income, referring to the right axle of £.
The Blue Line shows the Proportion (in %) of the population falling into the catagory of "Relative Poverty", referring to the left axle of %.

The proportion of the population living in relative poverty initially fell, then increased to its peak around 2007. That is, whatever the UK Government done during this period it had effects both on reducing and increasing Relative Poverty by small amounts (+-1% point).

However, when the financial crisis hit in 2007-2008, throwing the world economy into a crises (with lower wages and unemployment), the median wage consequently fell. The perverse effect then is that the proportion of relative poverty ALSO fell - from almost 19% down to 16% of population. Why? Because the line is tied to median income; when median income falls, the crucial amount earned to fall below the defining line of relative poverty dropped, resulting in less proportion of the population being catagorized as in "Relative Poverty".

That is, focusing on "Relative Poverty" meant that the effects of a global financial crisis did a lot more to help UK people to escape relative poverty than did the UK government in the decade leading up to it. An absolutely perverse effect, and an outrageous claim.

Needless to say, whenever you hear someone talk about "Relative Poverty Line" or "Poverty Increasing in the UK", you know it's a load of rubbish. It has no relevance to actual poverty.

_________________

Seen on a global scale, however, the median income is £10, resulting in a "world relative poverty line" of £6. Bottom Line: barely NOONE in the UK falls below the world relative poverty line, using the fallacious definition of 60% of median income. That's about how useful the idea of "Relative Poverty" is.

Seminar Time - And the tendency of intervention

As I take the introductory course of Public Policy here at University of Glasgow, I also attend the weekly 1-hour long tutorials in the course. To be fair, put aside all the obvious objections I have towards this subject, its lecturers and the ways in which  it is taught, the Tutor of my neat seminar group is great. She openly displays her opinions and always let us discuss freely our own ones. Shame time is such a scarce resource.

Naturally, as most of the group consists of sociologists or students of other social sciencie, the tendency is very much towards an intervetionist "The State Will Fix Everything" kind of idea. And, yet as natural, whatever comment I make disrups the status quo of allowable opinion, at times producing a war in that little room of ours.

Todays subject; Health Inequality. Appearantly, the percieved and measures "Inequalities" in health related areas in Glasgow are particularly interesting to sociologists due to the fact that they are heavily correlated to geography within the city. It even has given name to the international phenomenon of WHO.

Our tutor gave us the task of suggesting Policies to Solve this Problem (a future post will be dedicated to explain why it isn't even a problem to begin with). What types of policies did my wonderful group come up with?

1) Regulations
2) Tax on unhealthy food
3) redistribution of income

It's gotta be a good life these keen supporters of public policy have. The answer to EVERY question is STATE INTERVENTION or STATE REGULATION. It's a bit like listening to Keynesian Economists, their magic trick being INCREASED SPENDING.

It's a funny world we live in.

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Oh, btw!

During this mornings lecture (Time of first Thatcher critique: 22 minutes) we were fed the faulty socialists' concepts of transforming correlations to causality; Health in Glasgow, we were told, are appearantly determined by 1) Race, 2) Gender, 3) Social Class 4) Geography and OF COURSE the almighty Income (and Income inequality). Funny that, I had the impression determinism was long ago considered a bit out of fashion, if you'd like. That individuals make choices, preferes DIFFERENT THINGS was of course readily discarded as some black magic Mumbo Jumbo. Funny.