Archive for August, 2012


Thursday, August 30th, 2012

By Mark Rogers

On February 10, 2012, I posted a prediction that the Barmiest Political Story of the Year would be the refusal by the British government to accept India’s rejection of the Department for International Development’s hand-out of £280 million a year: this aid programme is set to end after 2015.

Nothing barmier has emerged – only the original story getting even barmier. My original concern was simply that the Indian government had categorically stated that it didn’t want it, although of course at the back of my mind was the thought that India is a nuclear power – why was it deemed to need a hand-out?

India Orbiting Mars

It was reported just over two weeks ago that India is to launch a satellite which will orbit Mars. The cost of this project is just under one fifth of the amount of money that the Department for International Distribution of Other People’s Money sends to India each year. India has been conducting a space programme since the 1960s and has launched many satellites.

India is also a large regional military power – with a navy.

The Indian Military

Whether or not India intends to emerge as the region’s dominant military power is not at issue; what is at issue is that it is surrounded by hostile or potentially hostile powers, the obvious one being the ongoing conflict with Pakistan not only over Kashmir but also about Pakistani-backed terrorists operating in India in pursuit of goals other than just the Kashmiri issue. But India fought a war with China in 1962 – and China’s ambitions cannot be ignored (especially if its economy goes into a widely predicted decline). India has both the manpower resources as well as the economic wherewithal to provide for its own security. It has proud fighting traditions and its long association with the British Army laid solid foundations for its modern prowess.

Today it was reported that the Indian Navy is spending £1 billion on three warships – and buying them from Russia. This has caused a predictable uproar in the U.K., chiefly because the British Navy, along with the rest of the British armed forces, is being emasculated.

Yet here is the public purse being used to send “aid” to India, in pursuit of the Coalition government’s promise to raise the total spending on international aid to 0.7% of national income. Promise to whom, one has to wonder? There are serious problems with the Ministry of Defence – not just the usual overspending on projects that are then abandoned; not just that, unlike the Indian Navy, we no longer have any aircraft carriers (the Indian Navy has aircraft carriers and warplanes to put on them); but, most importantly, the large number of redundancies being inflicted on the services and a very serious crisis of military pensions.

No wonder the self-deluded International Development Secretary, Andrew Mitchell has been quoted as saying: “I completely understand why people question the aid programme to India and we questioned it ourselves.” Obviously he didn’t completely understand the answer.

Just to drive the point home, two things should be noted about the U.K.’s aid to India: first of all, India has become over the last two-three decades so much of a developed nation that it even has its own international aid programme; and second, that the money that the U.K. sends to India is borrowed – that’s right, we don’t even have the money that we dispense with such largesse!

Aid Targets

The Department for International Decrepitude justifies this largesse on the grounds that the money goes to targeted projects and is not just a general hand-out to the Indian government which then gets spent on Russian battleships. That misses the point entirely. Besides there are development projects run by Indian charities that are compromised by the aid money – it is not just the Indian government that has denied that it needs aid, autonomous organisations within India, working in the very poorest regions, have rejected the need for it.

Those who defend the aid to a country like India accept that India is now a major economic power, but point out that the country, with a population of 1.21 billion, is still riddled with poverty. This is saying nothing – it is like pointing out that Britain at the height of its imperial power still had pockets of dire poverty. The Empire didn’t go round asking for hand outs for the East End; the amelioration of poverty was the result of people’s own indefatigable efforts in a low tax environment, aided where needed by voluntary organisations and self-help societies.

None of this shakes the self-belief of those would dip their fingers into others’ pockets to bolster their sense of their own rectitude.

“Lord Ashdown emphasised the immense influence and respect that meeting our aid commitments and being a leader in international development gives us in international affairs. He then made the moral case for giving aid, arguing that the UK is a great country ‘and one of the reasons we’re a great country is because of our humanity.’ ” Thus the self-important Lord Ashdown at a debate organised by Save the Children and UNICEF, held in London in May.

Thus, the Indian government says it does not want or need Britain’s aid: such is the power of the “moral” case that the British government can “afford” to ignore the Indian’s in a fit of smugness that we – the colonial masters still, perhaps in imagination, eh, Lord Ashdown? – know best what’s good for Johnny Foreigner.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS 

And for background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST


Saturday, August 25th, 2012

By Mark Rogers

Now that the main Olympics are over and the daily newspapers have recovered their normal size and weight, it is possible to see what else is happening in the world. Surprise, surprise… while London was full of sportsmen and women doing their best to out-compete each other to make some sort of achievement, those other Olympians – the gods of the Eurozone – have got precisely nowhere. Which in practical terms means less than nowhere…as we have previously seen here.

The Greek Prime Minister has been smiling his way from Paris to Berlin – but it isn’t going to make much difference. The German government is under huge popular pressure not to make any more concessions to the Greeks, the idea being that as the Greeks have, again, failed to make progress to meet any of the commitments they had already made, where is the logic or reason in renegotiating?

The problem is simple, and is well understood by Chancellor Merkel: the only way in which Greece (and Italy? Spain? Portugal?) can be kept in the euro is by the Eurozone becoming a real fiscal union with Germany permanently underwriting the poorer countries’ debts. But this is completely unacceptable in Germany, and other northern European countries (Austria, the Netherlands and Finland) are equally opposed. Was this one of the original compromises made before the euro was launched? While knowing that the single currency might only succeed if the proper fiscal union was created ab initio, but also knowing that this would have been politically unacceptable, the politicians went ahead with their vanity project knowing that it would be botched…  No wonder they’re desperate to patch it up somehow, but their inability to do so, because of the impossible circumstances they have created, has led to this apparently never-ending stasis…

But perhaps not quite, because from a completely unanticipated direction a break-up of the eurozone may be on the cards sooner than anyone expects, except those who have prepared for it: the Finns.

The current issue of The Economist (August 25, leader) states: “efforts to shore up the euro might be scotched not in Berlin but in another austerity-minded northern capital: Helsinki.”

The Finns have already made contingency plans for the break-up of the euro. On July 6, 2012, the Finnish Finance Minister was quoted in The Daily Telegraph as saying:

“Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland,” Ms Urpilainen told financial daily Kauppalehti, adding though that “Finland will not hang itself to the euro at any cost and we are prepared for all scenarios”.  She went on: “Collective responsibility for other countries’ debt, economics and risks; this is not what we should be prepared for.”

It is worth keeping in mind that Finland is one of very few EU countries that has managed to maintain its triple-A credit rating; the finance minister therefore speaks with a good deal more authority than most other players in this wretched game: “We are constructive and want to solve the crisis, but not on any terms,” she said [my emphasis].

The Economist goes on to point out that “uniquely, Finland has demanded collateral for its part of Greece’s second bail-out and for the funds it underwrites to support Spain’s crippled banks. If a grand bargain on the mutualisation of debts is ultimately required to keep the euro together, the Finns could block it. A few observers even think a “Fixit” (a Finnish exit from the euro) is more likely than a Grexit.”

This is quite a turn around. It should be remembered that in the 1990s the Finns pulled out of a banking crisis entirely on their own, demanding no assistance from anyone: no wonder they are hostile to bail-outs!

The Economist says that the longer Chancellor Merkel prevaricates, hoping to come up with some grand unifying scheme, the more the cost of bail-outs will increase; but surely the real point is that while prevarication has prevailed, the money itself has run out.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS


Thursday, August 23rd, 2012

By Mark Rogers

There is of course a long way to go. A journalist quoted on the Utah Sound Money website pointed to the inexperience of most people in Utah (let alone the whole of the United States) in using gold and silver as money – but there is an obvious explanation for that: namely, gold and silver have not actually been in circulation as legal tender for decades and decades! (Notwithstanding the provisions of the Constitution, Article I, Section 10, quoted here.)

A further point made is that the tendency of this scheme is towards “gold debit cards” – but that is not merely the tendency, that is the intention. We noted here the economist Detlev S. Schlicter’s crucial point about there being a tendency “to confuse innovations in payment technology with the basic construction of a monetary system.” He points out that this confusion of technique and actual monetary value arises because all forms of fiat currency (since the divorce from precious metal backing) have been routinely accepted simply because of their convenience and not because of their intrinsic value. The fallacy lies in assuming that the value arises by adding together the acceptance and the convenience supported as they are by the government (or at least the central bank) as arbiter of last resort, a powerful and destructive fallacy.

The beauty of the Utah scheme is that the “gold debit card” is so clearly linked to the actual gold and silver, the value of which is constantly audited: the card represents the actual gold, which is also personally yours. The technology cannot trump the value or manipulate it. The gold backed debit card is analogous to the old promise printed on, say, Bank of England notes, whereby the possessor of the note was entitled to redeem the face value of the note in gold specie if he produced the note at the bank.

The promise on a contemporary bank note is spurious, not to say fraudulent. If it is accepted that the face value of the note is that and no more, i.e. it is not going to be redeemed in gold (or silver) then what does promising to “pay the bearer on demand the sum of TEN Pounds” mean in practice? That the cashier will simply smile and hand it back? Would the promise be kept by handing over a plastic bag full of coins (5 pence pieces?) to the stated value? That may be even more fraudulent than it might appear: there have been times when in the few minutes that it would take to do that, the note may have lost value as the printing press splashes out more notes…

The questions are of course meaningless, serving only to emphasise the fraudulent nature of a fiat money scheme – which is to say, every monetary scheme in the world at present: since the dollar was decoupled from gold, as Schlicter points out in his book, the world’s currencies, though pegged to the dollar as the residual “strong” currency, have been for the first time in history rendered both theoretically and practically valueless.

The Utah Sound Money scheme is set to change that.


Wednesday, August 22nd, 2012

By Mark Rogers

We noted here that the Federal Reserve of the United States has always conducted its own audit.

This could be set to change. Mitt Romney has recently on the campaign trail demanded independent auditing of the Fed. And in July 2012, the House of Representatives voted for “A Bill To require a full audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks by the Comptroller General of the United States before the end of 2012.” (H.R. 459)

The support for the bill was decisive, the vote being 327 in favour to 98 against. It is interesting to note how close was the Democrat vote: 89 in favour to 97 against. The extra one making up the 98 against overall was a lone Republican, the Republicans otherwise voting 238 in favour.

The Democrat vote in favour was something of an achievement given that the Democratic leadership in the House tried to whip all members to vote against. Senate majority leader, Democrat Harry Reid has asserted that he will not permit a vote in the Senate, even though he thought it a good idea in 1995. However, he could be out-manoeuvred: Senator Rand Paul (the son of Representative Ron Paul who has been championing this cause since 1983) has sponsored a companion bill in the Senate which has twenty-two cosponsors. The Presidential elections later this year may well provide a momentum that outwits Sen. Reid and forces a Senate vote.

However, there is reason for caution: Constitutional Tender, for one, thinks that there is little likelihood of this getting past the Senate anytime soon.

But all is not lost. The Constitution of the United States of America states, Article I, Section 10: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” Which means that Federal Reserve notes are unconstitutional, and States’ laws that have been passed to make them legal tender were passed in defiance of the above Article. This also means that the lifeblood of the Fed’s notes, quantitative easing, is also unconstitutional and therefore illegal. And the individual States have the power to act as Utah has and start remonetizing gold and silver through similar schemes.

This may well be the most revolutionary movement since the separation of the American people from the British Crown. The tendencies towards big government for so long unchecked – and striking at the heart of the Constitution – may at last be confronting a resistance that modern politicians do not expect to happen to them: the end of rule by political elites despising traditional methods of financial sobriety, in favour of ordinary people armed with gold!

We will be keeping a close watch on developments: while gold purchases are down in both India and China, while speculation as to China’s intentions about backing the renminbi with gold in order to become a rival to the dollar are still speculations shrouded in uncertainty, ordinary Americans are returning to the gold standard in a movement that is likely to prove unstoppable.

For a very thorough account of Utah’s sound money policy please go here.


Friday, August 17th, 2012

We saw here how the gold standard is likely to make a return, and specifically how it could be managed. We took a look at how Iran and China have been conspiring to revive payment in gold for bulk purchases of Iranian oil, a pseudo-return to gold as a currency, pseudo, that is, if it remains a means of payment for a limited period of time and limited to a single commodity. We have also speculated about the possibility that China may be planning to launch the renminbi as a reserve currency backed by gold.

We also saw here how sensible Greeks are forming credit unions and devising alternative currencies.

In the U.S.A., however, States are going for the real thing: under way is a revival of gold (and silver) as legal tender, and the pioneer is Utah and the Utah Gold and Silver Depository.

The move is in deliberate protest at the Federal Reserve’s monetary policy. Republican state representative Brad Galvez, sponsor of the bill, is quoted as saying: “If you’re mad about government debt, ditch the cash.  Spend your gold and silver!”

The Utah Gold and Silver Depository states:

“On March 25, 2011 history was made when Utah Governor Gary Herbert signed into law Utah HB317 thereby monetizing precious metals in the form of Gold and Silver American Eagles and United States numismatics (rare coins dated 1792 to 1964) in the state of Utah. The Utah Gold & Silver Depository was founded on the belief that every citizen of the global community has the fundamental right to legally create, preserve and store wealth. To meet the global demand for safe, secure transactions and storage, UGSD has developed a number of depository account options from which a customer can choose and tailor to best meet that customer’s needs and goals.”

The idea is that citizens who wish to monetize their gold and silver will lodge it in an account with the Depository which will then issue them with electronic money in the form of a debit card, which stores the dollar equivalent which is debited against the gold and silver which backs it. A simple idea, but one with radical implications.

The Fed can hardly claim that this sort of thing, especially if it starts to spread to other states, will undermine its authority – the Quantitative Easing it has been indulging is already doing that!

See here also for the Sound Money Act.


Sunday, August 12th, 2012

The Gold Mine Effect by Rasmus Ankersen, published by Icon Books, London, July 2012

Reviewed by Mark Rogers

Rasmus Ankersen, the “High Performance Anthropologist”, is an enthusiast, driven by a “fierce curiosity”. Eliminated from a career as a footballer by a knee injury at the age of 19, he became a football coach.

Early in this career, while Mr Ankersen was coaching at a Danish football academy, he and his fellow coaches failed to spot potential in a young Danish footballer: they thought his talent insignificant, only taking him on because they needed to make up numbers. This player, Simon Kjaer, went on to a stellar career.

Mr Ankersen’s frustration over this failure “ultimately led to [him] selling everything [he] owned and setting off to travel the world for six months.” The result is this book: he selected six of the most astonishing Gold Mines in sports, to meet the coaches, to train with the athletes, to evaluate at first hand the training regimes, and discover the “secret” of high performance.

His first conclusion is that: “The secret is not a secret.”

It is important to recognise that while his book is about what motivates high achievers in sport, the lessons learned are applicable to other areas of achievement. While such discussions are kept to a minimum, once the reader has grasped the point it becomes easier to work out these applications, one of the most important being to education, which will be dealt with in due course.

The Gold Mines

The title of the book is only half metaphorical: the athletes and sportsmen and women he studies win inordinate numbers of Gold Medals at World Championships and the Olympics. Why?

Why is 70% of Kenya’s Gold Medals in world long distance championships won by athletes from the Kalenjin tribe, which numbers three million and constitutes just 10% of Kenya’s population?

Why has Russia in a mere few years become the source of 25 per cent of the players on the world women’s top 40 ranking list?

Why does a diesel burnt track, with a disintegrating gym and no facilities worth speaking of, in Kingston, Jamaica produce most of the world’s best sprinters?

And where do the great Brazilian footballers come from? “In the 2010/11 Champions League, the world’s finest club tournament, 79 Brazilians had time on the pitch, compared to only 25 Britons, 26 Germans and 49 Spaniards – and not a single Brazilian team takes part in the competition!”

The other two Gold Mines are South Korea, from whence come 35% of the world’s best female golfers, and Bekoji, an Ethiopian village, which turns out the world’s best middle distance runners.


Mr Ankersen’s researches in the field and in the literature prove the facile nature of many of the more magical explanations for these successes. Usain Bolt’s father claims his son’s achievements are rooted in the properties of the yellow yam that was Bolt’s favourite food as a child. The more ubiquitous genetic explanations get a sound drubbing: there are no African “running” genes, no South Korean “lady golfer” genes, no Brazilian “footballing” genes: in the case of the latter two, this ought to be obvious as golf was not invented in Korea nor football in Brazil.

The conceptual results of this adventure into the Gold Mines are highly illuminating: merely listing the concepts will give the reader a ready idea of how they apply on and off the sports field.

(1)   The secret is not a secret.

(2)   What you see is not what you get.

(3)   Start early or die soon.

(4)   We’re all quitters.

(5)   Success is about mindset, not facilities.

(6)   The successful coaches are more like godfathers.

(7)   Not pushing your kids is irresponsible.

(8)   Who wants it most.

The Most Interesting Concept…

 … is number (2). The mistake that many coaches make is a cause/consequence fallacy: the potential for future performance is deduced from current performance. Stephen Francis, the Jamaican sprinting coach, is adamant that this doesn’t work: he wants the story behind the performance. Current performance may only demonstrate that the runner is already operating at the limit of his abilities. Good coaching, constant training in an atmosphere of encouragement, contribute to current performance but are not a sufficient guide to potential achievement. Mr Francis is notorious for taking on athletes that everyone else gave up on – turning them into Gold devouring winners!

Asafa Powell, for example, had been turned down by every club he approached before he arrived at Mr Francis’s burnt out track of grass. The Maximizing Velocity and Power Track and Field Club was founded when Mr Francis (who is not an athlete but a statistician) sold practically everything to set it up: in the early days, in order to ensure that his athletes had enough to eat, he couldn’t afford running shoes – so they trained barefoot!

What Mr Francis saw in Asafa Powell was a person “who at the age of seventeen ran the 100m in 10.8 seconds. He’d been to a poor high school with a bad coach and hadn’t trained much at all. The training he had done consisted of him going over to G.C. Foster College in Kingston, looking at the way they trained, then going home and doing the same thing. ‘This told me that Asafa probably had considerable underexploited potential,’ Francis explains.”

Applied Insight

It is immediately apparent how this principle is widely applicable: it ought to set up an elementary early warning system for recruitment and promotion in any sphere of business. “As Capital One’s CEO, Richard Fairbank, put it … ‘At most companies, people spend 2 per cent of their time recruiting and 75 per cent managing their recruiting mistakes.’”

It is equally applicable to schools, which are historically notorious for misjudging or overlooking ability, though this wouldn’t apply to a musical academy in Berlin with a reputation for turning out pupils who go on to join the best orchestras or become supreme solo performers. This figures in the book because it was the venue of an experiment the results of which “would challenge the most fundamental conceptions of what leads to elite performances.” These results are also a vindication of the concept that the “secret is not a secret”. The crucial factor is: practice. This sounds obvious, but while for decades some mysterious innate talent, some welling of the subconscious or other arcane process as plumbed by psychoanalysis or other fashionable therapy-based analysis was thought to be the key, the obvious was ignored.

The violinists were divided into three groups for the experiment: the virtuoso best, the second best, not star material but still very good to the point of having a performance career, and the third who would probably only ever be teachers. What distinguished the three groups? Simply the amount of time they practised. That, however, still did not explain the difference between the very good and the very best. Further probing revealed that the very best not only practised harder than anyone else while at the academy, but had practised over the years before coming to the academy and had started much earlier.

Not Pushing Your Kids Is Irresponsible

Number seven in the list of concepts, this is the most controversial. Education, education, education… but for whom, how, where and what? For some twenty years the British state’s Qualification and Curriculum Authority has insisted that the primary purpose of education is the cultivation of self-esteem. Children must not be exposed to anything that could cause some children to succeed while others fall behind.

This also means that children must not be pushed: this is the whole meaning of “child centred education”, that children will be naturally drawn out over time, that talent and achievement however mundane are somehow “innate” and are therefore not allowed to appear early for fear of it withering on the bough (something that never worried Mozart or his parents) – this is the poisonous doctrine at the heart of the failure of state education. Formal rule-based learning is abolished under this doctrine on the fallacious reasoning that rules are straight-jackets rather than springboards. The claim is that those who are exposed to learning rules are then confined by them and learn only to hate what they have learned. But think: do those who have learned and practised the rules of cricket give up in disgust once they have mastered them?

The vicious fallacy behind this thinking is exposed throughout this book, and particularly in relation to the success of the Gold winners in tennis from Russia and in golf from South Korea, for these successes are founded on a group of people largely despised by the British education system: parents. These parents not only push their children, but give up everything to stand behind their children, following their training, keeping log books of practice at home – in short, getting involved. Indeed, so important was the parental input that Mr Ankersen discovered, he goes on to say that to be casual about their children’s success, to be indifferent to what it really takes to master anything, is the true parental sin. And the other crucial insight, the one that was also found at the Berlin academy, was that these children started very young, as young as five or six.  

The attitudes he discovered in Russia and South Korea are contrasted with tennis in Britain. So concerned that the Wimbledon Championships have failed to produce a winning Briton for so many decades, the government and the Lawn Tennis Association throw £60 million a year at the sport. State of the art training facilities with every luxury and comfort exist – to which bored parents bring their children and then sit waiting outside the practice courts, reading paperback fiction and willing the session to be over so that they can get to the hairdresser.

Facilities or Motivation?

Brazil’s footballers owe their success to one single factor: the endless dribbling and scoring that they engage in year in, year out on the street corners of the favellas from a very young age. High on the hills above and beyond the favellas sit the family homes that successful footballers have built to rescue their families from the slums, acting as an inspiration to the next generation of footballers. The godfather of Brazilian football, Eurico Miranda, asserts that “95% of them have been created on the street corners … This is the kind of head start that you can’t catch up with. The biggest mistake they make in Europe is being too well organised. Brazilian footballers are not the product of organised talent development. … Our academies … just have to make sure not to ruin the raw material they take in. The work has already been done for them.”

Stephen Francis, the coach of the Jamaican sprinters, declares that he will never change his training ground. For one thing, it eliminates, sometimes at the very beginning, those athletes who look for glory but aren’t prepared to work for it and expect to train with all the mod cons and comforts. The Kenyan runners live semi-monastic lives up in their mountains, running, eating, sleeping and running again.

The book is full of surprising and convincing insights, and the most important theme running through it is the problem of “innate” talent. A small but interesting experiment conducted at Hong Kong University puts this into perspective.

Organised by Carol Dweck, a psychologist at Stanford University, students were given several challenging tasks; once completed, half the students were praised for the effort put into them, and the other half were praised for their intelligence. As a result, subsequent tests produced interesting results. Those praised for intelligence became passive and reluctant to perform the most challenging assignments; those who had been praised for effort simply kept on improving.

Even more instructive was what happened next: the children were asked to write letters to those at another school describing “their perceptions and experiences of the tests they had undergone. … Forty per cent of the students who were praised for their intelligence had lied about their results in the tests. They claimed that their test results were better than they actually were.”

Subsequently, these children were offered a chance to improve their language abilities. All classes at the University of Hong Kong are conducted in English, so it was assumed that the children would jump at the opportunity. “It transpired, however, that the majority of the students who had been praised for their intelligence preferred to stay at home and abandon the course.” This is a fascinating insight into the sort of problems that may be caused by the “innate talent” assumption: it “shows what happens when people end up in an environment that exclusively celebrates their natural talent and not, say, their commitment and application. They begin to define themselves by that talent-description, and when times get tough and that self-image is threatened, they have difficulty with the consequences, to the point that they would rather lie than be exposed as untalented.”

There is no doubt that the High Performance Anthropologist knows how to get results – and goes about it in a highly original and thought-provoking manner: the book is pure Gold!

Readers curious as to why a gold investment website should be running articles of this nature should refer to this statement:  GOLDCOIN,ORG: MIXING POLITICS AND NUMISMATICS?

G4S: Public Bad Versus Private Good? It’s Not So simple.

Tuesday, August 7th, 2012

By Mark Rogers

Following the revelations that the organisation of security by G4S at the Olympic games in London this summer was a “humiliating shambles” (Nick Buckles, G4S Chief Executive), there was a flurry of assertions by the commentariat that this disproved the “Thatcherite” dictum, Public Bad, Private Good.

There should be no doubt that this principle ought to have been proved beyond controversy by the crises at the end of the Seventies that brought Thatcher to power: for one thing, the combination of nationalised industries and trade union power and potency, enabling industrial action across the entirety of what was then the state sector, surely leaves little room to doubt that the balance of state power and private power ought in most things to lean towards the private sector – which is more diverse, more competitive and more accountable.

Having said this, however, Public Bad, Private Good is nothing more than a convenient shorthand for what is in fact a much more complex matter than it might at first seem. For what is at issue here is the appropriateness of public versus private ownership and action. Even more interesting is the way in which state and private sector functions intertwine, and the question of whether they should or not.

Take what is at issue in the G4S business: there was a time when law enforcement was private in the sense that the Queen’s Peace was mediated by individual subjects. One of the origins of the police was in what were basically private detectives at the end of the eighteenth century and the beginning of the nineteenth. They could be consulted and hired for expenses and a share of the value of the recovered property to investigate theft, for example; once an arrangement had been entered into both the client and the detective had to take that arrangement before a magistrate for approval and to render it lawful. Note that both the detective and the magistrate were lay people. Far from the operations of the law being something left to an elite police force, the public had a right and a duty to enforce the Queen’s Peace whether at home or in the highways and byways: law was definitely in the hands of the people, and, something that is often forgotten today, Englishmen had the right, indeed they were expected to bear arms. Long before professional standing armies and professional police forces came into being, the citizenry formed militias when called upon to do so, and defended their homes and families with force if necessary.

Much of the problem of crime and violence over recent decades has arisen from the profound changes wrought to the idea and practice of policing since the Wilson government’s reforms in the mid- to late-sixties.

Economies of Scale

There is an important fallacy operating in the usual assumptions about economies of scale; it is of the cause and consequence type. Economies of scale dictate the size of the organisation and not the other way around as is usually assumed.

Take cartels: what they are pooling is their inefficiencies, hence the attempt to rig prices. So far from size automatically producing economies of scale, size can often dictate ways of circumventing or overcoming them. When this is done in coordination with government, whether at the behest of the government or the businessmen, it is called corporatism.

So reverting to the G4S fiasco several things immediately become apparent. The world’s largest private security company was invited by the government to make a bid for the Games simply because it was so big: its bid was accepted forthwith – there was no competitive tendering. Second, the government is hopelessly bad at drawing up and enforcing these sorts of contracts – witness the Private Finance Initiative Public-Private Partnership scandals of the Blair-Brown years. Third, notwithstanding several controversies over lapses of security at military and nuclear facilities, there was simply no way of knowing whether, merely because it was big, G4S was capable of providing security on the sort of scale required for an event as large as the Olympics; the process involved in competitive tendering would have given a much clearer idea of the bidders’ likely competences. Fourth, being a business but one that had been granted a short-term monopolistic contract, there was simply no incentive for G4S to earn its money. Why, for example, were the various types of security operation not split up and contracted to smaller firms, with the option of removing the contract from a defaulting firm and giving it to one of the others – with the likelihood that, given the threat of competition, firms would be unlikely to default.

And of course given the security concerns around a large symbolic event taking place in one of the world’s great and free capital cities it is extraordinary that the army was not considered the more rational option, or even simply drafting in more police from county constabularies – which is what happens when riots take place.

And yet, none of the above considerations would have applied if it had been the case that G4S had proved efficient!

Government waste and business thrift

This readily leads to the heart of the dilemma of weighing the appropriateness or otherwise of government action versus private action motivated by profit seeking.

The great Jane Jacobs (whose seminal work The Death and Life of Great American Cities has already been referred to here) published in 1992 Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics. In a seemingly simple context, she sets up a Platonic dialogue between a small group of people, consisting of a retired publisher, a lawyer, a writer of crime novels, an environmentalist campaigner and a biologist, who try to discover the answer to what starts out as a simple observation, namely why large bureaucratic governments are so good at creating waste.

The fundamental moral foundations are established very early on in the book, which is the discovery that there are two self-contained moral systems at work in human life, and what is more that these systems are internally consistent and, crucially, are the opposite, in absolute terms, to each other.

The book develops from these systems and in an increasingly complex yet never obfuscating way (the book is delightfully written with plenty of room for humour – the dialogue form is completely right and convincing for the way in which Jacobs develops her insights) uncovers the appropriate forms, times and places for establishing what is the provenance of government and what is the sphere of commercial mores. One crucial insight that emerges is that things go wrong in both directions – when governments attempt commercial functions just as much as when commerce attempts gubernatorial functions. That is, there is very little room for overlap between the two syndromes; the syndromes are elaborated and the potential or otherwise for overlap between them is subtly explored with remarkable conclusions.

The book covers an immense amount of ground in several intellectual disciplines and one thing that must be stated categorically is that this is not a one-book-answer to the types of problem under discussion. In examining the contradictions of state power, the innovations of commerce (methods more generally as much as any specific technology) and the creative tension that must exist between them to propel and secure civilization, what Jacobs has done is to create a vital template which, placed over any aspect of political, social and economic activity, can cast illumination over the most intractable problems. And what are the syndromes?

Moral Syndrome A: Shun force; Come to voluntary agreements; Be honest; Collaborate easily with strangers and aliens; Compete; Respect contracts; Use initiative and enterprise; Be open to inventiveness and novelty; Be efficient; Promote comfort and convenience; Dissent for the sake of the task; Invest for productive purposes; Be industrious; Be thrifty; Be optimistic.

Moral Syndrome B: Shun trading; Exert prowess; Be obedient and disciplined; Adhere to tradition; Respect hierarchy; Be loyal; Take vengeance; Deceive for the sake of the task; Make rich use of leisure; Be ostentatious; Dispense largesse; Be exclusive; Show fortitude; Be fatalistic; Treasure honour.

The first is the Commercial Syndrome and the second the Guardian syndrome (the name is explicitly adopted from Plato). But to discover more, readers must find a copy – it is a truly enlightening book!

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS 

And for background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST


Wednesday, August 1st, 2012

By Mark Rogers

In 1999, the then Chancellor of the Exchequer, Gordon Brown, sold 400 tonnes of Britain’s gold – amounting to half the reserves – for £2 billion. At today’s price that gold would be worth £11 billion.

While I was looking into the archives for this abysmal deed, posted online by HMG, I found this note:


I shall retype the most relevant section, which is number 3:

“The Minister would be grateful for a daft note for her to send to the Chancellor, as you suggest.”

Well, Mr Brown obviously received his daft note alright, because he went ahead with the sale, when the price of gold was at an historic low, but just to make sure that this was a truly daft act, he first told the market what he intended to do, thus guaranteeing an even lower price.

“The reason given for this apparently quixotic act was ‘to diversify away from gold’. Given that the pound has now lost over 93% of its purchasing power against gold since 1971, this did not turn out to have been the most brilliant decision of all time.”

(Quotation from: Guy Fraser-Sampson, The Mess We’re In: Why Politicians Can’t Fix  Financial Crises, London, Elliott & Thompson, July 2012)

This was the man in charge of Britain’s finances! And what one earth did he think he meant when he claimed that this was “to diversify away from gold”? “Away” to where? With the fairies?



Error: Feed has an error or is not valid

Error: Feed has an error or is not valid

"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."